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Central government's procurement lessons for local government

Source: Public Sector Executive Jan/Feb 2012

James Mitchell, bid manager at public sector IT providers WTG and the former business development manager at the Forum of Private Business, discusses the progress – and lack of it – in getting more small businesses involved in public sector procurement.

In the last few months much has changed around Government procurement for small and medium sized enterprises (SMEs). The changes that SMEs need in the government market are beginning to take shape.

Central government has made good progress in striving to get SMEs engaged in this marketplace. The Government looks to be engaging two models of procurement, both of which have their pros and cons for all parties concerned, but from a SME point of view it shows commitment from central government.

What SMEs would like now is this same commitment from local government.

The two models of procurement suit different types of service. The first model is based around a reduced set of criteria and qualifying to be appointed onto a framework. This framework is catalogued for government departments to search for services or products they require without having to go through OJEU or a main framework. The main example has been the G-Cloud framework. This has allowed large corporates and SMEs to tender to be on a framework in a less bureaucratic manner and is still all-encompassing.

Having been at a presentation at Intellect about this, the upset of the tier 1 and 2 suppliers was palpable, with all of their questions being around quality and ‘letting all the SMEs in’. All I can tell them is that there is enough business for all companies, and the Government is ridding the industry of the 10% margin that tier 1 and 2 companies seem to charge the Government for subcontracting.

The other example is the new Ministry of Justice OJEU for the National Offender Management System (NOMS). This is a large IT procurement that no SME could deliver, but should they be excluded from the supply chain?

The answer from the MoJ has been ‘absolutely not’. They have invited all the SMEs to fill out the PQQ as best they can (the PQQ has been designed for a tier 1 ICT supplier) and the MoJ will collate this information.

When the top tier 1 suppliers have been chosen to be invited to tender, a list of the qualifying SMEs will be circulated to all the tier 1 Suppliers, with an evaluation element in this area. This can only be good: central government doing marketing for SMEs to tier 1 suppliers.

Which model is best depends on the service or product being asked for. The G-Cloud procurement is really around a product model and I think it will work well. Will there be teething problems? Of course, hence the short run of six months for this framework as the Government tries to get G-Cloud procurement correct, and how many companies they want on the catalogue. It is a trial and we all have to accept that.

The MoJ model is more around service and should achieve good results for large ICT procurements and other such service procurements, such as MoD procurements where tier 1 suppliers will always win due to size but will use SMEs to provide specialist products and services. SMEs no longer have to be tied to one or more channel partners and depend on them to win an ITT; they can be more flexible.

However, when it comes to local government, things are not so good. Local government at this present time is far more riskaverse than central, and this is hampering progress. Local government really needs to address this, especially within the current climate. Also, SMEs have to address this as well in their propositions to make sure that local government procurement managers feel that the risk to them is mitigated if the best proposition is from an SME.

One recent by-product of the austerity measures in local government is prohibiting them going down the procurement route due to the expensive nature of this. This can’t be right and central government must either give direct cash for this or find another way to help local government procurement.

Unless this happens, austerity in local government will mean losing far more jobs on the front line, rather than local government doing things better with better processes, automation and therefore keeping people on the front line.

It would also mean more opportunities for the SME sector.

In conclusion, the Government procurement policy has, in a short space of time, moved a long way in the right direction. Of course it can go much further, but it will take time. SMEs have to move with this and change their marketing and sales strategies to meet this new way forward.

SMEs need to be independent in the government marketplace, but also start to nurture relationships with multiple channel partners to get the best exposure. For the Government to hit the target of 25% of contracts to be with SMEs, its next step must be to tackle issues around local government.

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