Innovation and changeGovernment TechnologyThe public sector procurement dilemma

The public sector procurement dilemma

Colin Wales, Business Development Director at Arcus Global examines the complexity of the procurement process and why public sector organisations need to re-evaluate the tendering process to include the small tech innovators alongside the big businesses.

Over the past few years, the Government has been working harder to do more business with SMEs to level the playing field. In spite of this, the complexity of the procurement process has proven to halt many a potential purchaser in their tracks. As a result, in late 2018, a range of experts spoke to MPs on the Science and Technology Committee on how attempts to open up procurement to SMEs have progressed over the last three years.

The gist of the discussions was that early success in shifting contracts to a more balanced portfolio of suppliers had seen some modest success, but that the trend seemed to be reversing in the last year. One of the underlying causes of this was cited as the procurement processes that are used to make awards, and this is a theme that has received much attention in the last six months in other forums.

The Local Government Procurement Strategy guidelines published in 2018 described mature behaviour in procurement as ‘taking a proactive approach to integrating SME organisations into procurement and commissioning’, but has this vision really been achieved? This move towards maturity has seen lukewarm interest, with many authorities choosing instead to remain working as they have always worked, retaining legacy thinking in procurement activities.

A proactive approach can be described as ‘dialogue-based’, with local authorities taking the time to assess procurement suppliers based on their merits and their outcomes, with less reliance on the price tag. However, this may have been a premature idea at the time it was introduced – many authorities used a scoring system which was intended to mark suppliers in terms of their value. And, as is common, the conclusion was that ‘cheap’ is synonymous with ‘best value’. As we all know, SMEs are not always the cheapest option. Therein lies the first obstacle.

This stumbling block has caused some authorities to retain old practices or buy the way that they have always bought. The ‘old way’ invariably favours larger businesses which can traverse tender submissions with relative ease, automatically possessing the reference sites and high revenue that SMEs might not yet have built up for themselves.

Then the G-Cloud framework was introduced, designed to remedy these woes with a simplified system that allowed buyers to choose based on their specific needs and wants. Most of the suppliers on that framework were SMEs. The framework reduced the bid cost for both buyer and supplier and opened up the assessment system to more than a few key suppliers. Dialogue was welcome, encouraged and easily accessible. Or, it should have been.

This vision of easy and open dialogue saw modest progress, but quickly buyer behaviour shifted backwards. Why was this? For some, it was a matter of protection. The risk of opening themselves up did not equal the potential gains for some buyers, who are accustomed to purchasing online with little to no contact, whether that is for smaller projects or large, complex operations. For others, the average contract length presented something of a sustainability problem; it was just two years long. It allowed for an easy ‘get-out’ clause based on the short contact length. The plethora of obstacles that both buyer and supplier can face acts as a swift deterrent.

Vexing hurdles

Creating the G-Cloud framework was originally intended to simplify the procurement process and encourage local government to take steps towards fairer buying methods. The aim was to take away the red tape that favoured the powerful and the cheap, but instead of taking it away, the G-Cloud framework only replaced it with other, equally vexing hurdles. Any local authority looking to make changes in the way they went about procurement was swiftly discouraged from choosing SMEs, who lacked the large recurring revenue stream to meet financial standards and present themselves as ‘best value’. Adding to this, the aim of simplification may have contributed to the role of the procurement process being diminished.

This new system was simple but obstinate. By favouring safety over risk (even in the face of great rewards), those involved in procurement may have felt they were safeguarding jobs and keeping the sanctity of the process in place. The motivation to change was tepid.

The Government Digital Service (GDS) is responsible for transforming the way we work digitally. The three themes of innovation, transformation and collaboration discussed on their most recent year review podcast are clearly still a focus, but we need to address our understanding of why local authorities are still hesitant to change legacy thinking. Only a small number of workers in the civil service feel like their local authority is open to involving SMEs in the tech procurement process, and this has to change. The riddle runs deeper than a few overzealous regulations and unenthusiastic purchasers.

The procurement process needs to move beyond simplification, because simplification does nothing to fix regulations that stop SMEs from escaping the ‘cheapest is best’ trap – a trap that discourages dialogue rather than encouraging it as the GDS originally set out to do. We must make the outcomes far more appealing, worth the risk – while at the same time reducing the risk altogether. Legacy attitudes towards risk management cite jobs and job value as the reasons, so we also need to reassure, and do all we can to ease concerns.

So, we raise a glass to the innovators, the risk takers and the visionaries who cut through the culture of ‘we can’t’ and start to think about ‘how we can’. And that nearly always starts with making sure that procurement is an enabler to change, not an obstacle to it.

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