New regulations have been introduced to make it easier for SMEs to access the tender process for public sector contracts. A potential goldmine awaits
Public sector contacts have always been notoriously difficult for small businesses to access. Even if they're deemed legitimate applicants, the lengthy and costly nature of the process unfortunately rules most SMEs out. But things could be about to change. On February 26, new rules came into force requiring public bodies in England, Wales and Northern Ireland to change the way they procure goods and services.
A key feature of the new rules is a reduced timeframe for procurement which will enable businesses to bid for contracts much quicker. This, teamed with the scrapping of the Pre-Qualification Questionnaire (PQQ) stage for low value contracts, aims to lower the amount of obstacles in the way of SMEs winning contracts. The PQQ is a lengthy document that has previously seen candidates slave away ticking boxes and proving their worth. Buyers will also now be encouraged to split their contracts into Lots, which means large contracts could be split in order to make more contracts available to SMEs for procurement.
In practice, then, these reforms balance the need for a contracting authority to be able to assess a candidate’s past experience with satisfying the European Commission and Cabinet Office’s intentions to make procurement processes simpler, faster, less costly and more effective for SME," says Colin Murray, senior associate at DWF LLP.
"For contracts below €134,000 (central government contract) or €207,000 (sub-central government contract), the process included in the regulations is simple and less onerous on SMEs,” adds Murray. He believes that the new regulations will ultimately make procuring contracts easier for SMEs as the new regulations have simplified legislation for SMEs to get their head around. “What may be lauded by SMEs is the fact that now ‘sub-threshold’ contracts have a prescribed procedure which has the potential to become uniform across all authorities. This may make it easier for SMEs to bid for contracts from a range of authorities because the conduct of procurements by differing authorities will be more uniform,” Murray says.
He points out though that whilst the PQQ has been banned for lower thresholds, the contracting authorities are still permitted to ask any candidates to answer suitability assessment questions if these questions are relevant to the subject matter of the procurement. Murray argues that these assessment questions are just a watered down version of the traditional PQQ but are not so burdensome to answer. The new regulations make it ever so slightly easier for SMEs to bid for government contracts but there is a sting in the tail. There is an increasing number of regulations to be adhered to: the previous rules had 56 regulations, the new set will introduce 122 regulations that SMEs, procurers and services all need to comply with.
It's no surprise then that not everyone is in agreement that the reforms to the PQQ will benefit SMEs. Tim Williams, managing director of Millstream, which runs the procurement portals for Scotland and Wales, believes that the material change will come with a greater cost to the public bodies who evaluate the tenders submitted and assess their suitability. “Instead of completing a relatively short questionnaire to demonstrate their qualifications, a candidate for a public contract will have to provide exactly the same information as part of their tender, but will also have to complete a full tender proposal. A full tender proposal will often consume a very significant amount of time and resources,” says Williams.
This has the added downside of giving false hope to businesses who get further down the line but are ultimately unsuccessfully as they would have failed had there been a PQQ to analyse their suitability. What's more, the complicated changes will take a long time for people to get their head around and Williams predicts that over time this will put companies off submitting tenders for public contracts.
“While well intentioned, the removal of the pre-qualification questionnaire (PQQ) process will significantly and adversely affect the ability of small firms to win public sector contracts,” he predicts. He points out that all firms that are considered for a government contact will still be required to be qualified to carry out the work; they must have adequate financial strength, appropriate insurance, quality management processes and a proven track record of completing similar contracts. The removal of the PQQ will mean that this information is given at the full tender evaluation rather than the initial stage, a move that Williams believes is more time-consuming for both SMEs and regulators alike.
Only time will tell how far the new regulations to help SMEs. Over the last few years the Cabinet Office has implemented many regulations to try to make it easier for SMEs to win contracts. One such initiative was a new framework that was introduced to the Government Digital Services (GDS) to make it easier for small and medium enterprises to carry out work for the government and public sector. “Until 2012, pretty much 80% of [the government's] IT was done by five companies, the big names that people would know like IBM, Hewitt Packard, Fujitsu and the likes of them," says Chris Chant, former executive director of G-Cloud in the Cabinet Office. "This government wanted to change that and get more SMEs involved, I put together something called the G-Cloud framework, which in essence enables SMEs to deal directly with the government more easily than in the past. [Until that point,] frankly, it was impossible and the only SME involvement was only subcontracted through large multinational companies.”
Chant made it possible for SMEs to tap into the wealth of GDS contracts independently rather than having to rely on being sub-contracted by market leaders. G-Cloud went live in 2012 and its success speaks for itself: £500m worth of contracts have been awarded and half of that has been earned by SMEs.