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A recipe for more SME provision of public services – more tasty than big chewy corporates

Wednesday March 11th, 2015

PASS - UK Public Contracts Regulations 2015

I was recently thinking about an owner of a small SME business that offers high-quality and well-regarded catering services. The company has a healthy customer base with local businesses and individuals. The owner and her team are keen to offer their services to the public sector but continually either bid without success or, on reading tender documents, feel unable even to bid.  They find this frustrating and a costly waste of effort and resource.

The levels of frustration are amplified when the team (including staff) see various local authorities in the area promoting: their commitment to procuring with SMEs and other small local suppliers; their policies on sustainability and local ‘green’ sourcing of goods and materials; and their adoption of the ‘living wage’.  The catering company has for some years been committed to local sourcing of its ingredients and supplies, whenever this is feasible. It has adopted the ‘living wage’, employees benefit from an ‘employee profit share arrangement’, and the company is currently looking at introducing an employee share ownership scheme. Trade union membership is encouraged and supported by management.

John Tizard

John Tizard

The company and its team identifies very closely with the town in which it was created and is now based. It supports local community events and charitable activities, both financially and through offering goods and expertise in kind.  It has taken on apprentices (albeit not many because of the overall small size of its work force), and offers work experience opportunities for students from the local secondary school and nearby FE college.

Local authority environmental inspectors have always found the company’s facilities to be exemplary. In addition, the company prides itself on following the latest practical advice from public health experts on the use of ingredients and means of preparing food.

Anyone reading the description above of this small but proud and growing catering company might have expected it to have been an ideal provider for local public services, including school, social care and staff canteen meals.  However, it has no public sector contracts other than one contract directly with an academy trust, and feels that unless the public sector makes dramatic changes, this will always remain a dream rather than a viable reality.

Significantly, the changes required within the public sector are about more than changes to procurement processes and requirements (important as these are). Rather, about the need is for changes in attitude, culture and behaviours. It has to be about aligning procurement practice with stated policy, and seeing procurement as part of a wider commitment to local employment, economic growth and building sustainable community capacity.

If the owner of the catering company and members of her team had an opportunity to sit down for a serious conversation with, for example, the local authority leader and chief executive or senior NHS executives on the required changes, they would have some simple but important messages.  They would argue that a public body which is serious about procuring from local SMEs must:

  • ensure regular dialogue with SMEs and similar providers in ways that do not add burdens to the latter. This dialogue would be about the services that could be offered; those that could be provided; the public sector’s overarching objectives; and the provider’s commercial requirements – and public bodies should commit to taking these providers’ views and requirements into account
  • package contracts in ways that smaller providers can realistically bid for – and not only be feasible for large providers with large and healthy balance sheets
  • adopt easy and affordable procurement processes
  • avoid aiming to transfer too much risk to providers that cannot either manage or bear it
  • avoid contract terms such as payment by results that are difficult for smaller organisations to enter into
  • commit to payments within at maximum 30 days – and even less to small-scale providers
  • practise non-bureaucratic and proportional client management
  • adopt procurement based on social value and public value principles, and not simply on lowest price so as to value local social, economic and environmental benefits
  • encourage all providers (large and small, and from whatever sector) to match the catering company’s employment and employee standards, ‘green’ credentials, and commitment and contribution to the local economy and communities
  • foster innovation and new approaches, and encourage their suppliers to adopt these

If the catering company’s owner and her team spoke with many local social enterprises and voluntary organisations, they would find that, there was in fact a shared agenda on this subject. They have common cause to argue for progressive, socially responsible public procurement. Such alliances need to be encouraged by the infrastructure bodies representing all three sectors, at both a national and local level.

Of course, being a local SME does not and should not automatically give a company an entitlement to win public sector contracts.  My advice to such companies wishing to bid for public sector contracts is simply to follow the example of the catering firm mentioned in this article in terms of employment practices, sustainable supply chains and local community involvement.  I would then extend this advice to include a need to bid ‘with the grain’ of the procurement body and its policies and objectives, and not position themselves in ways that seem overly critical of the public sector or to display any arrogance.  There is a need to recognise and respect the legal constraints and procedures of the public sector. They should understand that public bodies will often have very good reasons for maintaining ‘in-house’ provision and for sometimes  procuring on a large scale and/or from larger organisations. Above all, providers (including SME providers) must be able to demonstrate their commitment to a public service ethos not only in terms of employment practices but also by agreeing to:

  • ·    publish details of their ownerships and directorships
  • ·    auditable open-book accounting for contracts
  • ·    publicly available performance data for contracts
  • ·    publish their remuneration, dividend and tax policies and payments
  • ·    both they and the public procuring body being transparent about relationships between their organisations and key personnel in them

All of these should and must be possible without being overly burdensome and costly. They are critical to building the trust and the platform necessary for any expansion of public contracting with SMEs and similar bodies.

If the approach I have outlined above were adopted on both sides, there is a much higher probability of elderly people and school children enjoying the fantastic meals that the catering company mentioned in this article can offer – and at the same time, the local economy and wider community would benefit too. The proof of this will be in the eating!

John Tizard
Twitter: @johntizard
Linked In: John Tizard

PASS - UK Public Contracts Regulations 2015

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