File on Four – “Community Benefit” in public procurement

We featured here the recent BBC Radio File on Four programme on public procurement and their Francis Maude interview. It looked at whether the UK could do more to support UK based / local suppliers to win more government contracts. Apart from the Maude embarrassment, it's worth looking at some of the points made – and you can listen to the programme in full here.

It started with a contract for wheelie bins awarded by Durham City Council – to a French firm. Apparently there was a UK bidder who offered lower prices – saving £250,000 – but they couldn’t meet the required delivery dates. Now, my parents are Durham council tax payers and I think they might have hung on a little longer for a new bin if they’d known it was that much cheaper. Anyway, that suggests the “problem” was the council didn't place enough weighting on price - the UK supplier would have won if a higher weighting had been given.

Then we had the contract for steel for the Forth Road Bridge. Here, it got a bit difficult, as it seemed to be primarily a Prime Contractor issue – a Prime who had then sourced steel from Poland, Spain, China. And the contracting authority wasn’t in a position to dictate to the Prime where they should buy from. But then the “problem” was described as the weighting of cost at 92.5% in the tender – if it had been given a lower weighting and other factors taken into account, then the UK bidder might have won. So I ended up a little confused.

But you see the problem? In the first case, more weighting on price would have helped the UK supplier. In the second, a lower weighting would have helped. So while it was all interesting stuff, what exactly was the programme suggesting? Other than a bit of retrospective fiddling of evaluation processes, which I suspect many people would like, it's hard to see how we can square that particular circle to help UK bidders.

There was then some discussion of the way that some countries, like France, make it a requirement to split contracts into smaller lots when feasible – certainly not something that has been done in most of the UK, which if anything has gone in the opposite direction.

But the heart of the programme, which included ideas that are more applicable generally, came when we moved onto the work undertaken by public sector procurement in Wales. Their “community benefit” strategy asks potential suppliers to respond to tender questions that are within EU regulations but support local communities and businesses. For example – “state how you will actively participate in economic regeneration activities” or “provide a plan for how you will utilize unemployed people…”

You have to be careful how you ask such questions so they’re not perceived as discriminatory, but the point was (well) made that there is a lot you can do without crossing the line and breaking the regulations.

Now this all sounds great and I've personally got a lot of time for what has been done in Wales. But of course it does beg some questions. When the interviewer asked a guy from Costain (who won a roads tender that asked various community benefit questions) whether they'd upped the price because of all these “extras”, he got a not particularly convincing response. And price was weighted at only 20% in that particular tender – we didn’t even hear whether Costain’s was the cheapest bid.

So do we have any evidence as to whether this policy is costing Wales more money than the traditional approach? If so, how much? Do we have evidence as to what it is doing on the benefit side – has unemployment decreased faster in Wales than in other comparable UK areas?

That's the sort of research and analysis that someone should be doing, as it looks like Wales has been an excellent test-bed for this approach. Something for Cabinet Office to get stuck into? If the Welsh experience is delivering real benefits, then let's do it everywhere. But we need some more evidence, we'd suggest.

Then, after the Maude interview, the final part of the programme looked at the Bombardier / Siemens train contract, which we'll come back to later.

Voices (7)

  1. bitter and twisted:

    We might be being unfair on County Durham. 500k constituents= 100k+ bins ? They are switching to 1 rubbish +1 recycling bin – lots of other costs – a 250k premium to get bins at the right time may be quite reasonable…
    Hopefully purchasing were involved early .. but “we spent 250k more on bins to not waste 1m on idle facilities elsewhere” isnt a nice simple headline.

  2. Aardvark:

    What’s wrong with a bit of market sounding? In the case of the wheelie bin buyers, this could have revealed that some suppliers had longer lead times than others. The buyers could then have said “Shall we proceed with short lead times, knowing that we will have less competition and may pay more, or shall we allow a bit longer? Or shall we include delivery leadtime as a criterion alongside price and trade one off against another?”

  3. Dan:

    Scenario One: The contract is awarded to a British firm. The media kicks up a fuss about public money being spent to prop up uncompetitive British firms that are too expensive or of poor quality. Unfavourable comparisons are drawn with the ‘picking winners’ industrial policy before the 80s and economists talk about the dangers of protectionism.

    Scenario Two: The contract is awarded to a foreign firm. The media kicks up a fuss about public money going out of the country and the loss of British jobs. Unfavourable comparisons are drawn with the level of manufacturing before the 80’s and economists talk about the proportion GDP that the public sector is reponsible for.

    To my mind its a catch 22 situation, and we should just try and ignore everyone and get on with the job as best we can.

  4. Final Furlong:

    I recall from the programme that the next best bid for the Forth Bridge project (and the local bid…) was £200m more expensive. Perhaps they proposed building a second one, just in case the first one fell down due to sub-standard British steel manufacturing…

  5. bitter and twisted:

    The solution would be: Durham pass the bin bids details onto other councils, who can tweak their evaluation criteria to get the ‘right’ answer when they need bins.

  6. Dan:

    We really should be issued with a crystal ball along with a CIPS diploma…

  7. Clark Kent:

    Hindsight is a wonderful thing. Is it reasonable that price is the determining factor on a commodity like a wheelie bin? What is different here to other local authorities thatu have done this well. appreciative enquiry perhaps?

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