The Greater Birmingham Chambers of Commerce is one of the UK’s oldest and largest Chambers. It has nearly 3,000 member companies that employ over 200,000 plus affiliate organisations representing 15,000 people. It offers extensive services to industry and commerce, having served the interests of business for three centuries, promoting trade locally, nationally and internationally. Members of Greater Birmingham Chambers of Commerce: Birmingham Chamber of Commerce, Burton & District Chamber, Chase Chamber, Lichfield & Tamworth Chamber, Solihull Chamber, The Institute of Asian Businesses, Future Faces and the British American Business Council.
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Introduction
p.4
Executive Summary
p.5
Recommendations for Stakeholders
p.7
Report
p.8
Engage
p.8
Support
p.11
Reflect
p.16
Conclusion
p.20
Methodology
p.22
Results Tables
p.23
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Public Authority procurement strategies have never been more important. With austerity policies still in full swing and public sector funding harder than ever to come by, how public authorities spend their money, and the additional impact it creates on their local area, has become a topic of high concern. In this environment, many public authorities from Central Government down to local bodies are reviewing their procurement strategies. This document sets out simply and clearly the Greater Birmingham Chambers of Commerce members’ views on the core elements of public authority procurement strategies. It details the findings from original Chamber research into members’ views on procurement strategies and offers recommendations for key stakeholders.
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Encourage more businesses to tender by continuing to hold traditional engagement events and opportunities (such as “meet the supplier days�) and working with Chambers of Commerce to reach and engage more businesses outside of the traditional supply chain.
Look at innovative ways of supporting businesses through the procurement process. This includes breaking up some larger contracts into smaller units to allow more SMEs to tender, using procurement criteria to ensure that successful tenders for large scale contracts offer training for local SMEs and working with Chambers of Commerce to boost businesses awareness, confidence and capacity.
Take time to review internal procurement processes. When requesting insurance levels, ensure that they are directly proportionate to the value of the contract at hand. Regularly review PQQs to ensure that all questions are entirely relevant to the contract in question and keep equalities questions to a minimum. Consider developing Social Value criteria for high value contracts. Work with procurement officers and businesses to co-produce these criteria and test changes to PQQs to ensure that they are accessible, relevant and measurable.
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Naturally, local businesses are very interested in public authority procurement strategies. For some, tendering for and delivering public sector contracts for supplies and/or services forms the bedrock of their day to day activities. For many more the public sector represents a potentially lucrative future market. With an annual spend of £230bn1; public sector procurement has the potential to create significant business and growth opportunities. However, many businesses report barriers to entry and problems engaging with public sector procurement activities. Overall, public procurement still suffers from a poor reputation amongst the UK business community2. As a result, we are delighted to see the many local and national attempts to reform public authority procurement strategies announced over the last year. These include the Cabinet Office consultation on Making Public Sector Procurement More Accessible to SMEs, the West Midlands Police and Crime Commissioner’s Procurement Consultation and the more informal and on-going work of other local public authorities. We aim to ensure that the needs of businesses are reflected in the outcomes of these activities. This report refers to a GBCC online survey conducted in November 2013 which polled members on elements of procurement strategies and procurement priorities. 373 businesses took part in this survey. We argue that a successful public authority procurement strategy works with businesses to:
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Making Public Sector Procurement More Accessible to SMEs (Consultation Document), Cabinet Office, 2013 Buying a Brighter Future, CBI, 2012
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Work with businesses, and business membership organisations, to raise awareness of procurement opportunities and encourage more businesses to tender for contracts.
Offer additional support for businesses by working to improve the awareness, confidence and capacity of local businesses. This includes by breaking down some large contracts into smaller segments to allow more SMEs to tender and considering innovative ways of increasing the training available to SMEs.
Take time to review existing procurement processes and instruments including PQQs and insurance levels, making them directly relevant to the contract at hand and also considering social value criteria for large scale contracts. Overall we are clear that the best way for a public authority to create a successful procurement strategy is to work closely with businesses and procurement officers throughout the design and implementation process.
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Engaging large numbers of businesses in tendering for public sector contracts is highly important. It enables more businesses to enter and compete in a new market and public authorities gain greater choice when selecting suppliers and service delivery partners. Our results showed that only 35% of respondents had tendered for or worked on a public sector contract over the last twelve months. However, 53% indicated that they were quite or very interested in working on public sector contracts in the future. This indicates that there are a significant number of businesses who are interested in tendering for public sector contracts who are not currently doing so on a regular basis. As a result we believe that, in order to ensure maximum access to the market for businesses, engagement has to be a core strand of public authority procurement strategies.
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Our results showed that businesses highly value face to face engagement from public authorities with 80% rating ‘meet the supplier days’ quite or very important. “Meet the supplier” style events are public authority run events were business representatives with some or limited knowledge of procurement can learn more about the opportunities on offer. They often include public authority staff talking the audience through the procurement process including what they will need to demonstrate in their PQQ, how they can do it and the core areas procurement officers will be looking for. Whilst extremely useful and informative, these events often only reach those businesses that are already engaging with public procurement. There are many more businesses that could tender for public sector contracts, but are unaware of how to begin or how to find information on these events. As a result, we believe that public authorities should go further, working with existing business organisations, such as Chambers of Commerce, to engage local businesses who may be unaware that their business could tender for public authority contracts.
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As well as engaging businesses and raising awareness of procurement opportunities and processes, we believe that public authority procurement strategies should aim to support businesses throughout the process. Businesses demonstrated significant support for public authorities prioritising businesses offering local employment opportunities (where legally viable) with 84% rating this quite or very important. However, whilst we believe that a commitment to increasing the amount of public authority procurement expenditure reinvested in the local area is important, we caution against a direct protectionist agenda or ring-fencing approach (such as allocating a set proportion of the procurement budget for contracting with local firms). Many local firms who deliver public sector contracts may deliver them outside of the local authority, region or geographical area covered by the public authority in question, as well as in. Were public authorities across the nation to take a protectionist approach it would be damaging to the business community as a whole and limit public authorities in their choice of supplier and service delivery partners.
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In addition, all contracting authorities are bound by EU procurement legislation and general principals of transparency, equal treatment, non-discrimination and proportionality. As a result the extent to which this can be legally actioned through “hard” policies (such as quotas and ring-fencing) is, at best, limited. As a result we are advocating a “softer” approach. We firmly believe that improving the number of local businesses winning public authority contracts is intrinsically linked to awareness, confidence and capacity. Unless businesses are a) aware of opportunities to tender for public authority contracts, b) feel confident doing so and c) have the capacity to be in with a chance of winning the contract, we will not see a significant increase in local firms competing for and winning public authority contracts. We believe that it is crucial that public authorities work with local businesses, via existing mechanisms such as Chambers of Commerce, to support local businesses across these areas to help them get ready to tender.
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Another simply way that public authorities can support businesses is by breaking down some large scale contracts into smaller contracts as a means of encouraging more SMEs to enter the tendering process. 82% of respondents rated this proposal either quite or very important. Where many SMEs may be put off entering the tendering process by prohibitively high contract values, smaller contracts may allow businesses to engage with the process and build up their capacity and experience allowing them to feel more confident bidding for larger contracts (alone or as part of a consortium) in the future.
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Businesses also indicated support for local authorities requesting that successful bidders for large scale contracts offer training to local SMEs, with 61% of respondents rating this either quite or very important. Provided that this training is relevant and attractive to the SMEs being targeted, this could be a highly positive means of public authorities using the procurement process to acquire extra support for local businesses at no extra cost. Areas for consideration could include training on the procurement process, access to finance and other areas identified as priorities for businesses in the sector in question. Within this proposal it would be important to ensure that the requirements placed on the providers are not overly onerous or prohibitive. Public authorities would need to work with providers to ensure that these criteria are positive and beneficial for the business community, not simply an unnecessary box ticking exercise.
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Finally, we feel it is crucial that public authorities take time to reflect on their own practices and procurement instruments when reviewing their procurement strategies. On a directly functional level businesses have clear views on insurance levels and Pre-Qualification Questionnaires (PQQs). 78% of respondents felt it was quite or very important for public authorities to ensure that they request insurance levels proportionate to the value of the contract at hand rather than reusing standard frameworks or requirements from larger contracts. 82% of respondents thought it was quite or very important for public authorities to regularly review their PQQs to ensure that all questions are directly relevant to the contract at hand. 65% thought it was quite or very important for public authorities to reduce the number of equalities questions whilst ensuring that businesses can demonstrate that they abide by the Equalities Act (2010).
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To achieve this we recommend that public authorities take time to work with procurement officers to find out which questions they place a high value on and which answers that they follow up and those which are simply a box ticking exercise. Overlong PQQs can be burdensome both for businesses and the procurement officers charged with assessing responses. They should also work closely with businesses to ensure that questions and criteria are clear and do not have unintended negative consequences on businesses’ ability to tender. Taken together, these three results clearly show the importance of public authorities managing their procurement processes, to keep them as lean, effective and proportionate as possible.
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On a more philosophical level, businesses were highly in favour of local authorities requiring bidders for large scale contracts to demonstrate the potential social value their business would deliver locally. Three quarters (75%) of respondents rated this quite or very important. Social value refers to the additional value an organisation creates in the provision of supplies or services beyond simple cost savings. This can include creating employment opportunities, offering training, use of green technologies or supporting local community initiatives. The Social Value Act (2012) requires all public authorities to ‘consider’ the social, economic and environmental value bidders for high value contracts would create for the local area. Social value criteria in public procurement are still relatively new and untested. As a result, we recommend that public authorities considering introducing social value criteria work closely with businesses, commissioners and procurement officers to ensure that these criteria are 1) clear and easy to understand, 2) easily measurable and accounted for and 3) a positive, not prohibitive or complicated step.
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It is clear that a successful public authority procurement strategy will cover both external and internal practices. Externally, it will seek to engage with and support businesses. Internally, it will require staff to reflect on and reassess their own practices. We believe that public authorities should be working with businesses, and business membership organisations, to raise awareness of procurement opportunities, increase engagement and encourage more businesses to tender for contracts. This includes offering face-to-face events such as ‘meet the supplier’ days. Businesses are clear in their belief that more should be done to ensure that businesses creating local employment opportunities secure a greater share of local public authority contracts. However, rather than ring-fencing a proportion of procurement spending, public authorities should offer additional support targeted at local businesses to get the “ready to tender”.
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Public authorities can also help support local businesses and smaller companies by breaking down some large contracts into smaller segments, allowing more SMEs to tender. Businesses would also be slightly in favour of successful bidders for large scale contracts being required to offer low levels of training for SMEs, providing an additional area of support for businesses at no extra cost to the public sector. Finally we believe that public authorities should take time to reflect on and redesign their own procurement processes and instruments. Of particular importance is the need to review PQQs to keep them as concise and relevant as possible and ensure insurance levels requested are directly proportionate to the contract at hand. In addition public authorities may wish to consider using social value criteria for large scale contracts to ensure that public spend draws additional benefits to the local area. However, in doing so, we would advise them to work closely with key stakeholders to ensure that the criteria used are simple to understand, implement and measure. In all of these points we feel that it is crucial that public authorities work closely with businesses to ensure that their final outputs are relevant to and reflective of business needs.
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This survey was conducted through a web based questionnaire. Chamber members were invited to participate via email. Fieldwork was undertaken between October 2013 and November 2013. 373 businesses took part. The majority of Greater Birmingham Chambers of Commerce members that participated were of smaller size with 48% of respondent businesses having 1-19 employees, 36% 20-199, 8% 200-499 and 8% 500+ employees. 71% of respondents were from the services sector, 29% were from the manufacturing sector.
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Over the past 12 months, which of the following, if any, are reflective of your business' approach to public sector contracts? We have bid on at least one public sector contract (operating alone, not as part of a consortium)
23%
86
We have formed a consortium with other businesses to bid on at least one public sector contract
6%
23
We have worked on at least one public sector contract as a subcontracting business
6%
23
57%
212
8%
29
100%
373
We have not bid or worked on any public sector contracts Don't know Totals:
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How interested is your business in bidding for public sector contracts in the future? Very interested
31%
116
Somewhat interested
22%
83
Not very interested
18%
68
Not at all interested
22%
83
8%
29
100%
370
Don't know Totals:
How important is it that local authorities/public sector host 'meet the supplier days' to encourage businesses to tender for contracts and explain the procureVery important
49%
96
Quite important
31%
62
Not very important
11%
22
Not at all important
4%
8
Don't know
5%
9
100%
197
Totals:
24
How important is it that local authorities/public sector request that successful bidders of large scale contracts offer training to local SMEs? Very important
29%
57
Quite important
32%
62
Not very important
24%
46
Not at all important
5%
9
11%
21
100%
195
Don't know Totals:
How important is it that local authorities/public sector break down large contracts into smaller units to encourage more bids from SMEs? Very important
43%
83
Quite important
39%
76
Not very important
9%
18
Not at all important
2%
3
Don't know
7%
14
100%
195
Totals:
25
How important is it that local authorities/public sector request insurance levels proportionate to the value of the contract? Very important
42%
82
Quite important
36%
70
Not very important
11%
21
Not at all important
3%
5
Don't know
8%
16
100%
194
Totals:
How important is it that local authorities/public sector request that bidders for large scale contracts demonstrate the potential social value their business would Very important
34%
66
Quite important
41%
81
Not very important
15%
30
Not at all important
5%
9
Don't know
5%
10
100%
196
Totals:
26
How important is it that local authorities/public sector regularly review PQQ's to ensure that all questions are directly relevant to the contract at hand? Very important
48%
94
Quite important
34%
66
Not very important
6%
11
Not at all important
1%
2
11%
22
100%
195
Don't know Totals:
How important is it that local authorities/public sector reduce the number of equality questions in PQQ's, whilst ensuring businesses can demonstrate they Very important
30%
58
Quite important
35%
69
Not very important
16%
32
Not at all important
7%
13
12%
23
100%
195
Don't know Totals:
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Contact Henrietta Brealey, Policy Advisor Chamber House 75 Harborne Road Birmingham B15 3DH H.Brealey@Birmingham-Chamber.com 0121 607 1786 28