The House of Commons communities and local government committee reckons that local authorities can get more from their £45bn annual goods and services budget by improving procurement practices.
It has not gone down entirely well with the construction industry and at a time when the Chartered Institute of Purchasing & Supply is on an ethics drive, the MPs may have mistaken the concept of best practice in procurement with cheapest prices.
The report recommends the wider use of framework agreements by local authorities. These effectively shut out most local suppliers, except as subcontractors. The big companies that usually get the framework places often have little interest in small-scale town hall repairs but instead act as little more than middlemen taking a cut from local minnows.
The MPs say: “The Local Government Association (LGA) should conduct a review of collaborative public sector approaches at a local level and produce best practice guidance for authorities on the most effective means of joining-up procurement budgets across a range of local public sector bodies to help deliver joint local priorities.
The report says: “We recognise that local government is aware of the need to improve procurement practice across the sector and that some councils are adopting effective procurement approaches which deliver savings to local communities. We are, however, concerned that more needs to be done and that not all are procuring so as to achieve maximum value for money.”
The MPs reckon that £1.8bn savings can be made if councils join together more for purchasing.
The Federation of Master Builders, which represents the kind of small and medium-sized enterprises (SMEs) generally frozen out by framework deals, was swift to respond. Chief executive Brian Berry said: “We have concerns regarding the strong emphasis the committee has placed on economies of scale. Although the advantages of SME procurement are also recognised, if economies of scale are the priority, there is a danger that councils will overlook the value for money, and wider social value, that good local procurement can achieve. For instance, in construction, 60% of apprentices are employed by micro-businesses so they must be given fair access to these public sector opportunities if we are to maximise employment opportunities for our young people.”
He continued: “The Committee has taken heed of the FMB’s advice and highlighted the need for greater standardisation of PQQs in order to reduce the administrative burden on SMEs. Our own research shows that almost half of small construction firms have a negative experience of completing these forms and they are a major barrier to SMEs.”
Mr Berry concluded: “If central government really wants to encourage more SMEs to bid for public sector work, it must transpose the article in the new EU Public Procurement Directive that requests public sector clients, including councils, to divide their contracts into smaller lots wherever possible. Of all the new measures in this Directive, this would have the most positive impact on small construction firms and should be written into UK law as soon as possible.”
On the plus side, the committee’s report also makes recommendations for prompt payment of contractors. It states: “Councils should as a matter of course pay contractors promptly and include a requirement in contracts requiring contractors to ensure their sub-contractors are paid promptly right down the supply chain. Councils should publicise this policy and monitor closely the implementation of these terms through spot checks. Contracts must also require contractors to report failure to comply with these conditions. Local authorities should take into account any failure by a contractor to comply with the conditions when assessing tenders for any future work.”
The Civil Engineering Contractors Association (CECA) was rather more relaxed about the report. External affairs director Alasdair Reisner said: “Our members have reported that while some procurement by some councils is first rate, many local authorities lack the resources or capability to deliver effective procurement of large infrastructure schemes. Typically this leads projects to be delayed, piling up the cost of bidding for contractors.
“In its evidence to the committee last year CECA proposed the creation of a procurement ‘flying squad’ to assist local authorities in the procurement of major infrastructure projects.
“We are delighted that this recommendation has been endorsed by today’s report. The establishment of a dedicated ‘flying squad’ of infrastructure professionals who will be able to upskill regionally-based teams of trainers would spread best practice in the sector.”
The full report, called Local government procurement, can be downloaded from:
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