Encouraging SMEs in Public Procurement

In the past, government procurement strategies have traditionally been led by lowest price, whereby authorities sought out suppliers that could offer “efficiency savings” and “productivity gains”, which quite often meant a lot of SMEs were simply unable to compete with larger suppliers taking advantage of economies of scale.

2015 updates to the public sector directives and regulations

Under the Public Contracts Regulations 2015 there have been some significant changes to the procurement process. Contracting authorities can no longer ask suppliers to complete PQQs if the contract value is below specified EU thresholds (although not affecting NHS procurement until April 2016): £111,676 for central government contracts and £172,514 for local authorities. Above the threshold there will be a more standardised PQQ. The Cabinet Office Procurement policy update is available in full here.

Although contracting authorities cannot use PQQs for lower threshold contracts, companies being considered for government contracts will still need to be qualified e.g. have appropriate levels of insurance, be financially sound, have quality management processes in place and a demonstrable track record of having successfully completed similar contracts. Authorities may also ask “suitability assessment questions” provided they are relevant and proportionate to the contract.

Many feel that removing the requirement for PQQs simply changes the qualification process from a separate preliminary stage to a first stage of a full tender evaluation. This means that instead of completing a relatively short questionnaire to demonstrate their qualifications, a supplier for a public contract will have to provide exactly the same information as part of their tender but will also have to complete a full tender proposal. This will often consume a very significant amount of time and resources for SMEs and companies must be able to produce consistently high quality submissions in order to successfully win contracts.

Additionally, there is also likely to be a greater cost imposed on the contracting authorities who are evaluating the tenders submitted. Instead of evaluating perhaps a small number of tenders from qualified applicants, they will have to carefully evaluate all of the tenders that are submitted to them.

One of the much more positive measures is the focus on reducing the qualification barriers. For example, turnover has sometimes been used as a means to exclude SMEs that would otherwise be able to provide an excellent bid. The new regulations specified that in normal circumstances the requirement for turnover should not be more than twice the contract value.

Procurement Mystery Shopper Scheme

One of the directive’s main aims is to increase transparency throughout the whole process. The Government launched a Mystery Shopper Scheme in 2011 to allow any supplier involved in the public procurement process to raise concerns about contracting authorities’ practices. A report of the number and types of concerns raised for the first three years can be viewed here. Under the SBEE Act, the government has the power to investigate the way an authority’s procurement process has been conducted but suppliers should note that there are certain services and government departments where it will not apply for example, Schools, Academies and the NHS.

For the first quarter of 2015 there were 30 complaints to the Mystery Shopper scheme about various authorities’ procurement practices. The concerns raised have been grouped according to the type of complaint received, with 87% of complaints received relating to the procurement process itself! This encompasses concerns that contracting authorities prefer an incumbent supplier, timescales being too short to submit bids, issues with the specifications, evaluation, feedback and lack of transparency in the pre-procurement stage.

As a move towards greater transparency, the government’s “Mystery Shopper” is a step in the right direction and may help SMEs understand the procurement process more fully. On-going improvements and developments to the procurement process are necessary to ensure SMEs are encouraged to bid for contracts and have a greater chance of success.

The updated procurement directives are nothing to worry about and should not affect your bidding process too much. For further advice or professional support with a PQQ or tender, contact us today to make sure you are producing the highest quality submission. Call free on 0800 612 5563 or email info@executivecompass.co.uk.