Public AdministrationWritten evidence submitted by Community Matters (PROC 19)

Community Matters welcomes to opportunity to respond to this consultation. Our response focuses on the need for public procurement policy to offer a level playing field for small/local and large/national delivery bodies across sectors.

1. How successful has the Cabinet Office been at improving public procurement policy and practice?

2. Community Matters welcomes attempts by the Cabinet Office to clarify policy and practice in relation to procurement. It is important that this guidance is both wide ranging (ie applicable to a range of different circumstances and suppliers) and standardised (to allow commissioners to identify and apply common practices across different types of procurement exercise); and in many ways these criteria have been met. The promotion of outcome-focused specifications rather than prescription of process has also been a very positive move. However, there are still a number of key issues which impact upon procurement practice, particularly within the Civil Service and Local Authorities:

3. Continued need for clarity where it relates to legal requirements:

(a)Continued fear at central government and local authority level of requirements of EU procurement rules—need further clarity on levels at which these apply.

(b)Similarly, clarity on state aid.

(c)Some guidance has been vague with little indication of how to apply it practically—ie “Authorities should also incorporate social issues into procurements where they are relevant and proportionate to the subject matter of the contract.”1—this leaves local authorities tasked with determining what the terms “relevant” and “proportionate” mean an applying judgements as to when it is appropriate to consider “social issues” during the procurement process. We would argue that the cabinet office needs to lead with a clear concept of all issues to be considered during a procurement process and offer definitions of when any specifics may apply. Additionally, we would argue that “social issues” should form an intrinsic part of any procurement consideration.

4. There are also some areas in which the Cabinet Office guidance risks promoting an approach to procurement which disadvantages smaller and local organisations, and particularly those from the third sector:

(a)Over-focused on Value for Money requirements set out by the Cabinet Office.

(b)Still a varied range of procurement policies, many of which are biased towards delivery by national, private organisations.

(c)Procurement still not viewed as a flexible procedure—local authorities tend to adopt a “one size fits all” mentality despite CO guidance that they offer a “relevant and appropriate”2 approach for each purchase.

(d)“An Introduction to Public Procurement” states that: “At one end of the spectrum, a low value, low risk, non-repeatable purchase requires little process, governance or expertise. It is therefore probably best handled through the use of a Government Procurement Card (GPC).” While it is important that Local Authorities are supported to develop efficient procurement practices that do not unnecessarily complicate or bureaucratise lower value exercises, it is key that process and expertise are established to ensure a consistent and well thought out approach to commissioning these services. This is particularly relevant for local voluntary and community sector groups for whom one-off, low vale contracts may represent their primary experience of procurement.

5. What should be the strategic aim of the Government’s public procurement policy?

6. Public procurement should aim not only to secure goods and services required by the general population, but also to do so in a way which supports the sustenance of a diverse marketplace and a range of providers able to evidence clear additional benefits to relevant communities. Hence the strategic aim of Government procurement policy should focus on leveraging social value of benefit to local and regional communities, alongside value for money, as far as possible. This aim is supported in a recent draft resolution in the European Parliament (in response to a public procurement Green Paper), which stated: “In order to develop the full potential of public procurement, the criterion of lowest price should no longer be the determining one for the award of contracts, and it should, in general, be replaced by the criterion of most economically advantageous tender, in terms of economic, social and environmental benefits—taking into account the entire life-cycle costs of the relevant goods, services or works.”3 We would advocate the mandatory application of the Social Value Act at all levels of procurement, not only where procurement practices exceed EU procurement thresholds, to support this aim.

7. Does the Government have the right skills and capabilities to procure effectively?

8. The Cabinet Office Guide “An Introduction to Public Procurement” states that: “Contracting authorities need to deploy strong personal and organisational commercial leadership, and, in most cases, procurement activities need to be led by professionally trained staff.” However, we have identified a continued lack of professional training for commissioners, particularly as Local Authority level. It is doubtful that this will be solved through the Commissioning Academy due to the high costs of training a rolling/changing workforce, and the expectation that specialist expertise (ie from the VCSE sector) will be willing to engage with this process on an on-going basis without financial compensation, in order to ensure that commissioners understand the needs of their sectors.

9. Does the civil service have the skills and capabilities required to negotiate and manage contracts effectively?

10. As above.

11. What skills do procurement authorities require in-house, what skills can be bought in and what skills can be contracted out?

12. As a minimum, commissioners must be skilled in project management and procurement processes, and have a clear understanding of relevant law and finance. Associated skills –for example HR—should be available in-house, although not necessarily within the commissioning team. Where any skills or understanding specific to a particular procurement exercise are required, the first port of call for additional knowledge should be engagement of and collaboration with existing specialists from across sectors, or a competitive dialogue procedure. The use of external consultants should be a last-resort measure as they represent a high cost solution resulting in little, if any, transfer of knowledge to the public sector and a corresponding failure to build the capacity of existing commissioning bodies.

13. However, a caveat to the above is in the use of market engagement as a method of stimulating supplier capacity. A number of national and regional voluntary sector bodies have produced guidance to support procurement authorities in stimulating the local market across sectors—for instance by offering smaller contracts or supporting the development of local delivery consortia. However, this does not equate to encouraging organisations to move away from existing specialisms in order to win contracts. The Introduction to Public Procurement does not differentiate, stating that bringing in “the right approach can help, for example, in creating capacity where previously none had existed—perhaps by encouraging suppliers in an associated sector to develop the new capabilities required.” This approach is concerning, as the VCSE sector has less capability to develop and diversify into new areas without financial support. Engaging representatives of the private sector (who do not currently deliver similar services) in establishing requirements or capacity for procurement, without the opportunity for additional support, may offer an unfair advantage in that this may encourage private providers to move into previously untapped areas while VCSE representatives are unable to.

14. What lessons can central government learn from local government on procurement?

15. VCSE organisations have reported evidence of a risk-averse culture amongst local authorities, where fear of legal challenges have in many cases led to unnecessarily complex and bureaucratic procurement procedures. We would suggest that this extends to a reluctance to commission from the local voluntary sector where private, often national, providers appear to offer expertise in dealing with procurement requirements.

16. Some examples of positive practice exist—for example, Lambeth Council have stripped the commissioning process down to its first principles, and remade it to reflect the requirements of the people who live in the area. Norfolk have adopted a novel approach to the procurement of youth services based on local priorities and with the engagement of the VCS and young people themselves through a number of locally based commissioning boards. More information on Norfolk can be found in our recent report “A Return to Ancient Truths” available at www.communitymatters.org.uk/returntoancienttruths .

17. The recent Social Enterprise UK “Shadow State” report lists an additional example of good practice on a local level, in addition to one of good practice already existing at a national level, which we would urge further exploration of. These are:

18. National Citizen Service:

19. Management fee for all lead organisations capped at 5%.

20. 75% of payment made in advance, so that smaller social enterprises and charities without large capital reserves could afford to bid (23% of the groups had an annual turnover of less than £1 million).

21. 90% of organisations involved locally-based.

22. Liverpool City Council:

(a)Awarding contracts on the basis of local value, a pay-spine multiplier (that is, the difference between salary at the top and at the bottom) and social interest (companies that reinvest their profits and are, preferably, asset locked—such as social enterprises).

23. How successful are government departments and their agencies at communicating their needs to potential suppliers?

24. Local voluntary and community sector organisations experience a range of issues in accessing and understanding the needs of public sector commissioners. Experiences differ across local authorities, but the overall picture is one of badly-publicised procurement portals, short timescales on procurement processes and ill-communicated commissioning cycles. Risk aversion has led to contracts of under the EU threshold being presented with unnecessary complexity and contracts not subject to procurement regulations at all being haphazardly included within or omitted from portals—thus giving an unclear and uneven impression of possible opportunities for local organisations.

25. Where needs are delineated, the assumptions underlying these are sometimes poorly explained or based on inadequate assumptions which do not take into account community requirements. For example, Norfolk CC’s decision to commission drug support services exclusively on a countywide basis led to Community Matters’ member the Iceni Partnership, a hugely well regarded and successful organisation operating across Norwich, losing funding and services.

26. 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?

27. n/a.

28. 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? Do central government procurement “framework agreements” enable more effective public procurement?)

29. As noted in the issues and questions paper, issues may arise where institutions set up in response to the Localism agenda—such as free schools—are subject to procurement regulations they lack the skills or capacity to fully comprehend. These organisations may benefit from central government structures to allow for centralised procurement of large scale goods and services or support for individual organisations to get to grips with regulations. However, we would highlight that many of the goods and services required by an organisation such as a free school would fall underneath current EU procurement thresholds, and therefore a key role for central Government would be in clarifying these thresholds and reassuring commissioners where regulations do not apply.

January 2013