Back in March, Dun & Bradstreet held a roundtable at the Procurement Act Expo in Birmingham, titled ‘SMEs: Balancing Risk and Opportunity’.
Small, micro and medium sized enterprises (SMEs) are the backbone of the UK economy, with over 5.5m operating in the region, representing 99% of the Dun & Bradstreet UK data universe.
SMEs often foster innovation and diversity, and bring fresh ideas to the market, with many offering
specialised expertise and niche solutions. Relying on a diverse supplier base, including SMEs, can
enhance the resilience of the public sector’s supply chain. Diversification mitigates the risk of overreliance on a limited number of suppliers, reducing vulnerability to disruptions. Furthermore, SMEs are generally more flexible in their pricing structures, and can offer competitive rates, driving efficiency and value for money in public sector spending.
The Procurement Act aims to open the market for new businesses and make it easier for SMEs to contract with authorities. During the event, a number of public sector buyers gave their thoughts on the current challenges, frameworks, and what the new Procurement Act means for SMEs.
Challenges faced by SMEs
SMEs can often lack the resources and expertise required to navigate the public sector’s procurement processes, which can be highly complex and time consuming. Without proper guidance or support, many SMEs unfortunately find themselves at a disadvantage when competing against larger firms with additional resources, and more experience in public sector procurement.
Many SMEs struggle to understand the specific requirements and processes which can be difficult to decipher, or they fail the selection process when needing to comply with certain regulations and accreditations for the submission of competitive bids.
All of the above means that the public sector could be missing out on working with certain SMEs.
Crown Commercial Frameworks – are they working?
Part of bidding for Public Sector projects inevitably leads to the use of a framework (an agreement put in place with a range of providers that enables buyers to place orders for services), which can be beneficial to SMEs as it avoids the need to spend a lot of time reading and completing multiple bid documents across other public sector body portals.
Crown Commercial Services (CCS) published their last SME action plan in 2021, working to reduce barriers for SMEs to work with them and simplifying public procurement processes, for example with standard contract templates, and specific guidance for SMEs about bidding. However, as of the end of 2021 when the CCS SME Action plan was published, SME spend through CCS agreements was only around 13% of total spend.
The group discussed that, while the aim of frameworks is to streamline the procurement process by providing pre-approved suppliers and terms to public sector buyers, these frameworks also come with associated costs. Participants commented that suppliers must invest time and resources in gaining accreditations and meeting framework requirements, which can be prohibitive for smaller businesses. Additionally, public sector end users may face higher prices or limited choice when constrained by framework agreements, potentially compromising value for money, quality of service, and - it is thought - often stifling innovation.
This is an interesting point and one that we relate to, even as a larger company. Although there have been new frameworks in recent years, there is no specific framework for the provision of data perse, with G-Cloud being a bit of a catch-all. Unless there is a framework directly related to an SME’s business, this won’t be an option for them.
Transparency and accountability – will the act bear fruit?
The Procurement Act 2023 marks a significant step towards enhancing transparency and accountability in public sector procurement. By requiring buyers to disclose contract details and notices throughout the procurement process, the act aims to foster greater scrutiny and ensure fairness in awarding contracts.
Participants agreed that increased transparency can help build trust among stakeholders and mitigate concerns about favouritism or corruption, but also pointed out that (where SMEs are concerned), the targets set out each year by central government are rarely met. For example, despite having a target of spending around 33% of its procurement budget with SMEs, the UK government is currently falling short of this number, and many contracting authorities may not know which of their current or prospective suppliers are SMEs.
Will this new regime make it any easier? It is difficult to say and our roundtable guests weighed up the pros and cons. Price Waterhouse Coopers (PWC), who were also at the Procurement Act Expo shared a timeline image with the 11+ notices that need to be published at different parts of the procurement process under the new Act. The additional notices within this number will offer increased transparency, which allows suppliers to better plan for procurement opportunities – but also means more supplier information is publicly available and open to competitors throughout the contract lifecycle.
One attendee pointed out that there is often a culture in the public sector of ‘tick box’ exercises, particularly when it comes to procurement. It was felt that there is not necessarily enough expertise currently, when compared with the private sector. Some thought that the notice regime will only add to resourcing challenges, particularly within small departments and local authorities, where teams are already under pressure. For SMEs, the increased scrutiny could have a negative impact as larger competitors will be able to view performance and potentially commercial information and take advantage.
The policy of debarment
The introduction of a broader debarment policy has far-reaching implications for both suppliers and public sector entities. The policy of debarment has existed for some time at the Royal Mail, but the Act means this will come into force broadly. While intended to prevent unethical or non-compliant behaviour, the policy raises questions about its enforcement and potential consequences.
For suppliers - where found in violation of ‘certain regulations’ - the subsequent debarment will likely impact their reputation and revenue streams, particularly for SMEs without large PR and comms teams to manage their reputation and niche public sector suppliers. Public sector entities, on the other hand, must carefully assess suppliers' compliance history to avoid engaging with risky partners. This is where data comes into play. Under the Bill, the government will maintain a central list of suppliers debarred from bidding for public contracts for a specified period. Suppliers will be added to the list once a ‘relevant’ Minister has conducted an investigation into the supplier, is satisfied that the exclusion grounds apply and decides that they should be added to the list. Suppliers will then be given notice that such an investigation is happening and will have an opportunity to make representations.
However, if a supplier is added to the list will there be challenges in its use? The group felt there are still many questions to be answered – for example, around matching business entities correctly? It will be interesting to see how this is policed. Will the data be shared for all to apply as a ‘stop’ list against bidding entities? How effective the process will be? Will the debarment just affect the business entity or at group level if a large organisation? This may allow larger businesses to shift the sale of goods or services to another part of the group, and ‘game’ the policy.
Uncertain times
With the implementation of new procurement regulations, businesses and public sector organisations alike face a period of adjustment and uncertainty. We discussed how adaptation to the evolving landscape will require investment in training and keeping a close eye on drip feeds of information from the Cabinet Office. In fact, the Procurement Act Expo was one of the many roadshows currently happening across the public sector to ensure all procurement teams have visibility and understand ‘what it means for them’.
Technology, and compliance measures are likely to follow to ensure adherence to the new requirements. Additionally, it was highlighted by one participant that procurement teams must monitor developments closely and remain agile in responding to emerging challenges or regulatory changes.
The potential benefits
Despite the initial challenges and uncertainties, there was optimism amongst the group that the reforms will ultimately lead to positive outcomes. Enhanced transparency and accountability can foster trust and confidence in the procurement process, encouraging more diverse participation and fair competition. Moreover, it is hoped that the improved governance and compliance standards result in better outcomes for both suppliers and public sector entities, improving job satisfaction and ultimately benefiting the broader economy and society, as a whole. Only time will tell.
In the meantime, SMEs have the opportunity to make themselves stronger candidates, and more desirable to public sector buyers by using data on themselves (for example financial credit information) to understand how they are perceived by this audience. Furthermore, investing in areas such as frameworks and certifications over the next few months could make them be seen in a more favourable light before the Act comes into force.
For more information on The Procurement Act and the due diligence public sector buyers will need to conduct – including around SMEs – download our free guide today: The Procurement Act: A Due Diligence Guide for Public Sector Buyers]