Breakout group one: Improving processes
Chaired by Mr Douglas McLachlan, Solicitor, Biggart Baillie.
Five key themes emerged:
1. Improved training and awareness of public procurement rules and processes (for both the public sector and the private sector) would be beneficial to all
2. Good procurement requires close collaboration between both intelligent customers and skilled procurement specialists (intelligent customers/purchasers are more likely to make the right procurement decisions)
3. Public sector should be more open to dialogue with potential suppliers - understanding and interacting with the market requires time. Improved dialogue between both sides of the process would be beneficial to all.
4. Standardisation of documents and practices is needed although, given the diversity of organisations and their requirements, a one-size-fits-all process would be difficult to achieve. In standardising processes, care should also be taken to ensure that requirements are do not disadvantage SMEs.
5. Senior level leadership is necessary (including use of accountability structures) to deliver improvements
Summary of comments:
Paul McNulty set the scene for the Scottish Executive by outlining the diversity of the Scottish public sector and the fact that procurement activity was devolved to sectors, organisations and within organisations. For example, within the Executive procurement was devolved at various levels. This meant that central monitoring and control was more difficult than outside observers might sometimes imagine. While the Executive can set detailed rules for its departments and agencies, other parts of the public sector have traditionally been free to set their own policies and practices. Initiatives aimed at standardising processes and driving forward improvements therefore take time to implement.
All public bodies in Scotland are expected to award contracts on the basis of best value. All public bodies are also subject to EU law on procurement. So some of the things that the public sector is asked to do, for example, taking account of local economic impacts in contract award decisions, are simply not possible in most cases. Best value for money (vfm) means whole life cost and quality, not lowest price. Executive policy is that procurement decisions should almost always be based on vfm.
The end-user who specifies the need or requirement is not usually the same person who conducts the procurement. It is, therefore, just as important to have knowledgeable end-users as it is to have skilled purchasers.
The McClelland Report shows how procurement can be improved over a range of fronts. While there was some concern regarding aggregation of requirements envisaged in the report,
aggregation did not automatically exclude smaller companies. For example, the Executive's Design, Print and Publication Services (DPPS) contract is a managed service contract. Steps were taken when the contract was let to ensure that Scottish SMEs would be able to compete at a sub-contracting level. In practice, although the contract was let to a large company, a high proportion (over 80%) of the work is sub-contracted to Scottish SMEs.
Comments from the floor included:
General understanding of processes
· Across UK public sector lack of understanding of processes, particularly for below-threshold contracts. Need to improve skills and knowledge among practitioners. (Would it help to have subject-based procurement specialists?)
· Training and consensus on key terminology (e.g. best value not being the same as lowest price) is required - leadership needed.
· It seems unrealistic to expect conformity across all local authorities as the structure of procurement is subject to local politics. Authorities Buying Consortium (ABC) bidding for Efficient Government funding - A buying consortium doesn't necessarily add expertise or consistency to LAs, rather it acts as an advisor they can contact.
· Need to maintain openness and transparency. Amount of non-conformance by and constraints on Local Authority buyers.
· Use of supplier accreditation services (FirstPoint, a privately-owned supplier accreditation service, was mentioned) can help reduce tender costs although subscription costs can sometimes be a barrier. There were some legal diffifculties for the public sector in using accredited/approved supplier lists.
· Economic footprint of Scotland - what about the economic benefit to be had locally - how can this be included in the criteria/ weightings? (EU law does not allow this whatever the contract value, unless there are very special circumstances).
· Even if the public sector can't target or award contracts locally, could it still measure the impact locally of government procurement practices? Deciding what you want to buy (innovative framing of requirement) e.g. inclusion of social objectives (see best value comments above) can all help local firms.
Ownership of processes
· Role of governance and who is doing the buying - if it is the finance or legal departments conducting the procurement process it was queried as to whether they could have the necessary understanding of the subject detail.
· Procurement teams seem to be asked to buy anything - so the diversity means that they do not develop product or service expertise. Where the person with the requirement conducts procurement, this sometimes leads to subjective preferences for certain products e.g. academic or clinicians often have strong personal preferences for types of equipment and demand those rather than having an open mind as to what the market has to offer. This may lead to ethical questions as well as working counter to vfm in procurement of many commodities.
· Some agencies and non-departmental public bodies allow the person with the need to do the procuring but this does not cure problems with processes. Ideally we need to ensure closer relationships between professional procurers and the person with the need.
· Concerns about the idea of an external procurement advisor for a specialised subject - the advisor might be a competitor to the bidder - how fair, diligent and transparent will the advice and processes be?
Suggested Process Improvements
· One delegate had noticed some improvement in dealing with local authorities whereby bidders were invited to meetings early in the process. Is there a job description for procurers (not as such) - we need procurers to know what they want.
· Procurers need to understand their role in contract management and importance and keeping up to date with changes during contracts.
· Once you get your first contract it all changes - unfortunately knowing how to fill in the forms right is as important as the price being bid.
· Requirement for increased standardisation (where possible)
· Consistent pre-qualification would be helpful - one tender requires five years' annual accounts and another wants none.
· Suggested use of pilots in pre-qualification - prove a company can do the work, then each bid requires less work on both sides (this idea is not without merit but can be time-consuming and difficult).
· Bidders need feedback on why they are/ are not on tender lists or were unsuccessful - often only receive feedback on prices.
· Advertising portal. As in Scotland, the Irish were unable to discriminate in favour of local companies. However local companies may be better informed and perhaps better positioned to supply if a central portal providing access to public sector contract opportunities is available. They set-up a public sector advertising portal. Such systems take a while to mature - in Ireland companies did initially bid for contracts that were not really within their range, but value-banding of contract notices on the portal has now helped ensure that businesses are not wasting their time bidding. Advertisers also added more information than they would have given in the Official Journal, and bidders were able to identify appropriate opportunities more easily. Buyers had been anxious regarding the expected additional volume of responses to adverts but again value banding and more informative contract adverts helped solve the problem.
Role for SMEs in Improving Public Sector Procurement Processes
· Role for SME meetings with procurement, knowledge sharing.
· Perhaps SMEs/private sector might be paid to offer help on a consultancy basis?
Breakout group two: Encouraging innovation
Chaired by Ms Polly Purvis, Executive Director, ScotlandIS.
Scope:
"What are the opportunities to improve the relationship between Procurement and Innovation?"
Issues/Perceptions Raised:
1. Lack of specialist market/product knowledge in public sector procurement
2. Specifications often written by customers not buyers, and by the time procurement are engaged, buyer lacks the opportunity and/or experience or credibility to influence.
3. Concern that specifications stifle innovation and are focused on specifying the solution rather than the desired outcome.
4. Companies offering innovative solutions don't have a chance to make an offer or suggest alternatives. By the time they are aware of a requirement, specs have been written which exclude them.
5. Tender lists are stagnant and too dependent on big established companies. Public sector buyers are typically very risk adverse. How do we drive change?
6. SMEs are being excluded from bidding on certain public sector opportunities due to turnover restrictions versus contract size. How does an SME get big enough to compete for public sector opportunities without a share of the business to help them grow.
Actions Discussed:
1. Increase Public Sector knowledge of the market
(Noted: Legislative factors driving 'vendor neutral' approach)
a. Buyer training
b. Better informing customers
c. Recruitment and retention of appropriate skills (including relevant specialisms)
d. Securing specialist/market advice at critical points in the procurement project as necessary via business organisations (as a channel), consultants, virtual supplier network/ supplier forums.
e. Opportunity for 2 way secondments between public/private sector to learn about market/industry.
(Noted: No more 'meet the buyer' events!)
2. Encourage and incentivise innovation/entrepreneurship amongst buyers and ensure innovation is not stifled.
a. Ensure specifications are built on outcomes not solutions
3. Encourage buyers to proactively consider SME (small or medium-sized enterprise) opportunities
a. Consider/promote more alliances and/or collaborative bids
b. Increase awareness of possible small or medium-sized enterprise strengths, that is, flexibility, innovation and service
4. Investigate opportunity for public sector to create pilot/pathfinder projects on new solutions/innovation (possible link between procurement and grants) and to consider ongoing technology/product developments through life of a contract.
5. Consider possibility of whether we could/should stipulate and monitor progress on adding new suppliers to the bid list with each renewal to encourage degree of 'churn' in suppliers. (Noted: Debate regarding inferred preferential treatment versus decisions based on pure merit.)
6. Consider procurement's responsibility regarding enterprise matters as well as financial and consider matching award of contract to structure of the economy, and promoting awards to companies who offer training.
Committed Procurement Actions:
1. Develop and promote statement/policy regarding the consideration of supplier turnover at qualification stage, promoting an appropriate risk assessment and risk management strategy tailored to the criticality/risk involved in the procurement.
2. Continue with plans to implement public sector portal to advertise tender opportunities and, by promoting and enabling awareness of these opportunities, better enable a level playing field on which all companies can compete.
3. Recruitment, up skilling and training of buyers and the roll out of standardised best practice procurement are an integral theme of the McClelland Report.