The Government tendering process – a welcome change for small businesses?

Long a subject of media attention, the relationship between the public sector and the small and medium business sector is finally showing signs of improvement. Accused of letting SMEs down in this area by focusing too much on the needs of big business, the Government seems to have recognised the importance of opening up public contracts as a means of aiding recovery from the recession. Hence, two years on from the initial campaign ran by the Sunday Times, the topic has again become a focal point, sparking debate, controversy and renewed interest from all concerned.

Matthew Sanders, Chief Executive of de Poel, the number-one procurer of temporary agency labour, talks about how the tendering process has evolved for businesses such as his, and how he looks forward to a positive relationship with the public sector in the future.

Prior to recent Government legwork, there have been huge and unreasonable barricades between SMEs and public sector contracts. Rather than being openly barred from participating in the bidding process, small businesses have encountered less obvious difficulties, routed deeply in the process itself and the way it operates. Prevented from being shortlisted, small and medium businesses have been left feeling frustrated whilst procurement directors themselves have struggled to improve their supply base. In many cases it has been the sheer complexity of the procedure and the jargon used, on top of heavy bureaucracy, unachievable deadlines, an endless amount of laborious admin work and high costs which have eventually squeezed small businesses out. The need for insurances and other documents, the ISO 9000 for example - a quality-standards certificate only ever required by the public sector - also contributed to the hassle for small companies, rendering their problems disproportionately high compared with larger firms.

The good news is that change is happening, albeit very slowly.

For de Poel, the biggest obstacle has always lain within the pre-qualification stage of the application process. In their report on SME access to public procurement early last year, the All-Party Parliamentary Small Business Group (APPSBG) said PQQs were: "especially onerous, discouraging SMEs from registering". Indeed, despite having small and large clients in 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 been outcast at this phase solely on the basis that we do not already have a public sector client. Nevermind the fact that we are recognised by the public sector itself (scoring highly on every other application answer we give) for providing a low risk and robust business model, only charging our clients a percentage of their savings. Nevermind that we have 100% positive customer testimonials and a track record of providing savings of between 6 and 12% for third sector organisations with the tightest budgets of all. Without a public sector client already, we cannot supply a public body. To say that we have been placed in a 'catch 22 situation' would therefore be an understatement. Evidently, the only companies who can overcome this problem are those involved in second tier supply arrangements, leaving little room for procurement officers to consider new and smaller businesses who, regardless of their supply capacity, have been blockaded by a mere technicality.

And yet, most unexpectedly, 2009 saw two significant developments in the tendering process. The first was Harriet Harman's equality bill. Dubbed by some journalists as the deputy Labour leader's attempt to seize control of the £220Bn a year of public contracts in order to drive through an unprecedented equality crusade, initially, concerns were raised about how this would further affect small business' ability to access public procurement. The plans, which looked to preclude businesses from supplying to the public sector unless they could show gender and racial diversity from within their firm, were suspected to make it more difficult for SMEs to bid for public contracts. But contrary to popular opinion, we at de Poel were somewhat pleased with the proposals. 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 welcomed 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 temporary agency labour supply arrangements for as many as 50 national organisations in the UK and some of the biggest players in retail, logistics, waste management and care.

The second progressive step was as a result of de Poel's persistence. In a 2009 Office of Government Commerce (OGC) quarterly update, a notice was issued to all local public bodies with specific reference to the PQQ stage problem. Surprisingly, they went as far to urge local authorities 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 was enough to initiate radical change is still not yet known, but it has certainly paved the way for a revolution in this area by echoing the problems outlined in the APPSBG report and through reiterating the need for the Government to open up the system to public procurement directors and give them more choice in, and leverage over, their supply arrangements.

Of course, whilst nobody can doubt that progess is being made, the tendering process is as yet, far from perfect. Whilst the role of the small and medium business sector in public procurement remains hazy, there is still a long way to go before businesses will really be able to take advantage of the massive income opportunities the public sector offers. Perhaps, aside from the benefits for small businesses, one of the other things to consider would be the possibilities that a fairer and less rigid application process could generate for the public sector itself. With more choice and independence, not only could procurement directors create stronger supply bases, but also make massive savings in line with Government targets for the year ahead.

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