PARTNERS AT LAST? THE PUBLIC SECTOR AND THE SMALL BUSINESS SECTOR IN THE WAKE OF 2010
The government tendering process and its affect on the small and medium business sector has long been a subject of media attention. Two years ago, the Sunday Times ran a campaign urging for a better deal for small businesses tendering for public contracts. They accused the government of letting SMEs down in this area by focusing too much on the needs of big business. December 2009, and the topic is still a focal point, sparking debate, controversy and a renewed interest in the matter with every press release on its development. Matthew Sanders, Chief Executive of the number-one purchaser of temporary labour de Poel, tells how the road to public contracts may be opening up for businesses such as his own, and how he welcomes prospective changes to the system.
In the past, there have been huge and unreasonable barriers to small and medium enterprises tendering for public contracts. The problem has never been a case of SMEs being openly discouraged or barred from participating in the bidding process. The difficulties have actually been routed in the process itself and the way it operates, preventing small or new companies from being shortlisted and making it difficult for procurement directors to open up their supply base. In many cases it has been the sheer complexity of the procedure as well as the jargon used, not to mention continuous bureaucracy, unachievable deadlines and an endless amount of time, paperwork and costs involved which small businesses just haven’t been able to keep up with. The need for insurances and other documents, the ISO 9000 for example - a quality-standards certificate only ever required by the public sector - also contributes to the hassle for small companies, rendering their problems disproportionately high compared with larger firms.
For de Poel, the biggest obstacle has lain within the pre-qualification stage of the application process. In a report on SME access to public procurement by the All-Party Parliamentary Small Business Group (APPSBG) in April this year, PQQs are said to be: “especially onerous, discouraging SMEs from registering”. Indeed, despite having small and large clients in a variety of different markets, including organizations from within the third sector, care social housing and waste management industries, and irrespective of being the largest procurer of temporary labour in the private sector, de Poel has so far not been in with a chance past the PQQ stage on the basis that we do not already having a public sector client. To say that we have been placed in a ‘catch 22 situation’ would be an understatement. Nevermind the fact that we are recognized by the public sector themselves for providing a low risk and efficient business model (only charging our clients a percentage of their savings) and tend to score highly on every application answer we give. Nevermind that we have 100% positive customer testimonials and a track record of providing savings of between 6 and 12% for third sector organizations with the tightest budgets of all. Without a public sector client already, we cannot supply a public body, and the only companies who may overcome this problem are those involved in a second tier supply arrangement. Thus, evidently the government has left little room for public sector procurement officers to consider new suppliers, who are blockaded by a mere technicality.
The good news is that change is happening, albeit very slowly. As a result of de Poel’s persistence, a notice was recently issued to all local public bodies by the Office of Government Commerce (OGC) in a previous quarterly update, with specific reference to the problem. It urged local authorities and care trusts not to discount companies who don’t have a public sector client already at the PQQ stage if they have other relevant experience, as theoretically, this could be contravening fair competition laws. Whether this will initiate radical change is not yet known, but it does pave the way for a revolution in this area, echoing the problems outlined in this year’s report on SME access to public procurement by the All-Party Parliamentary Small Business Group (APPSBG) and reiterating the need for the government to open up the system to give public sector procurement directors more choice in their supply arrangements.
The other significant development in the sector is Harriet Harman’s equality bill. Dubbed by some journalists as the deputy Labour leader’s attempt to seize control of the £220 billion a year of public contracts in order to drive through an unprecedented equality crusade, concerns have been raised about how this will further affect small business’ ability to access public procurement. The plans, which look to preclude businesses from supplying to the public sector unless they can show gender and racial diversity from within their firm, are suspected to make it more difficult for SMEs to bid for public contracts. But to many people’s surprise, we at de Poel are somewhat pleased with the measure. With a female sales and marketing director and board member, a female marketing manager and as many as four female senior account managers, not to mention staff from a variety of ethnic and social backgrounds, we welcome an opportunity to promote ourselves to the public sector on the grounds of company attitudes and values. From our perspective, it is certainly fairer and more important that firms are judged on their commitment to equality rather than on whether they already have a public sector client, the latter saying nothing about a firm’s ability to supply effectively. What’s more, this kind of criteria shows no bias towards large firms, with a commitment to equality possible in companies of any size, and the paperwork to prove it consistent with the number of employees. If anything, rather than intensifying the problems for small and medium businesses, the move comes as a critical first step in the direction of government open-mindedness, and an appreciation of what really makes a good supplier. At de Poel, we’d like to think we are in a position to comment on what makes a strong service-provider, managing the supply of temporary agency labour for as many as 50 national organisations in the UK and some of the biggest players in retail, logistics, waste management and care.
That said, the future of small and medium business’ role in public sector procurement remains hazy, and there is a long way to go before businesses will really be able to take advantage of the massive income opportunities the public sector offers. Of course, the same can be said for the reverse. A fairer and less rigid application process would not only open possibilities for business, but for the public sector themselves in allowing them more choice and independence, which in turn, could lead to a stronger supply base as well as massive money-saving opportunities.
As the recession continues into the autumn, the pressures on the public sector are the most they have been since 1990s. Government spending remains under public surveillance, not to mention the critical eye of the Tories, leaving public bodies across the country in a precarious position.
Just a day after the Treasury ordered hundreds of public organisations to provide data on their back-office spending in an attempt to cut costs, the NHS was told it needed to lose 10 per cent of its workforce in order to achieve its target savings by 2010.
At the same time, the effects of a cross-sector skills shortage and a nationwide reluctance for individuals to take up permanent positions in industries such as care are pushing more public service providers to rely on temporary agency labour - an expensive and often risk-filled practice given the fragmented nature of the market and absence of a government regulator.
The route of the problem, recognised by the Treasury themselves in their recent data collection exercise, is that the majority of public organisations are unaware of varying fee and pay rates implemented by agencies, and have limited access to critical management information regarding their temporary agency labour spend. Spend analysis, according to the Office of Government Commerce, is crucial to controlling expenditure and obtaining the best out of the supply base. Unsurprisingly, results of a study published alongside the Budget suggested that the Treasury has only an estimate of public sector spend within back-office departments.
Thus, if there was ever a time for the public sector to cut spending on temporary agency labour, that time is now. And yet, the leading procurer of temporary agency labour in the UK, whose fail safe cost-cutting solutions are savings millions of pounds a year for social housing associations and charitable care organisations, are being turned away by public HR and procurement departments on the grounds of problems within the government tendering process.
Managing the supply of temporary agency staff for retail and waste companies such as Sainsbury’s and Sita as well as care and social-housing organisations like Shaw Healthcare and Mears, the Cheshire-based company de Poel are frustrated. Experts in their market, they have identified ways to increase an organisation’s visibility and control over their use and spend on temporary agency labour, which in turn, optimises the supply of agency workers and reduces costs by as much as 10 per cent annually.
But without the opportunity to prove these benefits, the company are useless to the public sector. In a bid to showcase the proven advantages of their intervention, for the first time in their company history de Poel are offering to forgo their savings fee and pass on 100 per cent cost savings to their first public sector client.
de Poel’s Sales Director, Jeremy Galpin, said: “Our expertise in temporary agency labour and our ability to save money has helped us attract clients across a range of sectors. We will guarantee tangible benefits for any public sector organisation, and are looking forward to demonstrating this with our first public sector partner.”
To discuss further please email Jeremy Galpin, jgalpin@depoelconsulting.com
