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Ian Ronayne, SAP
As the dust just about begins to settle on the 2017 General Election, and we begin to get a clearer idea of the Government’s way forward on various policy areas, now is a good time to collect, and consider what this might mean for public sector procurement.
The Conservative Party’s manifesto with regards to this, pledged that ‘Central government must play a role in supporting SMEs: across all government departments, we will ensure that 33 per cent of central government purchasing will come from SMEs by the end of parliament…we will use our buying power to ensure that big contracts comply with Prompt Payment Code both of government contracts and in their work with others. If they do not do so, they will lose the right to bid for government contracts’.
The message is clear and consistent with the Government’s central thrust on public procurement before the election was called and as laid out in the Industrial Strategy Green Paper; the central focus and commitment is around supporting and encouraging SMEs to play a bigger part in the public sector supply chain.
But there is another trend, and that is the ever increasing pressure to pay less wherever possible, both in capital investment and servicing charges, but (as far as possible) without compromising current levels of service and productivity. We have therefore seen a trend towards partnering, collaboration and service sharing among local authorities, agencies, NHS trusts and other public sector entities, and a further drive to rationalise systems.
Post-election, the Government officials responsible for procurement will be once more will be reviewing their options for achieving SME inclusion and cost reduction, balanced with quality maintenance.
The case for business networks, to pull off the balancing act
In order to pull off this balancing act, the Government needs to focus on the short and medium term as much as the long term. Public sector procurement should be seen as a strategic and value-generating function that plays an essential role in supporting UK economic growth, supporting small businesses, and transforming digital procurement and innovation over time, but there is an urgent need to focus on short and medium terms actions to improve efficiency and productivity.
One way to make improvement rapidly is through public sector uptake of business networks that support both public and private sector requirements, breaking down the silos and reducing complexity for SMEs. Such common platforms would enable departments and the wider public sector to share and replicate common approaches. Savings would then be obtained by improved processes, price transparency, increased supplier diversity and budget controls on the procurement side, and would be equally matched by improved process, faster procurement and access to wider markets on the vendor side.
SAP calculates, based on existing UK public sector adoption that moving even a proportion of centrally controlled government procurement to existing business networks would have significant benefits; on an estimated £40bn of relevant central government procurement, we estimate government could save £2.5bn, and UK SMEs would benefit by £2.33bn.
It would also support government initiatives to increase levels of procurement with SMEs, with an additional economic benefit of £613m according to Government estimates. And burdensome pre-qualification questionnaires, greater transparency and ensuring timely payment are all issues for SMEs that can be addressed by standardising on common usage of common business platforms.
Of course, overshadowing all initiatives to improve UK public procurement, is Brexit and our future relationship with the EU, with UK procurement policy currently heavily shaped by European Union law, with much procurement required to go through the EU’s standardised process (OJEU) if above certain size thresholds.
The central focus for the UK Government with regards to public procurement and Brexit, will be protecting the rights of workers throughout supply chains and continuing to encourage UK SMEs to play their part in the supply chain to the tune of 33%.
It is for this reason, also, that business networks should be seen as a great enabler for the UK public sector and UK business; they support local supply chain initiatives and local enterprise initiatives, ensure an up-to-date supplier base, allow transparency and enable exports. Whilst we are uncertain of the exact Brexit impact at this stage, this is certainly a hedge against the outcome.