The costs of UK public sector procurement processes are among the highest in Europe – Pedro Paulo asks whether new EU reforms will make life easier.
Small and medium-sized businesses have long felt unable to compete in UK public sector procurement competitions due to a focus by government on awarding monolithic contracts to huge multinational companies.
A package of new procurement directives recently agreed by the European Parliament is, however, set to change this situation, aiming to help EU member states cut the administrative burden and increase opportunities for SMEs to participate.
It is hoped that the introduction of a standard “European Single Procurement Document” will simplify the bidding process and make it significantly easier for SMEs to bid for public sector contracts.
Based on self-declaration, this document means that only the winning bidder will need to provide original documentation, a move which the European Parliament estimates will reduce administration by more than 80%.
In addition, the new directives will see public sector bodies required to break large contracts into smaller lots, which should not only make them more accessible to SMEs but also save them up to 60% of current bidding costs.
There has been support for these reforms from the UK government, which is working towards seeing a quarter of government spend with smaller business by 2015, and has been delivering measures to encourage greater overall involvement by SMEs in public sector procurement.
Time-consuming and expensive
Gatewit recently commissioned a report by the Centre for Economics and Business Research (CEBR) to investigate the current state of public sector procurement, and its findings offer a clear demonstration as to why these new directives would be welcomed by SMEs hoping to compete against larger firms for government contracts.
According to the report, the average cost of a UK procurement competition in the public sector is £45,200 which, at 90% re expensive than the EU average of £23,900, makes it the highest in the European Union.
At £1,260 per tender, 58% higher than the EU average of £800, the UK is also one of the most expensive countries in Europe for public sector bodies to attract bids from potential suppliers in a competitive process. Only Denmark, Norway and Italy record higher costs.
CEBR’s report also revealed that the UK’s public sector procurement process takes 53 days longer than the EU average, a fact that’s highly likely to contribute to the high costs of the overall process.
Figures such as these make it clear why a number of businesses in the private sector can feel less than enthusiastic about the prospect of tendering for public sector contracts.
The barriers to entry presented by these high costs and timescales can be particularly prohibitive to smaller businesses who might find themselves without the resources required to take part in the competition.
This means then that tenders are being submitted by a limited pool of businesses, with only larger companies able to participate, leaving the public sector with a restricted and, potentially more costly, choice of potential suppliers.
Despite these factors however, UK public sector procurement competitions are still attracting more bids than their average European counterpart.
In order to maintain this, and to increase value and efficiency for both buyers and sellers, businesses should welcome the new directives from the European Parliament as a positive step towards increasing competition and ensuring better value for the public sector by reducing the expense and complexity of the procurement process.
The launch of its CloudStore platform for public sector IT procurement in 2012 saw the UK government taking steps towards helping SMEs to take part in competitions for large contracts.
A new mandate from the EU Commission that comes into force in 2016 could further improve the situation, with European public sector organisations being required to adopt e-procurement technology for all purchasing.
This particular mandate is designed to make purchasing and bidding processes faster and more cost-efficient, and is predicted to deliver savings of around £30 billion.
Of course, over the next couple of years a number of small and medium businesses will have their first taste of the public sector procurement process thanks to the opportunities offered by the new directives.
It’s worth considering therefore that, although the size of the requirements may be lessened due to the reform, these companies will still be expected to invest a significant proportion of time, money and resources in all bids being made.
It’s likely though that, despite this, these same small and medium businesses are highly likely to welcome any reforms that offer them a way into the public sector procurement process.
What is clear from the CEBR report is that the public procurement process in the UK is currently far too expensive and time-consuming.
But, by broadening the competitive pool and reducing the barriers to entry for small and medium businesses, these new directives from the European Parliament could be exactly what’s needed to improve the process and deliver greater value to both sellers and buyers alike.
Pedro Paulo is chief executive of ICT supplier Gatewit