Richard Bennett, managing director of PSN supplier Updata, has hit out at the difficulty of procurement at a local government level, claiming that despite the right noises being made in the Cabinet Office it is still an unwieldy process for SMEs.
However, Bennett has highlighted a number of flaws in the procurement process at a local government level that make it hard for SMEs – flaws that he argues are getting worse and aren’t fair on small players.
Benett said: “Procurement is difficult full stop. I haven’t really seen any great movement in favour of the SME, other than what I have read in the newspapers. I haven’t seen it on the ground.”
He went on to provide an example of when Updata bid for a major contract with a council in the UK.
“It wasn’t a small contract, it was potentially worth tens of millions of pounds. Our written responses for that contract ran to 571 pages, we had to provide 72 different financial scenarios, and our appendices ran to a further 1,200 pages. It shouldn’t be that long, it just shouldn’t,” he said.
“If you look at the difference between central and local government – what you see in central government is shorter contracts, smaller contracts. Whereas, local government has decided it is going to do completely the opposite.”
Since the coalition government came into power it has made promises that huge IT contracts, such as the controversial National Programme for IT, will cease to exist and doors will open for SMEs. Francis Maude said in 2010 that ‘the days of mega IT contracts are over’, and this message has been repeated by various ministers and politicians ever since.
However, Bennett is adamant that this practice hasn’t been adopted by local authorities who are now making unrealistic – and not necessarily financially smart – decisions when procuring.
“What local authorities will also do, which is my biggest bugbear of all, is define the proportionality between the actual opportunity and the potential opportunity, which then rules out people like us from bidding,” he said.
“For example, Dorset County Council went out to tender for a PSN and in the prior information notice said that the contract was likely to be worth somewhere between £20 million and £200 million. They also stated that to bid for this – which was a pass/fail gate to apply – the value of the contract had to be no more than 50 percent of the annual turnover of the business that’s bidding for it.”
He added: “So you would have had to turn over £400 million to bid for that contract, which could just be worth £20 million over ten years.”
Updata had been the previous supplier to Dorset for its wide area network (WAN) but due to the guidelines under the new tender, it lost the contract to KCOM.
“We provided that WAN to Dorset, to the same number of sites, 90 percent the same technology throughout, at an annual cost of £820,000 a year. We had been doing that since 2004 when we turned over just £1.6 million a year and employed about 16 people. Suddenly the bar has been set somewhere else,” said Bennett.
“Don’t just come up with arbitrary figures - companies could be turning over X amount, but could be losing money hand over fist. In the local authority’s eyes it’s okay, as long as you are over the limit. A company could be doing 95 percent turnover selling boxes, what use is that if a local authority is looking for a managed service?”
He added: “It’s very foolish, short-sighted and it’s not fair.”
Finally, Bennett said that authorities need stop putting all the focus on driving down the cost of procurement, but rather procure intelligently.
He pointed to some local authorities deciding that a single procurement is cheaper, so they put a lengthy list of services on a tender, which could then also be supplied to a number of other local government organisations they have ties to.
However, this could result in one supplier being signed up to do it all, but without the in-house capabilities.
Bennett said: “There seems to be this belief that if you just procure once you save so much money on procurement, so it’s fine. But the cost of procurement is entirely dwarfed by picking the wrong supplier to do things.
“If a supplier has to be able to provide accounting software, data networks, internet connectivity, I can tell you now that if they are very good at the internet connectivity part, their accounting software is going to be pretty bloody rubbish.”
He added: “The supplier will be buying it from somewhere else, and shoving a big fat margin on it. It may have been nice and cheap to procure, but it’s not nice and cheap to pay for.”