Examination of Witnesses (Questions 40
TUESDAY 12 DECEMBER 2006
Q40 Chairman: There is a new focus
in the UKTI strategy on financial services and other issues. Do
you think you will get a fair shout for manufacturing?
Mr Temple: Yes. We want both of
them to be successful. We would hope there would be competition
in that respect. We are fairly supportive of the current approach
to manufacturing and engineering. We are involved in the engineering
sector advisory group and we think there are some very good debates
going on there. But right at the beginning of this we talked a
lot about the new shape of manufacturing. It is very hard to be
black and white about manufacturing and the service divide. I
know that you have picked specifically financial services, but
even in the case of the products today very often people have
to find packages to help the company to buy their product in terms
of finance and all that sort of stuff. There is an interrelationship
there. Today, manufacturing itself is very involved in the service
company either in its own right or with its partners to achieve
its aims. I do not think we feel uncomfortable at all about the
Q41 Chairman: Perhaps I may ask Rob
Marris's question. To what extent do manufacturers need help in
overseas markets in building partnerships to enable them to manufacture
and produce in those markets? To what extent should we be encouraging
outward investment from the UK in the long-term interests of this
country, or not?
Mr Temple: A few years ago I and
a lot of my colleagues were seriously worried about investing
outside the UK, moving jobs abroad and that sort of stuff. All
I can say is that if most of our companies in manufacturing had
not done some of that they would not be here today. Therefore,
investment abroad in component supply or whatever has been a vital
part of the mix that a company has to bring into play to compete
in today's global market. One just cannot avoid participating
in that sort of investment.
Q42 Rob Marris: I quite understand
that. Do you think it is appropriate for the UK Government to
be spending taxpayers' money to assist companies in so doing?
Mr Temple: It is hard to answer
that question in such an all-embracing way other than that I think
it is fundamental for many of our manufacturing companies to have
good manufacturing bases abroad, not to supply products and components
here but, more importantly, probably to invest next to market.
You find a very large percentage of our investment today is about
market proximity, not just the low cost of labour which is a popular
way to define it. Therefore, one has to look at these places to
take advantage of the opportunities in both cost and market.
Mr Radley: Alongside that, what
one needs to dosome RDAs working with the Manufacturing
Advisory Service are doing thisis to work with companies
and look at their particular business challenges and problems
and see whether investing abroad is the appropriate answer to
it. For some companies it will not be. It is absolutely vital
that companies exhaust all the options before they make a particular
Mr Temple: I would hate that to
be interpreted as our desire to promote the unnecessary exporting
of jobs, but very often it has been the key to survival.
Q43 Chairman: When in Brazil and
Argentina recently I was struck by people referring to UKTI in
its various old incarnations. I have also been struck when talking
to UKTI people about how often they have had to change strategy
to suit changing priorities. Do you agree with me that there is
a need for UKTI to set up a strategy, stick to it, keep its brand
identity and obviously to finesse it but not to have any more
Mr Temple: There are today very
limited funds available. One must clearly decide on what to spend
one's money to get the most value for it and stick with it. It
is so easy to get diverted in today's world.
Q44 Chairman: Do you think there
has been too much change?
Mr Temple: Historically, there
has been. I think that the key thing now is to see how well this
strategy is delivered and backed by the money made available.
Q45 Miss Kirkbride: In your memorandum
you draw attention to a survey which suggests that twice as many
companies find public procurement rules a hindrance rather than
help. Can you explain to the Committee what the difficulties are
with the public procurement rules?
Mr Temple: It is a combination
of factors. Very often, there is a prescriptive approach to what
is being bought rather than an outcome approach. There is an incredible
safety approach by many of the people who go through the purchasing
Q46 Miss Kirkbride: What do you mean
Mr Temple: I mean the purchase
of something that is absolutely certain to do what you want it
to do without any approach to innovation, so it is in that respect
that I make the comment. We always want them to engage earlier
with companies. This happens a lot overseas. One finds that in
the early stages of the project in particular the local companies
have an involvement to understand what is sought to be achieved
and the basic parameters of the project. That allows them to have
greater foresight as to the outcome of the project and perhaps
be better placed when it comes to bidding. We tend not to have
that to quite the same extent. Therefore, it comes down to the
skills and confidence of the people doing the procurement on behalf
of government. I believe that the Kelly report identified many
of these issues which showed how we could really develop a much
more professional approach to this.
Mr Radley: There is often a lack
of joined-up approach. Clearly, one of the priority areas for
this and many other countries is to address climate change issues.
There are big opportunities for Britain to stimulate demand in
environmentally friendly and energy efficiency products and services.
What companies have told us is that when they have tendered for
a particular market and have been able to offer a product that
is much more energy efficient than their competitors no weighting
has been given to this in the tendering process. That needs to
be a lot more joined up.
Q47 Rob Marris: Would those reservations
about the need for early involvement, lack of a joined-up approach
and so on, also hold good for smaller companies trying to get
Mr Radley: Very much so. This
is something that we have played at in this country. We have made
a few attempts to do it but have not successfully dealt with it
and created more opportunities for smaller firms to bid for public
sector contracts. That can often be vital to these firms because
it can be one of their first major orders and help get those companies
to the next stage. If you look at the example of the United States
where they have a small business innovation research programme,
this is something that it has stuck at constantly over the past
couple of decades. They have pushed it forward and developed the
skills of procurers to make it work and it has produced results.
That has led to a lot more contracts being won by smaller firms,
but those firms have also become more innovative and larger.
Q48 Rob Marris: Has it got any better
in the United Kingdom in recent years in term of the skills of
public sector procurers, addressing the difficulties that you
have just outlined and so on?
Mr Temple: I believe the defence
sector would say that the new procurement strategy has been a
very big improvement. Perhaps there has not been enough improvement
elsewhere. Other parts of government procurement could look at
the sort of things that happen in the defence area, for example.
Q49 Mr Binley: Much of what we have
been talking about and the terms we have been using today seem
so heavily bureaucratic that it has no impact on many businesses
in this country. A very sizeable sector of the small and medium
size market finds the whole complication of training a total turnoff.
The same thing applies to procurement. The whole process is so
bureaucratic particularly at levels where small and medium size
businesses can play a part in local government, for example in
local health supplies and so on. How do you think we can make
it easier and less bureaucratic for small businesses to play a
part in tendering for public sector business?
Mr Temple: We acknowledge the
complexity of training to which you refer. That is why I say that
the landscape needs to be tidied up. It is very similar to my
earlier comment about the over-prescriptive approach to procurement.
I suppose that within that is the inference that the tender documents
are very often highly complex and large pieces of work. To put
them together is just too expensive for a lot of companies. A
good number of the approaches in Kelly were to try to rationalise
the whole approach to this. Indeed, it is very often easy to point
to the private sector in this area. This is an area where companies
are much slicker in placing contracts and the paperwork surrounding
them. People just give up on it or are too daunted by it in the
first place. This is the sort of thing for which we have been
Mr Radley: You also have to look
at the fundamental causes of this. The forms are too big; they
take far too long to fill in. But why is this required of companies?
I do not think it is necessarily the case that people who work
in these bodies like to write long forms; it is the whole issue
of risk aversion. There is a culture of risk aversion within a
good part of the public sector. One must get away from that and
the "heads must roll" approach. One must train a lot
more people who make procurement decisions in how to be able to
take risk. The fundamental problem is to do with risk management
skills. Any exercise to cut down the size of forms will not work
unless one addresses the fundamental cause.
Q50 Mrs Curtis-Thomas: What you say
is very interesting. What would the press coverage be if we lost
control of public procurement projects, as we have done? We have
been blasted for it, have we not? Do you think there is a win-win
Mr Temple: In terms of relaxing
some of these things?
Q51 Mrs Curtis-Thomas: Do you think
that the taking of more risks with no heads rolling would go down
well with the public?
Mr Temple: These are always challenges
to face, but that does not mean that what we are talking about
here is bad procurement. If one looks at the very substantial
contracts that many of the other big industries undertakeautomotive,
aerospace and what have youthey are very challenging and
demanding, but at the end of the day they work together to deliver
them. Complexity and bureaucracy do not necessarily mean that
one will deliver the contract as one intended.
Q52 Mrs Curtis-Thomas: Earlier you
said "less safe and more innovative", and you also talked
about intelligent procurement. You drew analogies between the
public and private sectors. Is not the advantage that the private
sector has over the public sector at this time intelligent procurement,
and how do you suggest that organisations like yours help government
departments to address that particular shortcoming?
Mr Radley: There are a couple
of issues here, one of which would be the much better use of standards;
the other would be early briefing of companies of particular needs
in the market so that a lot of companies are much better prepared
for bidding and working with government.
Q53 Mrs Curtis-Thomas: You talked
about companies being given a better and earlier opportunity.
One example is that at the moment the government is looking at
preferred bidders. The criticism by preferred bidders for specific
pieces of work is that in order to become preferred they have
to lay out their stall and show that they can comply; they have
to put in a bid in advance for a particular piece of work, and
that process alone may be very expensive. They say that they would
prefer the government to be far more prescriptive and reduce the
amount of work they have to do which they may subsequently have
to put in the bin because even though they are preferred bidders
they do not win the contract. You are arguing for a greater degree
of flexibility and access by smaller companies and yet it brings
with it a very substantial cost across industry.
Mr Temple: The danger is that
when we talk about this in such broad terms we try to make one
size fit all. One might be procuring in entirely different areas.
For example, if one is building a hospital there is a difference
between asking a contractor to supply to the same design as opposed
to getting in a whole host of different designs. There are lots
of ways in which one can approach that differently. If one is
looking at a technological area one should be discussing what
outcome one wants rather than a pre-specification. It depends
exactly on what one is procuring.
Q54 Mrs Curtis-Thomas: You say that
one shape does not fit all?
Mr Temple: Yes.
Q55 Mrs Curtis-Thomas: I accept that.
The approach of a more intelligent procurer is a given in all
conditions, but the position to which Mr Radley referred, which
is to make it easier for more, applies only in some and not in
Mr Temple: It will apply in some
areas but not necessarily all.
Chairman: Can you give a practical example
of an issue that has worried me? I believe it was the furniture
industry which said that when it tendered for office chairs it
had to go through the full process. Peter Bone asked the question.
Q56 Mr Bone: When I was in manufacturing
we used to bid for government contracts. We were just building
electronic clocks linked to the atomic clock, which was the main
purpose. But the detail and specification that the government
built into those contracts was ridiculous and meant that we had
to build clocks that were much more expensive than necessary.
They did not talk to us at the beginning and say that they wanted
a certain clock. We would have told them not to build in things
that they did not need to do.
Mr Temple: That is the point we
are trying to make in certain instances.
Mr Bone: It happens in practice and it
is a real bind.
Q57 Mrs Curtis-Thomas: Is not the
counter-argument to the point put by my colleague that that would
have preferred his company? If it had been allowed into the process
of specifying the product it would have had a significant advantage
which it could have used to disadvantage other competitors. Is
not the government in a very difficult position when it comes
to specifying some types of product? If it invites in a number
of companies it will automatically disadvantage other companies
because those companies write into the specification those attributes
that best suit their businesses. Does it not disadvantage competition
in its broader sense, and is it pragmatic to have a balance?
Mr Temple: It is difficult to
answer that because you end up trying to discuss that particular
example. If somebody wants clocks to be supplied I think it is
quite reasonable to invite people along and then make a choice
based on what he thinks does the job best all things considered,
not just on price. There may be other perceived benefits. We may
be missing the point that you are trying to make here.
Q58 Mrs Curtis-Thomas: In your evidence
you call for an informed procurer which should have a greater
relationship with contractors and suppliers.
Mr Temple: Yes.
Mrs Curtis-Thomas: The counter-argument
is that if one lets suppliers dictate the terms of the contract
does it not lead to other suppliers who have not had that opportunity
of direct interaction being disadvantaged?
Chairman: As an example, in the care
homes sector government allowed the big businesses to set the
kind of safety standards that should be imposed on the industry
which disadvantaged the small contractors. The big boys could
meet those conditions and they squeezed out the smaller suppliers
by helping the government specify the level of care provided in
care homes. That is the point my colleague is making, is it not?
Q59 Mrs Curtis-Thomas: Yes. You have
argued for improved public procurement intelligence, but does
it not come with a disadvantage to companies that are not involved
in developing that intelligence?
Mr Temple: I think it depends
on what is being bought. One has to look at what one is buying.
There are some areas particularly in large-scale projects where
it is valuable to get people in to discuss precisely what outcome
one wants and see how best one can achieve it. There are other
areas where one may well want to put out a tender with a description
next to it. That is quite typical and understood in some areas.
But it is very hard to generalise in this area. The examples that
you give highlight the very difficulty about which we are talking.