UK economic growth stalled by tendering inefficiencies — new analysis by Spend Network shows UK businesses could be starved of more than £22bn in cash flow
First published on 10th March 2014
Data company, Spend Network has revealed that up to £22bn of government cash, intended for the UK economy, is being delayed by an inefficient tendering system. The company’s analysis of over £1tr of EU procurement data shows that UK’s tendering process is 45% slower than the EU average, and that up to £734m of the stalled funds could be delayed to UK SMEs each year.
Spend Network, is one of the companies on the Open Data Institute’s (ODI) startup programme. In its analysis of tender processes across Europe, the company found that the UK public sector is third slowest in the EU for completing tenders, behind only Greece and Ireland. UK Government took 45% (53 days) longer than the EU average to complete an EU compliant tender in 2013.
Cost to small businesses
In particular, Spend Network estimates that a delay of 53 days starves the UK’s SMEs of £734m of cash flow each year as they wait for the Government to award contracts*.
Ian Makgill, Managing Director of Spend Network said: “Delays such as this not only create an unnecessarily challenging environment for SMEs, but also dissuade SMEs from engaging with government in the first place. Having to wait nine months to know if you’ve won a contract is really only feasible for larger companies, SMEs simply can’t operate with a nine month delay on cash flow”.
Gavin Starks, CEO, Open Data Institute said: “Access to data such at this is critical to an open economy. We applaud the steps that the European Union has already taken to open up datasets but there is more that they can do. Too many EU datasets, including the data that this research is based on, is still not provided in a truly open and useful manner. Doing so would enable us all to understand what the causes and solutions may be to help grow our SME economy.”
Spend Network is now calling on governments in the UK and EU to release specific information as open data:
- Details about the closure of all EU tenders including information on whether they have been cancelled or awarded (at the moment only about 30% of UK tenders get a contract award notice specifying who won the work).
- Information on contracts, including where work has been awarded through government frameworks. Frameworks are short-lists of suppliers that are can be approached about specific pieces of work. There are many thousands of these across the EU and at the moment, there is no information about where a contract might have originated.
- Details of all government spending, with no monetary threshold (currently, most departments only publish their spending data over £25k). This should then be clearly linked to specific contracts, so it is possible to trace what money is being spent on which products and services from each supplier.
- A dataset with unique identifiers for every public sector body in the UK. Currently, there is no way to clearly identify every public body and so it is impossible to accurately link each organisation to specific contracts.
Notes to editors
*According to spend statements analysed by Spend Network, the total spend with SMEs by Central and Local Government (Nov 12 — Oct 13) is at least £3.14bn. This data is sourced from over £1tr of spend data published by Government, spend with SMEs is identified as spend linked to companies that are exempt from publishing full annual reports to Companies House on account of their size.
** 99.9% of the UK’s 4.9 million businesses are SMEs, with a combined turnover of over £1.5tr:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/231994/SME_Two_Year_On_Report.pdf, https://www.gov.uk/government/news/number-of-private-sector-businesses-surpasses-last-years-record-high
For a full breakdown of the figures and methodology used for this analysis, and a map showing the differences in tender times across Europe, go to Spend Network’s micro site (http://tt.spendnetwork.com/index.html).
Spend Network’s research is based on data from over 350,000 tenders from 2009 to 2013. The data shows the time in working days between each tender being issued and the contract award notice being posted by the Official Journal of the European Union (OJEU). The data has been taken from the Tenders Electronic Daily (TED) dataset which includes all EU public sector tenders valued above 134,000 EUR (£111,676) as required by EU procurement legislation.
TED is published by the EU Publications Office, which has recently made the data available for free, but under a restricted license. The EU Publication Office is in the process of transitioning to publishing this data as open data, but there are currently restrictions on how Spend Network uses it.
Spend Network’s figure of £22bn is based on a proportion of the total spend with registered companies by Central & Local Government, so £94.76bn is the total spent with companies by Government between November 2012 and October 2013. This is divided by 227 (total number of working days) to get a figure of spend with companies for every working day, (£417.4m per day). We then multiply that by 53 (EU avg tender timeframe is 119 days, and the UK is 53 days above average), giving us £22.13bn as a total cash-flow figure that is held back from the UK economy by a 53 day delay.
Spend Network’s figure of £734.2m is based on the total spend with SMEs by Central & Local Government, so £3.14bn divided by 227 to get a figure of spend with SMEs for every working day (£13.9m per day). We then multiply that by 53 (EU avg tender timeframe is 119 days, and the UK is 53 days above average), giving us £734.2m as a total cash-flow figure that is held back from SMEs by a 53 day delay.
We estimate that the total cost to the state of delaying tenders is £112,025,918.84. This is based on the state completing 9,926 OJEU tenders in 2013, and that a tender costs the Government £213 per day to service. With each tender delayed by 53 days, the state absorbs a cost of £11,286 per tender in extra costs, which equates to £112.06m in costs. Resource costs were based on an average salary of £32,000 for a procurement officer and 1.2 FTEs working on a tender on a given day.
About Spend Network: Spend Network provides collects the spend statements and tender documents published by Government in the UK and Europe and then publishes this data openly so that anyone can use the data. We currently host over £1trn in transactions from the UK and over 1.6m tenders from across Europe. We make money by selling research and analysis to Government and business. Spend Network is one of the businesses in the Open Data Institute’s startup programme, an initiative designed to support and nurture businesses to become profitable enterprises through the innovative use of open data.
About the ODI: The Open Data Institute catalyses the evolution of open data culture to create economic, environmental, and social value. It unlocks supply, generates demand, creates and disseminates knowledge to address local and global issues. Founded by Professor Sir Nigel Shadbolt and Professor Sir Tim Berners-Lee, the ODI is an independent, non-profit, non-partisan, Limited by Guarantee company. It has secured £10 million over five years via the UK innovation agency, the Technology Strategy Board, $750,000 from global philanthropic investor Omidyar Network, and is working towards long-term sustainability through match funding and direct revenue.
Originally published at spendnetwork.github.io.
