Everything the public sector needs, from pencils to buildings, has to be purchased via the public procurement process, so there’s a good chance your business can enter this market.
Taken together, the public sector is UK industry’s most valuable customer, spending around £242bn each year. That’s why it’s important for you to understand public procurement.
But we’re not suggesting you jump in feet first. There’s a lot to consider, and you need to understand the costs to your business before you can reap the rewards.
Finding opportunities can take time. With so many contract portals out there, searching them all and filtering out opportunities not relevant to your business can be a big effort.
Managing the various portals is itself a full-time job. In addition, responding to opportunities can be a lengthy process, and, if you aren’t winning, it can seem like a wasted effort.
Procurement can be complicated, especially if you don’t bid regularly. The process can be daunting if you don’t have the knowledge necessary to tackle it in the right way.
Alongside these intangible costs to your business there’s often a monetary cost as well. You may have to travel after winning the contract or pay additional staff to fulfil the specification. In addition, the UK has the second highest tendering costs in the EU.
So what are the benefits?
The money we all pay in taxes is used to fund our public services, including the procurement process for purchasing new goods, works and services.
Because this expenditure comes from the taxpayer, government has a duty to guarantee that the money it spends is spent well.
With the public sector always looking to improve its service delivery and identify new, innovative suppliers to ensure the public is getting the best procurement deal, this in turn creates a number of benefits for suppliers working with the public sector.
|Transparency in the public sector is a must, so government bodies have to be fair, honest and professional in the way they choose suppliers and in any dealings with them.
|The public sector has to pay promptly and in line with the agreed contract terms. Public sector agencies must pay accounts within 30 days of receiving a valid bill or invoice. The public sector is never a bad debt risk.
|Public sector contracts offer stability. Depending on which part of the market you are involved in, even during an economic downturn public services still need to be delivered. This provides suppliers with a relatively stable and durable customer base.
|The public sector can offer bigger contracts than the private sector, which is particularly important for smaller businesses.
|Since the public sector needs to get the best deal, this encourages competition in the market, meaning your business has a greater chance of being considered for each opportunity
Total government spending in 2016-17 was £796bn, accounting for all central and local government expenditure, salaries, pensions, expenses and so on.
Of this massive spend, £242bn was attributed directly to procurement: the purchasing of goods, works and services via competition.
Click on the image below to see how this government procurement spend is split:
When the Liberal Democrat/Conservative Coalition Government came to power in 2010 they put businesses at the heart of their plans to grow the economy out of recession.
They set an ambitious target of 25% of all central government procurement spend to be awarded to small businesses in the wider public sector supply chain, and in early 2015 they announced that they had hit that target.
Figures released by the Cabinet Office showed that in 2013-14, 26.1% of central government spending – representing £11.4bn in value – went to SMEs.
Overall, 10.3% of government spending went directly to small firms, up from 6.5% in 2009-10. A further 15.8% went to SMEs indirectly via the supply chain, creating the 26.1% total.
However, the public sector is now looking to go even further, with the new Conservative Government announcing plans for a third of all central government spending to go to small firms across the UK by 2020 in what could be the biggest SME spending drive the country has ever seen.