It’s no surprise that political parties aren’t rushing to talk about procurement in this election campaign. In a campaign dominated by big topics – Brexit, the NHS, social care, nationalisation of industry – who can really blame them? You can’t don a high vis and a hard hat for a contract unveiling.
But it matters.
The central government procurement budget is estimated to be worth £40bn, a figure which has been growing under both Labour and Conservative governments in recent years and will only continue to do so as the state gets further squeezed.
As more public services are contracted out to private, public and third sector suppliers, it is essential to have an effectively managed procurement process. Now, more than ever, public sector procurement teams need to be constantly reviewing how to spend their budgets efficiently and which organisations to work with in order to achieve the cost–effective outcomes that the public sector so desperately needs.
The National Audit Office (NAO) has revealed that more than 43% departments depend on single tenders or existing contracts, meaning limited or zero competition when procuring services, which must in turn limit the competitiveness of the bids.
As part of a drive to change this and to break up the big ‘prime’ contractors’ dominance, the Government is committed to increase outsourcing to Small and Medium Enterprises (SMEs).
In 2010 the Government set a target for 25% of government spending to go to SMEs by 2015, a target met ahead of schedule in 2014-15, when the Cabinet Office stated that 27% of spending went to SMEs. The Government has extended the target to 33% by 2020.
However, if you dig a little deeper you see that the figures include sub-contracting from prime contractors in order to make up the target, so in reality the procurement space is still dominated by a few large players.
Although they recognise some progress, MPs on the Public Accounts Committee have recently stated that they are “not persuaded that the Government’s approach so far has resulted in substantially greater competition for government business”. The report also said that they see continued domination of large providers; for example, the Government’s top five IT providers received over half of government’s total spending on contracted out IT.
Their findings are backed up by sentiment analysis conducted with digital analytic tools by our sister agency, onefourzero, which suggest that the general public have overwhelming negative sentiment towards the subject of procurement:
However, focusing solely on the procurement process misses the point and the real benefit is in what good procurement delivers – value for money, innovation, competition and much needed growth opportunities for the country’s SMEs.
With almost 5.4 million small businesses in the UK, SMEs are crucial to the UK economy. Through opening up procurement opportunities for SMEs, the public sector can not only support and drive local economic growth, but also play a key part in driving forward the Social Value Act.
The Cabinet Office has pledged to cut procurement times from 220 to 120 working days for all but the most complex goods. However, Reform, a social policy think tank, have argued that procurement times had in fact increased and the time it took to win a contract remained the third slowest in Europe, which in turn costs money.
Brexit gives government the opportunity to look at procurement rules, currently governed at an EU level, to see how we can make them work better for the British economy. One of the ideas being floated around is whether procurement could favour British companies, which, while initially attractive, presents undoubted legal implications and could lead to similar protectionist measures from the European market.
And yet, there are some signs that an attempt to change the procurement process is occurring.
Ben Gummer MP, minister for the Cabinet Office and the paymaster general in the previous government, called for a deep transformation in public sector procurement in the Government Transformation Strategy in February 2017, stating that there is a need to “to ensure that user-centered, design-led, data-driven and open approaches are commonplace in contracting by 2020”.
This approach has to be welcomed and the hope is that it is pursued by the new Government after the election, particularly considering Ben Gummer is being widely tipped for promotion so may not be there to see it through himself.
Assuming we do see the Conservatives returned to office, and Theresa May continues with her low profile approach to governing, then perhaps procurement reform will be on the agenda and the Transformation Strategy might live on.
It may not be a top of the priority list for the general public, but what could be more fitting for a “strong and stable” government who eschew the headlines than to get stuck into the unglamorous world of public sector procurement, and reform the system so it improves our public services and creates opportunities for business.
And you never know, with 15.7 million people working for SMEs, it may even win parties some votes.
To find out more about our business to Government capabilities please get in touch: email@example.com