The UK public sector’s procurement process is the most expensive in the European Union, according to new research from the Centre for Economics and Business Research (CEBR).
Commissioned by Gatewit, Europe’s leading e-procurement provider, the independent research found that procurement processes in the UK incur the highest combined costs to public sector bodies looking to attract bids, and private sector suppliers bidding to win contracts.
The average total cost of a competitive procurement process (or competition) is £45,200, with £8,000 of those costs falling on the public body seeking to attract bids. This compares to an EU average cost of £23,900, meaning that public sector procurement processes in the UK are 90% more expensive than the EU mean.
The research also isolated the costs of holding a competitive procurement process to public bodies. The average cost to a UK public authority of attracting each bid from a potential supplier is £1,260, making the UK the fourth most expensive place in Europe for public bodies putting contracts out to market. Only Denmark, Norway and Italy record higher costs for this measure. The UK’s high costs contrast sharply with the EU average of £800, making the UK’s public procurement process 58% more costly than that of its European neighbours.
CEBR also studied the length of procurement processes. The UK public sector purchasing process was found to be one of the longest in Europe, a full 53 days longer than the EU average and some 20 days longer than the Italian process, the next longest.
The cost and complexity of bidding processes has an important effect on the value the public sector is able to achieve. Longer, more difficult processes dissuade potential suppliers from submitting bids, meaning that the eventual winner comes from a smaller pool of bids which is less competitive.
Complex processes also tend to discriminate against smaller firms which can lack the required resources to commit staff to a time-consuming, and therefore expensive, procurement process.
Pedro Vaz Paulo, CEO of Gatewit, comments: “There are multiple areas of concern for public sector procurement departments in the CEBR data. With public bodies looking to reduce expenditure across the board, the cost of attracting bids in the UK is still too high when compared to other similar European countries. The long duration of competitive procurement processes in the UK adds expense because of the increased labour costs incurred by longer competitions.
“The EU Commission aims to combat these problems through a mandate requiring all public bodies to implement e-procurement platforms by 2016. Some countries have already begun to implement these solutions, but our own research has predicted savings of £30 billion across Europe when the rules come into force and the use of e-procurement becomes widespread. Using e-procurement solutions will enable the public sector across Europe to reduce its procurement costs, shorten the time per competition and increase transparency. In the process this will enable greater competition because more firms will be encouraged to bid if the process is made easier, therefore ensuring best value for governments and taxpayers.”