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Making public procurement from SMEs, social enterprises and charities real

Monday January 12th, 2015

Gov Opps’ training partner, PASS (Procurement Advice & Support Service) runs training events for both the public and private sector. These include an Introduction to Public Procurement, Writing a Tender Specification, Preparing Perfect Tenders and Impact of the EU Directive on the UK Regulations. Click here for more info.

 

Small firms, social enterprises and charities would be overflowing with cash if they had received a few pounds every time a national or local politician had exclaimed his or her commitment to spending more of their public procurement spend with them. Tragically, the reality has not matched up to the rhetoric and has all too often fallen a very long way short.

For the sake of a healthy, innovative, growing, diverse and entrepreneurial economy, never mind decent services, this can and must change.

Central and local government, the NHS, schools, universities and other public sector bodies spend a vast amount of money buying goods and services. Many of them, especially local and central government, simultaneously invest in economic growth through supporting small businesses, new starts and social enterprises. They also claim to wish to support the expansion and capacity of charities and the voluntary and community sector. So why is it so rare for these same public bodies to link these sets of policy objectives together? Lambeth Borough Council and some others are making this link, recognising that they can secure wider policy goals through the use of their procurement spend – but such examples are few and far between.

John Tizard

John Tizard

I have little doubt that the pursuit of local employment and local sourcing, reducing poverty, building community capacity and much more can be hugely boosted by the targeted application of public spend on goods and services. However, this requires more than a high-level policy commitment and/or occasional political rhetoric. It requires a ‘whole system’ approach with political and executive leadership driving a shift in policies, behaviours, expectations and ‘actions on the ground’. It also requires imaginative, sophisticated and ‘enlightened’ procurement practice.

In some circumstances, public bodies (especially local authorities, police and crime commissioners and NHS clinical commissioning groups) can secure services in partnership with charities and the voluntary and community sector through grant aid and collaboration, avoiding competitive procurement. However, this approach has its limits and is rather more problematic when seeking to procure goods and services from SMEs and social enterprises.

To make a reality of this socially responsible approach to procurement, it is vital to understand what charity, voluntary and community, social enterprise and SME providers can offer, and what terms make it prudent (or even possible) for them to bid and deliver. Public procurement and commissioning teams have to have dialogue with such potential suppliers on a continuous basis and in ways that offer confidence to both providers and potential providers. Having listened, they must ensure that their policies and practices reflect what they have heard. This must not be a cosmetic exercise that ticks a box, wastes everyone’s time and resources and simply adds to the levels of frustration and disappointment.

It is almost certain that most charity, voluntary and community, social enterprise and SME providers will propose similar approaches to enable them to respond to public procurement opportunities. There is often more in common between these organisations than between large corporates and SMEs.

What is required is likely to include:

  • a strong commitment to take social value and local economic benefits into account when awarding contracts
  • an emphasis on quality ahead of price
  • simple and short procurement projects
  • contracts of a size that these smaller providers can deliver
  • outcome-based contracts, which encourage innovation and challenge orthodoxy
  • avoidance of the requirement for providers to have strong and large balance sheets – so fewer large-scale and payment-by-results contracts
  • appropriate risk transfer and management that is bearable for smaller organisations of whatever sector
  • non-bureaucratic contract terms, which balance the requirements of the public sector for accountability, probity, etc in a proportionate way
  • a commitment to fully fund contract conditions such as exemplar employment practice, the living wage, fully honouring TUPE, pensions, diversity initiatives and talent programmes – rather than to omit these and allow a race to the bottom at the expense of employees
  • a willingness and strength to challenge risk-averse lawyers and narrow-minded procurement teams/external advisors

When it is necessary to contract with large organisations because of scale, technical expertise, investment or other reasons, the public sector should be required to consult local smaller providers from all sectors first and then to explain their decisions. They should also be willing to support the creation of consortia of charity, voluntary and community, social enterprise and SME providers to bid. This could include making capital available to invest in systems and machinery to enable contracts to be delivered.

If and when major corporates are offered contracts (and to some extent national charities too), the public sector client should make those contracts conditional on the prime contractors employing local charity, voluntary and community, social enterprise and SME providers within their supply teams, on the same basis as the public sector should be contracting with them. There should be no more of the harmful behaviours as witnessed in the worst examples within the Work Programme, where prime contractors have ‘screwed/abused’ their supply chains in a variety of destructive ways. Responsibility for ensuring appropriate supply chain management in public services and the acquisition of goods by the public sector must be the responsibility of the public sector client. These clients and their prime contractors must be held to account publicly for this, with full transparency and disclosure, external audits and ‘whistle-blowing’ mechanisms for organisations that feel aggrieved.

Ultimately, the goal all political parties have claimed publicly to be seeking is a growth in contracting with charities, voluntary and community groups, social enterprises and SMEs – and for these organisations to gain an increasing proportion of the total number of contracts and value of spend on goods and services. This goal can be achieved, even if there is less public service outsourcing, but it requires more than new sets of procedures and processes. It will be constantly challenging and never easy because basically this is about a fundamental shift in culture, behaviour and attitude – and that requires focused political and executive leadership.

The prize is worth the challenge – if only someone will seize it, act and lead.

John Tizard
Online: www.johntizard.com
Twitter: @johntizard
Linked In: John Tizard

Gov Opps’ training partner, PASS (Procurement Advice & Support Service) runs training events for both the public and private sector. These include an Introduction to Public Procurement, Writing a Tender Specification, Preparing Perfect Tenders and Impact of the EU Directive on the UK Regulations. Click here for more info.

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