CHAPTER
8
Public sector bodies and Government departments want you to be successful too since, when businesses do well, the economy benefits. And in recent months Government legislators have created some useful legislation to help your business flourish.
Legislation and procurement regulations probably don’t sound like front page news, and most businesses think of legislation as endless red tape and stifling bureaucracy. But, if you’re serious about winning with the public sector and are willing to understand these regulations, you could end up in a much better position to win than your competitors.
On 26 February 2015, new Public Contracts Regulations came into force in England, Wales and Northern Ireland.
For small firms in particular, the changes should make the procurement process more flexible, simple and transparent, allowing smaller businesses to compete much more effectively for public sector business.
The new Regulations have a number of elements designed specifically for businesses like yours, and understanding how to use these to your benefit will greatly improve your chances of success in winning government contracts.
Here’s a quick summary of the main points of the Regulations:
Old rules |
New rules |
Improvement |
|
Red tape |
Organisations were required to provide three years’ worth of audited accounts and extensive supporting documentation before being eligible to bid for work. | In some instances, the winning bidder will have to provide full audited evidence. In addition, the complicated Pre-Qualification Questionnaire has been abolished for contracts under £10,000. | The bidding procedure for companies will be much simpler, allowing your firm to demonstrate that you can meet the demands of the contract without the need for burdensome evidence and red tape. |
Turnover |
Smaller bidders were often excluded because contracting authorities demanded potential business partners have a high turnover, regardless of the size of the contract. | Contracting authorities can no longer ask for organisations bidding for contracts to have an annual turnover of more than twice the estimated contract value, unless special risks are attached to the contract. | Reducing the turnover requirement for firms bidding for work will level the playing field for smaller firms, creating greater opportunities for businesses to get involved in public procurement. |
Payments |
Late payments from government buyers have been an issue for smaller firms in particular, especially for firms working on one contract at a time. | Everyone in the supply chain must comply with a 30-day payment period, and public bodies must publish an annual ‘late payment report’. | Your firm can now expect to be paid quickly for the work you’ve done, ensuring your business maintains a healthy cash flow. |
Smaller lots |
Contracting authorities previously had a choice in whether to split contracts into lots or not. Refusal to create smaller contracts would naturally benefit larger suppliers. | Public authorities will be encouraged to think about SMEs from the outset in their tender processes, with smaller lots as opposed to large contracts becoming the rule. | Smaller opportunities open up more competition to firms, meaning your firm could get access to contracts which were previously unattainable. |
Innovation |
Beyond the UK Sustainability Agenda, there was very little thought given to innovation, environmental or social considerations in the previous rules beyond the need for ‘variants’ while advertising the contract. | The new Regulations actively encourage environmental and social considerations in the procurement process, with firms being excluded from the procedure if they do not meet environmental or social standards. | Smaller firms are more likely to be able to adapt to meet the needs of a contract, incorporating new technologies, processes or materials. Encouraging this type of innovation will enable more small firms to get involved. |
Beyond the above headline improvements there are several areas of improved regulation which aim to help your business with the procurement process.
eProcurement is the practice of publishing notices online and submitting bids electronically, and it is set to become the norm in coming years.
eProcurement can significantly simplify the way procurement is conducted, delivering greater efficiency, reducing timescales and saving on administration costs while allowing greater competition. For these reasons, the new Regulations make it clear that the future is online.
A major factor now being introduced by the European Union is one which should already be familiar to UK suppliers: green procurement.
The new rules aim to put more emphasis on environmental considerations in procurement procedures. In bidding for public sector work, an enterprise which does not respect the environmental requirements of UK law can be excluded, and the firm which submits the lowest priced solution may not be awarded the contract if certain green considerations are not met.
Your firm may submit a strong bid at a low price, yet still lose out if the product is not of Fair Trade origin (where appropriate), if sustainable materials are not used or if whole-life costs are not factored into the bid.
The new rules also include a ‘social clause’, which states that any company failing to comply with relevant social obligations may be excluded from the procurement procedure.
In the construction and production sectors, buyers may now give consideration to the process by which goods are produced, and may elect to award a contract to the company which commits to employing the greatest number of ‘disadvantaged’ people, social enterprises or third sector firms, if set out in the contract.
We’ve covered the process suppliers will have to go through to win contracts with the public sector, but this isn’t the only way to win in the world of procurement.
In some cases, the public authority will have the need to publish a large-scale contract, one which requires a lot of different solutions to fulfil the entire contract specification. To fulfil these many different solutions, subcontracts might be necessary.
Take the example of a public authority looking to build a new, state-of-the-art hospital. While this construction contract might seem straightforward, in most cases the work involved in building this hospital will be undertaken by many, smaller companies.
A larger organisation might win the contract to construct the hospital, but that organisation might then offer smaller parts of the whole contract to other, smaller firms. This could be to provide plumbing, furniture or gardening services.
In this example, the large firm is the Prime Contractor and the smaller firms are subcontractors.
A subcontract is the contract entered into by a large organisation under which they agree a deal with smaller subcontractors to provide elements of the main contract.
There can be many layers of these types of subcontracting opportunities right down the supply chain. For example, the main contractor could subcontract a service to Supplier A, who could then subcontract an element of that service to Supplier B and so on. In this case, Supplier A is known as the Tier 1 supplier, Supplier B would be the Tier 2 supplier and so on.
Tender specifications will explain whether the Prime Contractor will be obligated to advertise for subcontracting opportunities to fulfil the specification or not.
If obligated, the Prime Contractor must go through the same tender process as their public sector awarding authority. However, if no obligation is specified, the Prime Contractor can award the work as they see fit, sometimes without the need for a tender procedure.
Regardless, the key to winning subcontracting opportunities for any firm is intelligence. The more you know about key projects and the earlier you know it, the more likely you will be to find opportunities.
Services exist which will provide the additional intelligence you should be seeking, including market analysis, Government spend trends and upcoming project leads and contacts. By keeping abreast of market changes and buyer needs, you can be sure to be ahead of your competitors in finding subcontracting opportunities.
It may be the case that your organisation could supply part of the solution to a specification, but may not have the skills or experience to deliver everything the contract notice requires.
However, you could then partner with another supplier which can provide the extra skills or experience your firm currently lacks. You then enter into an agreement to work collaboratively to find a solution to the contract.
This type of collaboration is known as a procurement partnership or consortium.
If a contract seems just out of reach, it could be worthwhile exploring options to collaborate or enter into a consortium with one or more other suppliers to bid jointly for the contract.
We’ve now taken you through the full procurement process, showing you what it is, why it’s important and what to do to win.
But there’s more. In the next chapter we will show you how to get in front of buyers to build relationships, generate brand awareness for your business and seek out the many opportunities there are to showcase your products and services. Buyers might not know your product or service even exists so read on to find out how to educate and inform them.
