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Partners at last?

Monday January 18th, 2010

By Matthew Sanders, Chief Executive, de Poel

Matthew Sanders explains how the road to public contracts may be opening up for SMEs such as de Poel.

The government tendering process and its effect on the small and medium business sector has long been a subject of media attention. Two years ago, the Sunday Times ran a campaign urging a better deal for small businesses tendering for public contracts. They accused the Government of letting small and medium sized enterprises (SMEs) down in this area by focusing too much on the needs of big business. Two years on, and the topic is still a focal point, sparking renewed debate and controversy.

In the past, there have been huge and unreasonable barriers to SMEs tendering for public contracts. The problem has never been that SMEs are openly discouraged or barred from participating in the bidding process. The difficulties have rather been routed in the process itself and the way it operates, too often preventing small or new companies from being shortlisted and making it difficult for procurement directors to open up their supply base. In many cases the barriers have been the sheer complexity of the procedure and the jargon used, not to mention continuous bureaucracy, unachievable deadlines and the seemingly endless amount of time, paperwork and cost involved, which small businesses just have not been able to keep up with. The need for insurances and other documents – for example ISO 9000, a quality standards certificate only ever required by the public sector – also contributes to the hassle for small companies, rendering their problems disproportionately high compared with larger firms.

For de Poel, the biggest obstacle has lain within the pre-qualification stage of the application process. In a report on SME access to public procurement by the All-Party Parliamentary Small Business Group (APPSBG) in April 2009, PQQs are described as ‘especially onerous, discouraging SMEs from registering’. Indeed, despite having small and large clients in a variety of different markets, including organisations from within the third sector, care social housing and waste management industries, and despite being the largest procurer of temporary labour in the private sector, our company has so far not been in with a chance of getting past the PQQ stage. This has been solely on the basis that we do not already have a public sector client. Without such a client already, a company like ours cannot directly supply a public body; the only companies able to overcome this obstacle are those involved in a second tier supply arrangement. Effectively, the Government has left little room for public procurement officers to consider new suppliers, who are blocked by this technicality.

The good news is that change is happening, albeit slowly. As a result of persistence from firms such as de Poel, a notice was recently issued to all local public bodies by the Office of Government Commerce (OGC) in its quarterly update, with specific reference to this particular problem. The notice urged local authorities and care trusts not to discount companies who do not have a public sector client already at the PQQ stage if they have other relevant experience as, theoretically, this could be contravening fair competition laws. Whether this will initiate radical change is not yet known, but it does pave the way for reform in this area. Echoing the criticisms outlined in the APPSBG report, the OGC notice reiterates the need for the Government to open up the system to give public sector procurement directors more choice in their supply arrangements.

The other significant development in the sector is Harriet Harman’s Equality Bill. Seen by some journalists as the Deputy Labour Leader’s attempt to seize control of the £220 billion a year public contracts spend, concerns have been raised about how this will further affect small businesses’ ability to access public procurement. The plans, which look to preclude businesses from supplying to the public sector unless they can demonstrate a commitment to gender and racial diversity within their firm, are widely predicted to make it more difficult for SMEs to bid for public contracts.

From our company’s perspective, however, it is fairer and more important that firms are judged on their commitment to equality rather than on whether they already have a public sector client – the latter saying nothing about a firm’s ability to supply effectively. We would certainly welcome the opportunity to promote ourselves to the public sector on the grounds of our company’s attitudes and values. What is more, equality criteria show no bias towards large firms, with a commitment to equality possible in companies of any size and the paperwork to prove it consistent with the number of employees. If anything, rather than intensifying the problems for SMEs, this move comes as a critical first step in the direction of government open-mindedness and an appreciation of what really makes a good supplier.

That said, the future role of small and medium businesses in public sector procurement remains hazy, and there is still a long way to go before such businesses will really be able to take advantage of the massive income opportunities the public sector offers. A fairer and less rigid application process would, however, not only open possibilities for SMEs, but also allow the public sector more choice and independence, which in turn could lead to a stronger supply base as well as massive money-saving opportunities for government.

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