Public sector procurement has always been a focus of interest to Construction Law and in recent years recognition of the need for reform has been growing.
Recent years have seen several attempts at procurement reform, focussing on contract management, increasing competition, boosting transparency of procurement and strengthening social value in the process of contracting out. It all came too late to prevent some highly significant scandals, such as the collapse of Carillion.
The Cabinet Office Procurement Playbook which was brought out in February this year is the most recent attempt to institute reforms that are widely accepted as urgently needed. A just released report from think tank Demos (see News) presents recent thinking on what still needs to be done to improve UK public procurement. It is a wide ranging examination of the areas where reform is needed, but here we will mention only two, competition and transparency.
Many tender invitations only attract a single bidder, Demos highlights. There was no competition for 23% of tenders in 2018, a survey showed, compared to only 15% in 2016. Another trend that has been increasing in recent years is the low participation of small to medium enterprises (SMEs) in public procurement, with just 22% of UK SMEs participating in public procurement as against an EU average of 32%. Measures are being taken to improve this, with a target of achieving one-third of all central government contracts to be let to SMEs by 2022.
To meet its targets the government has made changes to procurement policy. For example government departments have been prohibited from excluding potential bidders on the basis of low turnover. Larger contracts are being broken up into smaller lots; bidding procedures have been simplified; communication between SMEs and the government has been improved.
Concerns, however, have been raised that the government does not appear likely to meet its target. Despite initial progress, the percentage of government spending going to SMEs has started to reduce in recent years. And the proportion of procurement spend on ‘strategic suppliers’ – companies receiving more than £100m annual revenue from government contracts – has increased significantly, with the public sector market share for the 25 strategic suppliers increasing from 13% in 2012/13 to 18% in 2016/17.
This has led to concerns that public sector procurement continues to be overly reliant on a small number of large suppliers. The problems inherent in this were seen with the collapse of Carillion, which had 400 public sector contracts underway when it failed. Another high-profile supplier, Interserve, also fell into administration, further highlighting the potential problems.
Demos says the need for more transparency in procurement is also pressing. It can encourage contracting relationships to become ‘more like collaborative relationships, where different parties and stakeholders collaborate on the basis of trust and reciprocal exchange, while still retaining the emphasis on delivering public value’, leading to better service delivery focused on outcomes. This chimes with construction industry moves towards greater collaboration.
Procurement is however relatively opaque in the UK. Demos quotes an EU Single Market Scoreboard that measures EU countries across 12 aspects of good public procurement, in which transparency is a key theme. Whilst achieving a ‘satisfactory’ rating overall, the UK is rated unsatisfactory in four of the 12 key aspects of concern, such as overall poor data on calls for bids, buyer numbers and registration numbers.
Lack of transparency means the public has no right of access to information on the contracts under which their money is being spent. Increasing transparency might prevent situations where key contracts are let to large suppliers that are already underperforming on existing contracts.
Nick Barrett
Editor