How the Cost of Living Crisis is Continuing to Impact Public Sector Tendering and Procurement

Defined by The Institute for Government as ‘the fall in real disposable income’ excluding essentials such as rent/mortgage, bills and food shopping, the drastic rise in cost of living has plunged an estimated 40% of households into living month-to-month, with the average household almost £1,200 worse off than prior to the beginning of the crisis.

In February 2023, the annual inflation rate was calculated at 10.4%, significantly higher than the national economies of comparable G7 countries; 10% more than Germany, a 30% greater margin than France and almost double that of the United States. Although forecasts are now more optimistic than original long-term projections in 2022 – with the Office for Budget Responsibility predicting a return to 2.9% inflation by the end of 2023 – an April calculation sees annual inflation rates persistently within double digits.

Impact on public sector procurement

In more positive news, the cost of living crisis on public sector opportunities and total procurement spend has not affected the public purse as severely as the 2008 financial crisis, which resulted in a decade of austerity measures which impacted procurement spend. For the 2021–2022 financial year, however, gross spending across all central and sub-central authorities totalled £379 billion, an increase of £24 billion or 7% from the previous year – a good sign for businesses relying on public sector contracts for guaranteed revenue.

To minimise the severity of future cost of living impact due to fluctuations in energy supply or global food supply chains, the central government has implemented a handful of initiatives to support long-term resiliency and consumer savings. For example, in March of this year the Department for Energy Security and Net Zero announced a funding package totalling £1.8 billion to support decarbonisation and energy efficiency, with the additional advantage of saving residents money on energy bills. Funding comprises of three different initiatives:

• Social Housing Decarbonisation Fund: installation of renewable energy systems, heating controls and cavity/internal/loft insulation totalling £778 million.
• Home Upgrade Grant: providing energy efficiency upgrades and low-carbon heating through local authority funding channels, worth £630 million.
• Public Sector Decarbonisation Scheme: supporting the government’s aim of reducing emissions from public sector buildings by 75% between 2017 to 2037, tallying £409 million.

As well as realising consumer savings, the collective scheme will also aid in supporting the government’s Net Zero by 2050 targets, delivering real value and long-term savings across multiple initiatives while providing valuable tendering opportunities for companies in the plumbing, heating and mechanical and electrical sectors.

Examples of cost of living initiatives

Public procurement analysis website Tussell has released a review of local government schemes and opportunities with the explicit purpose of alleviating the effects of the cost of living crisis over Q1 2023. This includes the following:

As evidenced above, the opportunities are not relegated to a single sector, but consist of contracts for heating and plumbing services, business consultation and wider public education. Additionally, they will align wider governmental objectives such as the widely-touted Levelling Up agenda, creating a synergy which will result in more impactful outcomes for businesses (via sustainable growth) and communities (through providing meaningful change for regionally specific challenges).

Supporting clients with bid and tender opportunities

With over 14 years’ experience and 7,000 ITT and SQ submissions completed on behalf of our clients, Executive Compass are well placed to support with a variety of bid and tender writing services (including bid writing, tender reviews and overall bid management service) that are relevant to the cost of living crisis. This may consist of the following:

• Embracing cost of living challenges as a ‘bid theme’ by incorporating local statistics to effectively demonstrate sensitivity and awareness of local issues (such as fuel poverty) alongside persuasive content on how your organisation is best positioned to deliver on issues facing the wider community.
• Introducing efficiencies and cost savings into the tendered service, such as delivering training to residents on managing their new energy-efficient heating systems, thereby delivering innovation and added value to buyers who are also experiencing difficulties with budgeting in the current economic climate.
• Advising on social value commitments which maximise impact on reducing the effects of the cost ofliving crisis, by conducting independent research on the purchasing authority’s priorities and challenges and ensuring the proposed commitments are targeted, feasible and proportionate to the overall contract value.

Central government bodies and sub-central contracting bodies such as local councils, housing associations and police authorities issue tender opportunities daily across the UK. To find out more on how we can support you with an opportunity suitable for your organisation, contact our sales and marketing team at 0800 612 5563, or via email info@executivecompass.co.uk.