One of the stated ambitions of the current procurement reforms is to open up access to the Public Sector purse to SMEs on a more effective basis. Badged as another post Brexit opportunity, there is little to criticise in this aspiration, however, the proposals to achieve that goal already exist and clients have all the tools they need now to be inclusive procurers of goods, works and services. This article focuses on four features of current procurement practice where competition can be encouraged and opened up for the benefit of SMEs without changing the legal framework.
opened up for the benefit of SMEs without changing the legal framework.
- The client's business case. This is probably the most important step to including SMEs in a supply-chain. The client should, when a project is still just a twinkle in the Minister's or the organisation's eye, set out comprehensive and coherent reasons, based on value for money considerations, as to why the contract should be delivered by SMEs. Without this formative direction, SMEs are unlikely to get a look-in to the final procurement opportunity. A competition needs to be scoped and designed with the ultimate bidder in mind otherwise there is a risk that either: (1) SMEs see the ensuing competition as irrelevant or unsuitable or (2) they are put into competition against larger companies who may well have the benefits of a larger/slicker marketing team and a dispersed overhead that gives the larger bidder the option to cross-subsidise its bid to ultimately provide a cheaper price and win. Our experience is such that SMEs thrive in public sector competitions when the business case has been made by the client at the outset of the process to reserve either the entire procurement or a specific proportion of the procurement to SMEs alone.
- Pre-market engagement. The extent to which the client consults its potential bidders ahead of a procurement will often dictate the level of competition for a contract and who bids for it – even if the contract opportunity is ostensibly designed to be bid for solely by SMEs. The pre-market engagement process should be very much a two-way flow of information between the client and the marketplace. The client is able to undertake intrusive questioning and research as to what potential SME bidders think about the packaging of the works, but not only that – market engagement can cover the timing of the competition e.g. when it's coming to market, how it is packaged, its scope and even the design of the competition process itself.
- Competition design. What the client asks of the bidder in terms of scope and amount of information needs to be proportionate to the value and complexity of the contract, and easily compiled by the bidder.
The Lord Young reforms, introduced into the Public Contracts Regulations 2015, made two interesting assumptions: (1) that SMEs do not bid for contracts because they do not know about them (hence the obligation to advertise below-threshold contracts in Contracts Finder) and (2) that selection questionnaires are the biggest barrier to competition for SMEs. I would certainly take issue with the second of those assumptions. Reg 111 of the Public Contracts Regulations 2015 prohibits the use of selection questionnaires in some below-threshold contracts. This prohibition has caused more mischief and cost within the SME bidding community than the alternative position of requiring clients to use selection questionnaires which only include proportionate selection criteria. Unfortunately, this position has not changed under the new Procurement Bill. - Persuasive articulation of "why an SME"? Encouraging and opening procurement to SMEs should not be the sole responsibility of the client. Potential SME bidders need to be able to clearly articulate what measurable benefits they bring to a contract and what value they provide as distinct from their larger competitors. In many sectors, the usual assumptions as to the benefit of employing an SME (for example, the securing of innovation, the employment of local people or female-led businesses, the ring-fencing of contract spend to the local area) is not reflected in either the tender brief or the award criteria. Therefore, it needs the SME bidder (at all stages of the tender process but particularly at the outset) to bring the narrative and focus back to these benefits and provide the client with plenty of opportunity to reward those features, in the ensuing process.
Given all of this, we do not need to wait for the procurement reform to focus on SME involvement in all stages of a procurement process. We do need to be careful and use the flexibilities allowed under the new Competitive Flexible Procedure in a way that does not create additional barriers to SME access and so the same best practice message will apply: early and proactive engagement with your SME supply chain, as well as sympathetic competition design based on proportionality will ensure that competition for the public sector purse is encourage and opened up to SMEs.
(This article is based on a presentation given by Rebecca Rees, Partner and Head of Public Procurement at Trowers & Hamlin's to the Westminster Business Forum at the Conference centre, London on Friday 9 December 2022).
