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John Tizard: For SMEs and VCSE public procurement practice must match rhetoric

Monday May 18th, 2020

Government, local NHS and local government leaders are consistently imploring small and medium-sized enterprises (SMEs), start-up businesses, social enterprises, and small local charities to compete for tenders to deliver public services and to supply the public sector with goods. There are certainly enough reports, policy statements and political speeches on this subject to clog up the memory capacity on most laptops.

John Tizard

John Tizard

Whilst I would strongly caution the public sector to very cautious about outsourcing public service provision it is vital that if and whenever the public sector seeks to procure goods or services, it does so in ways will encourage and enable SMEs, start-ups and Voluntary and Community Sector Enterprises (VCSE) to bid – rather than instantly discourage such interest.

More specifically, if and when the public sector (be it central government, local government, the NHS or any other public service body) particularly wishes to work with charities and the voluntary and community sector (VCS), it should ideally adopt a ‘relational partnership’, rather than competitive tendering, and wherever possible, use grants (accepting that there may still be a need for a contractual agreement to ensure transparency and accountability).

Given the context above, and the repeated/deafening statements about ever-greater opportunities for SMEs, charities, the VCS, start-ups and social enterprises – it is, frankly ‘bizarre’ and mind-boggling that so many public bodies choose to use procurement and contracting processes/procedures that are more appropriate for letting multimillion-pound contracts to very large businesses and/or for large complex projects.

Just in the last few weeks, even during the COVID-19 crisis, I have heard about and experienced truly abysmal/incredibly poor practice from local authorities and others. Do chief executives and elected political leaders have any awareness of the nonsensical processes their organisations are promulgating – practices that discourage and commonly effectively prevent target organisations from considering bidding?

These include:

  • overly complex and time-consuming pre-procurement and procurement processes and procedures – utterly disproportionate to the financial value of the potential contract and the risks involved
  • procurement documents and moribund tender templates running to hundreds of pages, containing many irrelevant questions and unnecessary calls for evidence
  • requirements for bidders to produce at least three years of audited accounts and/or track records of delivery, which blatantly discriminates against recent start-up businesses, social enterprise charities and/or VCS groups
  • contractual terms which are totally disproportionate to the value of the contracts and the risks involved, and well beyond
  • the capacity and tolerance of these target suppliers – including:

o   requirements for massive bonds that may be many times greater than suppliers’ individual turnovers

o   payment schedules requiring suppliers to have substantial existing and assured cash flows

o   requirements to have balance sheets significant enough to bear delayed payments and/or substantial up front investment

o   unduly high and multiple levels of insurance coverage which do not reflect the risks involved

  • requirements that contracts be signed in person – not electronically – and witnessed by independent third parties, even during this period of lockdown, home working and ‘social distancing’. Are the people imposing these rules for real? Yes – I am afraid they are, and seemingly living in a parallel universe.

    These all represent the worst of poor practice, and procurement models that are not only well out of date but very much contrary to stated public policy.

    Of course, one must ensure probity and maximise public value.

    However, there is absolutely no merit whatsoever in public procurement officials and mindless bureaucrats standing in the way of the pursuit of policies to encourage greater diversity of supply to the public sector. Whether services are outsourced, or goods purchased from third parties, or when public bodies are seeking to foster relational partnerships with charities and the VCS – there is no excuse at all for a lack of pragmatism, realism, common sense and best practice.

Surely it is not controversial to suggest that public procurement be based on the application of five core elements (not a series of rigid and inflexible manuals, thousands of pages in length, that were last revised some time ago):

  • risk assessment
  • proportionality
  • securing public value based on a holistic assessment of value and social, economic, environmental, and democratic impact including maximising place- based outcomes
  • the pursuit of wider policy objectives including exemplary employment practice
  • achieving sustainable quality provision of services and goods

    The current crisis is placing a strain on public procurement and frankly an even greater strain on the very suppliers that the public sector says – loudly and repeatedly – that it wishes to support and engage with.

Is it too much to ask, that this period of crisis be the moment when public procurement re-invents itself, ‘steps up’ to the plate, and ‘steps down’ from inappropriate processes, overly bureaucratic procedures, and wholly irrational barriers – and be pragmatic about supporting and nurturing the future health and growth of the social economy?

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