Public AdministrationWritten evidence submitted by Panlogic (PROC 2)
1. How successful has the Cabinet Office been at improving public procurement policy and practice?
As an SME, it is difficult to get a complete overview of all the changes that have been made. Our experience is that COI (which was a known quantity) has now been closed and we now either have to go through framework agreements or use procurement portals such as Contracts Finder (which appears to be open to anyone) and GPS eSourcing (which we get periodic invites to bid from).
To be honest, at our level (<£500K) I suspect that the need for procurement—which is inevitably costly, procedural (eg mandating the need for three separate responses etc.) and often merely underlines the choice that the project sponsor wanted to make in the first place—outweighs any potential savings to the public purse. In short, they overburden small projects.
In much the same way that personal health/care budgets and direct payments are both improving outcomes and saving public money http://www.dh.gov.uk/health/2012/11/phb/I would suspect that it would be more efficient, more effective and simpler for public bodies (and their suppliers) to be able to (under this £500K threshold) to be able to just appoint a preferred supplier if that is easier/more desirable for the public sector body. This should at least be an option. Suppliers would have to sign up some widely accepted legal T&Cs (without the possibility for amendments) in order to ensure this was robust and quick process. This would have the added advantage of allowing projects to start and finish more quickly, allowing Government to get on with the business of public service delivery.
2. What should be the strategic aim of the Government’s public procurement policy?
Both the UK Government (http://www.cabinetoffice.gov.uk/news/sme-procurement-event-francis-maude-speech/http://www.bis.gov.uk/brdo/business/business-diversity) and the World Bank (http://info.worldbank.org/etools/docs/library/49256/fan.pdf) stress the importance of SMEs and state that SMEs are the “engine of growth”. Given that growth is sorely lacking at the moment more must be done here and quickly. As a result, support for SMEs needs to be at the heart of Government procurement. However, despite the (understandable) need for economies of scale in some Government procurement, the stated figure of only 13.7% of Government spending (p. 4 of http://www.parliament.uk/documents/commons-committees/public-administration/121106%20I%20and%20Q%20on%20procurement%20docx.pdf) going to SMEs is (still) a disgrace.
3. Does the Government have the right skills and capabilities to procure effectively?
I suspect that the West Coast mainline debacle would suggest not. At least not at that level. For our level, our experience has been that most procurement people are sufficiently competent, but almost without fail deliver the letter, rather than the spirit, of the law.
Occasionally, the individuals are over-inclined to say “no”, rather than being empowered to say “yes” or “yes, but…” and they often use procurement rules to hide behind.
Does the civil service have the skills and capabilities required to negotiate and manage contracts effectively?
In our experience, yes.
What skills do procurement authorities require in-house, what skills can be bought in and what skills can be contracted out?
No view
What lessons can central government learn from local government on procurement?
No view
How successful are government departments and their agencies at communicating their needs to potential suppliers?
COI were excellent by the time it was abolished. Current experience is mixed. COI delivered consistency of documentation, process and personnel. That has now gone and creates more of a minefield for SMEs (second guessing, learning the ropes for each organisation, understanding the needs of multiple individuals etc.). That said, I would not now re-invent the COI, just address the issues indicated elsewhere within this response.
4. How should the civil service ensure it recruits and retains staff with the right skills to run procurements, to negotiate and manage contracts and to deliver major projects effectively?
I would suggest that all procurements that have a significant business model behind them must have an incredibly well-paid econometrician and/or economist assigned to them, as well as resources akin to Venture Capitalists (ie people able to comprehend an overall business model incredibly quickly and then immediately ask very penetrating questions to see if the thing actually stacks up). Salaries should be similar to what the big banks/VC houses pay for this expertise. This need not be ridiculously expensive if someone was only brought in for a few weeks from these types of institution for large (eg £50m+) projects. Even at commercial rates they will be able to a) help avoid West Coast mainline situations and b) help drive down submitted costs.
5. Does the Government have the organisational structures in place to enable it to procure effectively? (For example, how far should the Government centralise responsibility for public procurement?
Government should centralise the guidelines, legals etc., but decentralise the capability/capacity to be able to procure and the actual decision-making process. Subsidiarity should be the watchword.
Do central government procurement “framework agreements” enable more effective public procurement?)
Yes and no. They are quicker and provide more certainty to all parties. However, pass-through style set-ups can actually be negative. Please see the answer to #9 below for details as to why.
6. Does the Government collect the management information it needs to understand how public procurement is working?
In general yes, but it’s typically a burdensome and bureaucratic process. This is even more the case for pan-European reporting/measurement requirements.
7. How should Government ensure that European directives on public procurement do not inhibit public bodies’ ability to procure effectively?
Do as other countries do and largely ignore them. UK Government procurement should be to the benefit of the UK and no-one else.
8. How should Government assess and manage risk when negotiating procurement contracts? (For example, how much risk should Government be prepared to accept and what are the limits on the transfer of risk to the private sector?)
Payment by Results (PBR) needs to be a model that the public sector can adopt. At the moment, procurement has a budget and can only accept spend up to that budget. Under a PBR model the private sector takes on some risk, but needs to receive additional remuneration for taking on that risk. Procurement therefore needs to have allocated an “upside” budget to allow for this transfer of risk.
9. What is the best role for “prime contractors” and what are the advantages and disadvantages of relying on “prime contractors”?
Typically the framework provider is a large corporate with no interest in paying their sub-contractors at all quickly. The sub-contractors are often SMEs with very little market power compared to the public sector organisation or the framework provider. This can have very negative cash-flow implications for the sub-contractors, not to mention potential reputational risks to the public sector organisation if personnel (etc.) are not paid in a timely fashion. To help resolve this, the framework provider should either have to pay sub-contractors a gross amount and then receive their pass-through monies back from the sub-contractor (the sub-contractor is incentivised to pay the framework provider quickly or run the risk of contractual issues, in any event) or to be mandated to pay sub-contractors within 10–15 days.
10. What are the key lessons to be learned from the experience of cost overruns, delays and project failures in central Government procurement over the past five years or so?
All contracts should prohibit/exclude the possibility for cherry-picking. The private sector provider should have to take things on “warts and all” otherwise you privatise profits and nationalise losses.
Payment by Results (PBR) needs to be adopted (please see #8 above).
Need for a cross-Government procurement platform with real-time pricing of goods (SKUs and prices etc.).
e-Reverse auction procurement: transparent, downward bidding from service providers (but still with the ability for the public sector organisations to meet with the supplier, probe cost reductions, establish rapport etc.)
GroupOn style approach: meta-government procurement (public sector organisations sign-up to reduce costs per framework and/or per purchase); If a certain number of public sector bodies sign up, then deals become available to all; Ability to tag onto larger purchases/set time/price limits etc.
December 2012