Procurement – an enabler to change, not an obstacle to it

Arcus Global

Arcus Global
February 1, 2019

By Colin Wales Business Development Director

MPs on the Science and Technology Committee recently heard from a range of experts on how attempts to open up Gov procurement to SMEs has progressed over the last three years.

The gist of the discussions was that early success in shifting contracts to a more balanced portfolio of suppliers had seen some modest success but that the trend seemed to be reversing in the last year. One of the underlying causes of this was cited as the very procurement processes that are used to make awards and this is a theme that has received much attention in the last six months in other forums.

The Local Government Procurement Strategy guidelines published in 2018 described ‘mature’ behaviour in procurement as; “Taking a pro-active approach to integrating SME organisations into procurement and commissioning.” It also encouraged a more dialogue-focused procurement process with less reliance on ‘price tag’ and more focus on outcomes. Despite this, it is evident that many Local Authorities have retained legacy thinking in procurement activities with contract awards still based on a flawed scoring system that was intended to identify ‘best value’ but actually created a basis for suppliers to win bids based on the quality of their bid teams, not their products and innovations.

The introduction of the G-Cloud framework provided a marketplace where SMEs could focus bid effort on securing a place in the supplier listing and then customers could assess their needs and buy from a ‘catalogue’ of expertise based on their specific needs and wants. This should have provided the ideal environment for a dialogue-based market assessment and reduced the bid cost overhead for both the purchaser and the supplier. Instead, a large number of Authorities simply chose to ignore the framework and retain their former buying behaviours. Why would that have happened?

A cynical view might be to suggest that by making procurement more straightforward, the role of the procurement resource in Local and Central Government was diminished. By favouring ‘the old ways’, procurement teams might have felt that they were protecting jobs and justifying their existence in a digital world where most of us expect to buy on-line without necessarily having any direct contact with the supplier or legal representatives at all. Of course for small purchases this is fine, but for more complex projects and outcomes there is obviously still a need to have contracts and a clear understanding of expectations on both sides. But that should not mean that suppliers have to jump through all of the same hoops all over again that they did to secure their place on the framework in the first place. And, having decided on the best partner to deliver the desired outcome, why would it then be necessary to run a process within a process and award to the cheapest bidder?

Add to this the early G-Cloud framework contracts only allowing a two year term – which for technology projects was far too short and an easy ‘get out’ for local procurement to decline to participate under those terms – and what should have been a new model for SME participation rapidly became as onerous and complex as the processes it sought to replace.

According to techUK in an article published early in 2018 ( only 21% of civil servants believed that there was inclination within their department or organisation to increase involvement of SMEs in the tech procurement supply chain. At a Local Authority level the back office systems marketplace continues to be dominated by a small number of well-entrenched suppliers who have the benefit of a large recurring revenue stream to fund bid teams and reference sites that are often mandated in tender submissions. For an emerging SME, making existing sites mandatory and applying financial criteria that a new business could not hope to comply with, causes the innovation rocket to stall on the launch pad. Add to that the persistence in the application of the ‘cheapest = best value’ principle and it’s easy to see how an established player could leverage revenue from historic business to ensure that any new suppliers are denied access to their market share.

The whole point of GDS and the digital agenda was to stimulate innovation and change. At present the way that Local Government procurement in particular is operated that rate of change will be very slow indeed. Being risk averse when you are dealing with the public purse is a commendable trait – but applied too rigorously and without due regard for risk:reward analysis this approach simply extends the life of legacy systems, stifles digital ambition and presents barriers to market entry for a host of smart, innovative SMEs just dying to show how technology that has revolutionised the commercial sector in a matter of a few years could do the same for UK Local and Central Government.

So we raise a glass to the innovators, the risk takers and the visionaries who cut through the culture of ‘we can’t’ and start to think about ‘how we can’. And that nearly always starts with making sure that procurement is an enabler to change, not an obstacle to it.