engaging sme’s – ‘the best things come in small packages?’

© Cameron Consulting 2012. All rights reserved.

Engaging SME’s – ‘The Best Things Come in Small Packages?’

Karen ThodyBSc(Hons) MCIPS MinstLM MIC


Background

What are we really talking about?

Company Category

Employees Turnover (Euros)

Micro <10 ≤2m

Small <50 ≤10m

Medium <250 ≤50m

Turnover £2bn with pre-tax

profits of £94.5m

(10 x turnover of ‘average’ SME)

A sporting chance…….

99%

59.1%

907,000 (1/5 th)Real life PQQ:ITT filter

50:50

68.8%78.4%

The ‘Big’ Agenda

“So if you run or represent SMEs,

give us the chance to prove we’re

serious about much more public

sector business going to small

businesses. We want SMEs to be

confident that, if they bid for our

business, they know there is a real

chance of winning”.Our latest figures show that the

value of central government

business going to SMEs is on

track to double from £3 billion to

£6 billion (6.5% to 13.7%) by the

end of this financial year, despite

government spending much less

overall on procurement.

What will make it easier?

Catches all contracting authorities in England and most in Wales, but not utilities Applies to all above-threshold, non-excluded, services procurements (Part A's and Part B's) and frameworks for such services Originally a private member's bill; main provisions came into force 31 January 2013

Social Value Act?

What will make it easier?

Comments based on public sector draft (30 November 2012)Contains lots of proposals to help SME's For supplies or services procurements valued at >€500,000 and all above-threshold works contracts, you must consider dividing procurement into lots and, if it considers lots unsuitable, explain why.

New Procurement Rules?

Social Value will be the panacea?

Before commencing a procurement, you must consider:

How what is proposed to be procured might improve the economic, social and environmental well being of the relevant area; and What you might do in conducting the procurement with a view to securing that improvement; Whether to consult with stakeholders on these issues

No….it’s all about proportionality!

Focus on lots….And limiting the

number of lots!

Measures to ‘reduce the

burden’ of PQQ

‘Show me the money’*

‘Lots’ could actually put

larger companies off….

Perils of self certification?

BUT, something doesn’t add upDisclaimer Required?

During the next section, I may well refer to ‘real life

examples’ - of good (and bad!) practice

Feel free to ask questions!

2+2 = 5


Outcome Based Research?

A little research…..Cost

Maude states that the average cost of each French public sector procurement is £19,000, while in the UK it is £46,000, and that typically UK ‘bidding costs’ are four times as muchWhy is bidding cost so important?

Murray, 2011“The biggest failure of the whole speech is that it does not say how the proposed changes will be made to work. For example a number of the older initiatives mentioned have failed to cascade from policy to embedding in procurement strategy, procedures and performance management”. “The speech did not explain how the new ‘revolutionary initiatives’ will be monitored. Without performance management, it will be difficult to make progress”.

Is History Going To Repeat Itself?“The ideas will not revolutionise how government buys, because most of initiatives are recycled. That is not to

say that some of the initiatives should not be re-emphasised at a time when procurement appears to

have drifted to a focus on price. Yet policy-makers need to understand there is an enormous chasm between

saying something will, or should, happen and it actually happening—the revolution would need to be

embedded in procurement strategy, procedures and performance management.

In the absence of a robust approach to performance the revolution, recycled or not, can only be expected to

remain a pipedream. A failure to implement procurement policy should be a concern as it weakens the whole foundation of the UK’s austerity strategy”

(Murray, In Publication)

Historical Barriers to SME entry? (Loader, 2005)

Lack of awareness to opportunitiesDifficulty getting on ‘approved supplier lists’Lengthy & Complex Tendering ProcessOverly Prescriptive Requirements

Insufficient consultation prior to tenderScales of contract unsuitable for SME’sToo much focus on costRestrictive requirements (e.g ISO14001)

There’s more…..How we make procurement decisions

Value adding and quality are factors but cost-cutting, which is most prominent, is the more difficult for SMEs (Beaver and Prince,2004).Bovis (1996) determined that a majority of SMEs found larger scale public contracts to be an inhibiting factor to supply and this was supported more recently by Walker and Preuss (2008) in their study focusing on sustainable procurement. Supplier consortia could provide a means for small firms to enhance their capacity. However, evidence suggests that such arrangements prove difficult for small businesses, because of their characteristics and attitudes, especially as a consequence of the dominant nature of the owner-manager role (Pittaway, 2004).

Entry barriers increasing for SME’s?

SmallLo

cal

Large

Specia

list

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Increase In En-try BarriersSignificant In-crease in Entry Barriers

As if that wasn’t enough…..7 years on, what’s the difference?

Track Record

Bureaucracy

InertiaLack of competence

Contact & Accessibility

*

What should the difference be?

Case Law relating to Track Record EvaluationAll contracts >EU thresholds subject to same process regardless of company size applyingPublic Sector Inertia….to be discussed!Lack of competence remains, particularly in SME understanding of tendering requirements and that ‘things ain’t like they used to be’Process led procurement means that handshakes over breakfast are no longer the way to do business

Track Recor

d

Bureaucracy

Inertia

Lack of compet

ence

Contact &

Accessibility*

And yet……

“The voices of SMEs are getting through to government thanks to the Mystery Shopper initiative, and problems are being dealt with. There is always more to do, but we are on the right path to a more dynamic, transparent and innovative

supplier marketplace, which will lead to better government services and better value for

money for taxpayers”.

Mystery Shopper ‘Enquiries’

Example 1What can cabinet office actually ‘enforce’ ?

Example 2

Example 3


Real Life Examples…What is the marketplace

doing?

Soft Market Test

Pre

Procurement

Engagement

Soft Market Test

Do those results ring true?

Encouraging SME Inclusion at Pre-Procurement Stage Client

Be realistic!

Manage Expectations in line with strategy

SME

Be Realisti

c!

Manage Expectations in line

with Company Capacity

Stakeholders

Be Realisti

c!

Manage Expectations in line with the actual

service requirement

s!

What is possible?

What are the actual benefits?

What does it reveal?

What can the key challenges be

How do you overcome them…..

Catalyst Housing – Strategic Alliance to benefit allPre-Procurement

Lots of stakeholder engagement to ascertain– What works well– What doesn’t work so well– Ideals for a ‘new’ service

Soft Market Test & Resident Conferences to explore ‘what the market could deliver’Contracts were split into ‘areas’True capital spend was analysed before going to tender to ensure financial limits were set appropriatelyFocus on ‘getting the job done’ over ‘corporate gloss’

Catalyst Housing – Strategic Alliance to benefit allDuring Procurement

Development of Local Supply ChainWorking with the Gateway team to develop ‘value added’ but with full support!– Apprenticeships– P2P– Return to work– Local Initiatives

Regular ‘handholding’ meetings to ensure contracts being adhered to & pricing matrices’; KPI’s etc being metSignificant client project management

Post Contract Award

Robust PQQ process with use of SSIP and best practice reporting (no duplication)ITT focused on ‘the job in hand’ rather than making promises which would never be metSignificant resident involvement which was used as evidence for CHL TPAS accreditation

However….no defaults; incentives being met and no contractual disputes ‘just because they can’

A balancing act?

Directly employed labourStrong Owner InterestDirect points of communicationSpecialist Skills within SMEs

CapacityCapabilityStrong project management can be required‘Hand to Mouth’IT ImplementationDisaster Recovery?Tendering cost can be prohibitiveCan be hard to manage during tender exercises!

Can Value For Money Be Achieved?

Lower overhead rates – no ‘glossy’ officesMight avoid cost of re-procurement due to contract failure‘Value Added Schemes’ may be more relevant to local economyWorking with local supply chain may lead to greater discount which can be passed onMore willing to abide by set contract termsUse of direct labour

Greater client side project management resource may be requiredMay not have ‘back office support’ to assist with ‘value added schemes’Supply chain may not be as robust and discounts difficult to pass on


Stumbling Blocks

Processes; Protocols & People!

‘Prompt Payment Schedules……..’

SME’s thrive where a broader value-for-money

decision factor is required and where shorter and smaller-scale contracts are

available through open competition. Is it

possible that Government ‘publicity’

is making SMEs ‘run before they can walk’?

‘Capacity’

‘Purchasing Power’

‘Decision Makers……..’

‘Organisation Strategy?’

What can we do to help?Simplify PQQs?

SME’s thrive where a broader value-for-money

decision factor is required and where shorter and smaller-scale contracts are

available through open competition. Is it

possible that Government ‘publicity’

is making SMEs ‘run before they can walk’?

Don’t ask for

irrelevant

information?

Set appropriate criteria to the nature of work being procured

Undertake full pre-procurement

activity to understand what the market can

deliver

Be honest!

Use of Open Tendering – cutting out 1 stage will reduce bid costs (on both sides)

Apply logic

Think Innovatively

Adhere to internal

standardsKeep up to date with

procurement standards &

case law!

Barriers to SME inclusion……


Progress?

Sir Francis MaudeNew commitments from large private sector players. A new approach to IT contracts. Prompter payment for SMEs. This will include rolling out Project Bank Accounts, which are already being used successfully in the construction sector, to sectors such as defence and facilities management.Greater transparency. The first department to be rated by SMEs will, appropriately, be the Cabinet Office in May.Extending the investigative Mystery Shopper service. Following the success of the Mystery Shopper service - where SMEs can complain about procurements and trigger an investigation - the Cabinet Office will now investigate complaints from sub-contractors about unfair practices in the supply chain of government contracts.Better dialogue between government and smaller businesses. New online tool will help government buyers to engage earlier with SMEs. It will allow buyers to put informal postings online about what they need to buy in future and SMEs will be able to respond and explain what they can offer.

Will ‘Social Value Act’ impact SME inclusion

The Public Contracts (Social Value) Act 2012 places

an obligation on Contracting Authorities to give

consideration to the potential social benefits that can

be delivered from every service contract other than

those called off under framework agreements. This

process must take place before inviting offers, and

should involve customers where appropriate.

Social Value Act

Will ‘updated EU directive’ impact SME inclusion

“You will have to take contractors on trust

that information they supply re mandatory and

optional

exclusion conditions, minimum requirements for

qualification and scored questions is correct.

Verification can only be (and must be) demanded at

end of process, and then only from putative winner”


Final Thoughts

Thoughts…not suggested actions!*Understand what the market can offer successfully for your needs - use pre-engagement

Don’t use Social Value to preclude bidders who aren’t ‘local’, use it effectively to input criteria which assist the local economy

Understand the frustrations of all parties during the procurement process

Be realistic with yourself about your internal capacity and capability

Be honest about your organisation size and need – Wouldn’t it be lovely to appoint partner firms using assessment centres to determine

cultural fit based on your own ways of working and size?

Don’t break things down into lots if it could be considered as disaggregation!

Retain equality of treatment at all times and ensure that all bidders understand the way in which you are evaluating them regardless of size…..another story for another day!

Questions

engaging sme’s – ‘the best things come in small packages?’

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