Procurement in the public sector: madness that way lies….
I’ve just sent this note (below)to a number of decision-makers in Wales. Although it is written about and for Wales it has a wider application. Overburdensome, risk averse public sector procurement rules are everywhere raising barriers to entry to smaller companies and in effect reducing competition. I say this as someone who has worked for a bigger consultancy and won many contracts from the public sector. I also used to advise Ministers on such matters.
Here’s my note to Welsh colleagues, as relevant in Australia I fear as in the Principality. It just causes more damage in a country like Wales where the public sector is dominant and where we desperately need to encourage enterprise:-
‘ Colleagues: The Welsh Government must reduce procurement burdens and barriers to entry for Welsh business.
Just a thought. I write as a former special advisor to Ministers in England and in Wales and a former MD of an international company which is expert in public procurement. Although currently in Australia I have just advised (pro bono) on the structure of education in Wales. So my knowledge of Wales is up to date and my passion for change is un-dimmed.
Here is my view:-
The transaction costs of doing business with the Welsh Government need reducing.The procurement processes are overburdensome for most Welsh companies and play to scale:hence bigger UK companies win most public sector contracts in Wales.The barriers to entry to win contracts are just too high .You need deep pockets,patience and a big strategic capacity to be able to survive the overblown tender processes.
The risk aversion of the Welsh Government (WAG as was) and the desire to see every bidder tick a vast array of public policy boxes is squeezing out smaller companies (that is to say Welsh companies).
The issue is not that no tender process is required.The issue is for the process and the resources required to bid must be proportionate to the rewards. They aren’t.
Companies bidding for WAG contracts that may only be 50k will typically spend months (usually longer:one tender for a framework went on for 15 months and was then never used…) in the bidding process and money,resources and time will be requireed to survive that. Only the bigger companies have all that -plus the insurance cover now absurdly asked for- and so win most contracts. My previous company was once required by WAG to provide 4 million sterling professional indemnity cover for a contract of something like 30k by WAG!. I have beaten smaller companies to win such contracts so I know. Such burdens are decadent and cannot be afforded in the richer England let alone the poorer Wales.
Planning applications are another case in point. The hurdles to overcome to make a planning application have long since squeezed out smaller housing developers for example. I once advised the English planning minister, so I know. I showed her a quarter inch thick file required to make a small housing development application in 1997 and the 4 inch file required now.Small companies just do not have the capacity or cash to get through such processes and they squeeze out competition.This is why the UK uniquely has such a concentration of big house-builders. Wales must reduce barriers to entry and will win investment by so doing.
And then you add in the way in which WAG interpret EU procurement rules…Italy either never bothers to advertise most public contracts in OJEU or insists that applicants have previously done business in the country or specific region before! WAG advisors on procurement never provide this kind of advice to Ministers.We are afraid of our shadows .
I raise all this more in anger than in sorrow. Wales is too poor to waste costs and raise absurd barriers around procurement especially when in so doing they help everyone except smaller Welsh companies on which our economic recovery will depend.
The relevant minister needs to inquire into the procurement processes overseen by her department and WAG (and indeed the bloated anti-competitive methods used by all the other bits of the public sector in Wales)with a view to reducing transaction costs and barriers to entry – as these are discouraging local, smaller scale Welsh enterprise at a time when we need to be strengthening our economic base’.