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Calls for government to look with "fresh eyes" on public sector procurement

3 min read

24 July 2018

SMEs could be in a stronger position to win lucrative public-sector contracts after a damning Parliamentary report into the ineffectiveness of large strategic suppliers.

The Public Accounts Committee inquiry, set up following the collapse of construction giant Carillion in January, found that the Government’s procurement process when awarding public sector contracts focused on tendering and winning bids rather than ensuring it had found the right supplier.  

“The Public Accounts Committee has long highlighted weaknesses in Government contracting and the lessons it must learn if it is to outsource effectively for the benefit of service users and taxpayers. The collapse of Carillion in January sharpened our focus on the relationship between Government and its Strategic Suppliers—companies that receive over £100m in annual revenue from Government contracts,” said Committee Chair Meg Hillier MP.

“We have identified a need for Government to be more assertive in shaping the markets in which it operates, with a renewed focus on driving value for taxpayers’ money. The Public Accounts Committee has too often seen examples of businesses which have bid for contracts in areas where their understanding of the sector is weak, and their expertise is not well suited. The emergence of a small group of large companies which are expert at winning public contacts but who do not always deliver a good service is a concern.”

The Committee said Government must look with “fresh eyes” at the motivations of companies currently bidding for central government work and develop a strategy that requires contract-awarding bodies to look beyond bottom-line costs. It called for clearer specification of contracts, properly scoped, so that when any deal is signed there is an agreed understanding between Government and the supplier of what is being paid for, and over what timescale.

In addition, more competition was needed.

FSB National Chairman Mike Cherry agreed: “Today’s report reinforces the view that the public procurement process is broken, heavily favouring big firms that waste taxpayers’ money. The committee recognises that a ‘Merry-Go-round’ culture has developed where public contracts are being awarded to a small number of large companies. By doing so, Government is handing over huge market power to these firms and effectively closing the market for small businesses. Taking back this market power and opening up the public service market benefits everyone from both large and small businesses.”

The Committee also declared that there “is no excuse” for small and medium supplier businesses not being paid on time. It called on the Government to address delays in payments, retention payments, preferred supplier discounts, increasing the use of Project Bank Accounts and reducing the barriers to direct bidding to Government.

Cherry added: “More must be done by Government to get its own house in order including barring strategic suppliers, paid on the Government dime, from bidding and winning public sector contracts until they improve their payment practices.”