Public Sector Procurement
Quite predictable. Not much has changed
by Ethar Alali
Here is where Dan Sheldon’s Government self-harm expose gets really annoying! Not just that, but the ruse has firmly been directed at the wrong people after Brexit. The public blame Europe.
I’ve been working with companies to get them into positions to procure leaner and secure themselves against vendor lock-in or plan for exits for a few years now. Bear in mind, I do this as head of a vendor, albeit one who’s more concerned about getting clients the best bang for their buck than siphoning off millions and millions. Unfortunately, the UK government simply does not understand the waste they generate all round by doing this in the way they do it. Furthermore, they are hamstrung by some legacy aspects of CCS. Specifically the process for tendering.
Contrary to popular belief, whilst the UK is subject to OJEU thresholds, the process to tender for public sector work is actually defined by the sovereign right of each individual member state to govern itself. In the UK, it was defined by the UK’s own Office of Government Commerce in the 1980s. The other European Union members each have their own, much swifter processes for tendering which leaves the UK stone dead last in cost and time (being 90% more expensive than the EU average but also taking 53 days longer).
Tendering is arduous and wasteful both for the UK public sector and vendors, since it’s not uncommon for hundreds of hours to be spent by teams of people on both sides of the divide just to present and review tender submissions. With the average amount lost in each tender being £45,200 and there being 110,000 public sector tenders every year, this is a total wasted cost of almost £5 billion lost every single year!
That money has to come from somewhere, so the taxpayer spends it all the way through. Vendors who lose tenders, lose money, but they make it back on other tenders or, like us, choose not to tender for some work at all, to mitigate losses. This leaves the UK government in the unenviable position of not being able to recruit the best talent, simply because the process is biased in favour of large vendors who can absorb those unreclaimable costs, or as I like to refer to it sometimes, “we wouldn’t be that stupid!”.
Then there is the point of integrity. It is not uncommon for us to withdraw from tender processes if we find signature characteristics during the procurement process that imply the department doesn’t really know what it is doing or it is at risk of breaching a ruling by the way they carry out the procurement. They may have aimed to project that they have a grip on the situation and we will of course, have priced accordingly. However, if that position changes, we consider our own submission null and void. It’s better that we and the client know that from the outset, than find that out months or years into the start of the contract, once they’ve paid out millions in fees to the vendor. That money is just wasted. There is plenty of work for us to do elsewhere.
Encouraging exactly the Wrong Sort of Culture
Such a position taken on some contract procurement can cause some suppliers to literally make things up and sell the moon on a stick. This in turn, leaves other suppliers, often smaller, more agile and capable than the larger companies, who are also naturally cheaper, at a distinct disadvantage because they are honest and carry that integrity throughout the way they work. Their exclusion created a tit-for-tat between “faceless corp” and UK Gov try to out-think each other during the contract negotiations, which turn into a verbal and legal game of chess to make sure the other doesn’t take advantage of the first and vice versa. I’ve heard of naive SME’s try to compete and absorb central or local government negotiator positions and then then go out of business less than half way through the contract.
However, finally, the UK Government now know this is unsustainable. In part, this was due to the financial crisis and is why sectors like Management Consultancy, have seen a 90% reduction in funding available to them from public pots. They have always offered “dubious value” since they started. Not that the methods they use are necessarily wrong, more that “big corp”, as a cohort, absolutely do not know how to use them effectively! In many if not most cases, even the methods they now own. In addition, the withdrawal of good suppliers mean that the procurement exercise is left with a pool of rotten suppliers to choose from. Facilitating spend on yet more dubious value.
In the search for replacement business to mitigate the loss of UK Government business, this has forced the big incumbents to work with the “unsavoury” likes of SME’s. The very sectors that, in previous years, they wouldn’t have touched with a barge pole! They simply were not lucrative enough. However, their numbers have increased, so they might be worth a punt.
Desperate times eh?
A Blessing in Disguise?
Moving out of the EU will necessitate the formation of our own procurement processes independent of another body. Yet at the same time, that process exists to stop corruption in government. Something we see time and time again. Such as local government officers awarding contracts illegally.
“ In 2009, the Office of Fair Trading (OFT) imposed fines totalling £129m on 103 construction firms in England. These firms were found to have colluded with competitors to agree over-inflated bids for building contracts with, amongst other organisations, the NHS and schools. This activity is known as ‘cover pricing’.
Cover pricing is where one or more bidders in a tender process obtain an artificially high price from a competitor. Cover bids are priced so as not to win the contract but are submitted as genuine bids, which give a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.
The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a ‘compensation payment’). These payments of between £2,500 and £60,000 were facilitated by the raising of false invoices.”
If those OJEU thresholds and light touch regulatory controls could stop (or at least mitigate) Silvio Berlusconi’s [alleged] infringements, it certainly can ours. Again, it is not the EU’s fault that we make a mess of how we procure here in the UK, it is our own.
However, let’s be clear! The government are going to be busy negotiating the UK’s exit from the EU. A comprehensive legislative review will of course, be conducted in time, but this will focus on the relationship after triggering article 50 first and foremost. Then we will get into discussions about what we do internally. Between our date of exit, which can render procurement rules invalid and violations potentially unenforceable, and the point at which we put in new laws to cover the gap, which would be years in the making, this may create a period where corruption goes unchallenged and government itself suffers more at the hands of “last minute” vultures aimed at pillaging the public purse. Their alternative is to play it safe and awards extensions. Until they can get their own house in order.