Public Sector Procurement

Today, another post from Richard Manson from CloudTrade The limited use of SMEs by local government has for many years been flagged as a problem. There are 4.8m SMEs in the UK, making up around 50% of the private sector with an annual turnover of £3 trillion. Yet SMEs are often discouraged from public sector deals due to the bureaucracy that comes with working with them and the associated costs which can price SMEs out of this market space. In a bid to increase the use of SMEs, UK government and the European parliament have introduced initiatives to make it easier for SMEs to do business with the public sector. Yet the success of these has been limited. Initiatives have mainly focused on the use of technology and frameworks to reduce the barriers SMEs face in doing business in the public sector. Although a step in the right direction, the myriad of frameworks and poor adoption rates within government has hindered success.

For my sins, I have been looking at the NHS Procurement Atlas of Variation – Metadata, the opening two paragraphs of which read: The NHS Procurement Atlas of Variation has been developed to deliver greater transparency by comparing the prices paid by different trusts for the same types of products. This will allow trusts and their suppliers to understand where better value is available and then act on this information to reduce costs (my emphasis). Discontent with the Atlas has been well documented and I don’t need to rehearse those arguments here. What surprised me was that, even now, after all of the improvements in public procurement in recent years, the DoH could issue a procurement policy document that treated price, value and cost as synonyms and expect to be taken seriously. This is an antediluvian notion, that procurement is about securing the best (usually lowest) price and nothing else. It is not.

On Monday morning I had what I thought was a slight cold. Sniffing, I headed to London. By late morning, it was a proper cold and by the time I arrived in Westminster for the second sitting of Stephen McPartland’s parliamentary inquiry into e-invoicing, I’d developed full blown man-flu. This was a session characterised by contrasts. Forthright opinions together with cautiously expressed views. Good news mixed with disappointing revelations. But overall a great second session.

MEAT or the Most Economically Advantageous Tender has always been one of the assessment criteria upon which contracts could be awarded under EU procurement law. But no longer – soon it will be the only option. A slightly refined version of old MEAT, new MEAT will encourage evaluation of the bids offering the best price-quality ratio. This change is described by Jennifer Robinson as just one of many changes to EU procurement law that collectively represent a complete overhaul, the biggest change in public procurement law in 10 years.

On 8 October 2013 the Aswad Composite Mills factory, in Gazipur, outside Dhaka in Bangladesh burnt down. Seven workers were killed and a further fifty were injured in the fire. As newspaper reports state, the fire came soon after eleven hundred workers had been killed in a blaze at the Rana Plaza factory, a tragedy which led to more than ninety High Street retailers reaching an accord to ensure fire and safety inspections at their suppliers’ premises. The Aswad Composite Mills were not amongst those to be inspected because they were not perceived to be in the direct supply chain of the Western retailers.

I thought of these tragedies when reading the draft Directive on public procurement regarding use of “life cycle costs” in assessment procedures. I am aware of the possibility of bathos in that sentence – I was reflecting on the very real human cost of supply chain decisions the further one looks back through the tiers.

I have been reading the draft of the new Procurement Directive. I had previously dipped into it but have now read all 360-odd pages in sequence. There is a lot in the draft Directive of value, particularly about sustainability, but I found myself musing on the concept of “Abnormally Low Tenders”. The explanatory notes in the draft are quite clear what the concern is: (44a) Tenders that appear abnormally low in relation to the works, supplies or services might be based on technically, economically or legally unsound assumptions or practices. Where the tenderer cannot provide a sufficient explanation, the contracting authority should be entitled to reject the tender. Rejection should be mandatory in cases where the contracting authority has established that the abnormally low price or costs proposed results from non-compliance with mandatory Union legislation or national law compatible with it in the fields of social, labour or environmental law or international labour law provisions”.