Engaging SME’s – ‘The Best Things Come in Small Packages?’
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Transcript of 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
© Cameron Consulting 2012. All rights reserved.
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
© Cameron Consulting 2012. All rights reserved.
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
© Cameron Consulting 2012. All rights reserved.
Real Life Examples…What is the marketplace
doing?
Soft Market Test
Pre
Procurement
Engagement
Soft Market Test
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
© Cameron Consulting 2012. All rights reserved.
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……
© Cameron Consulting 2012. All rights reserved.
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”
© Cameron Consulting 2012. All rights reserved.
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