Is public procurement really biased against UK firms? We examine the evidence

Yesterday we featured the feedback we had from Cabinet Office on various remarks made by UK Ministers and officials at the supplier conference in November. One of the most widely reported comments was from Francis Maude, Cabinet Office Minister, who said,

"And we are determined to remove the anti-UK bias in the way our public sector does its shopping. So UK based firms actually have a level playing field in which to compete”.

Apart from the fact that I do HATE people calling procurement “shopping”, we were curious to see the evidence of this “anti-UK bias” in public procurement. I can hand on heart say I never saw any evidence of it in my 10 years or so working in and around the public sector. So we asked the Cabinet Office for the evidence to support the assertion.And here are some extracts from the response we got from them.

"According to European Commission statistics, 3% of UK public procurement by value went to overseas firms, compared to 1.9% in Germany and 1.5% in France.

In the same 12 month period while British companies won £432m of EU contracts, French firms won £911m and German firms £3600m. (Spend Matters note – to clarify, this appears to be total value of contracts won outside the “home country”.) 

I should explain that the Minister was not suggesting that any historical bias against UK-based firms in procurement was deliberate. However, just as the manner in which some public procurement is conducted disadvantages SMEs and action needs to be taken to level the playing field, so the same is true for some practices inadvertently disadvantaging UK suppliers.

Instances include a failure to signal a smooth pipeline of demand in advance meaning that firms with potential capability can't gear up to deliver (such action benefits firms that can offer an existing solution), an unwillingness to discuss requirements with the market pre-procurement meaning that on occasions specifications are drawn up that UK-based firms cannot deliver even though they could have offered an equivalent solution if given the chance to input into the drawing up of the specification, and longer, more costly and complex procurement processes that militate against the participation of smaller, domestically-based firms".

Well, let's play "spot the logical fallacies" here.

1. Only 3% of UK public procurement by value goes to overseas firms - that seems an incredibly small proportion and it can only mean that any non-UK firm with an office in the UK counts as "UK"? Anyway it is such a small percentage it is hardly a significant sign of bias in any case.

2. The overall lower success rate of UK firms in winning business outside the UK (the £432M) obviously cannot have anything to do with bias shown by buyers  within the UK.

3. The relatively lower success compared to other countries in winning business may relate to the mix of UK economy; to the UK producing lower quality / higher priced goods or services; to less strong sales efforts made by the UK in other countries; to the UK having fairer procurement processes than other countries; or to some sort of anti-UK bias in other countries. Or indeed other factors- there’s no way of interpreting these figures. But again, they do not relate to Maude’s hypothesis anyway – that procurement inside the UK is biased.

4. The points raised around procurement practice in the UK are valid but they do NOT indicate any bias. That's because they relate to non-UK firms as well as UK based.  So if UK firms are disadvantaged by the lack of a “smooth pipeline of demand in advance”, then so are French (unless we’re saying that our authorities are tipping off the foreigners and not the UK firms…!) If “unwillingness to discuss requirements” sometimes hurts UK firms, then it must hurt German bidders. And if “complex procurement processes militate against the participation of smaller, domestically-based firms” it must also hurt smaller non-UK firms.

Of course all these points can and should be addressed in the interests of better procurement practice generally. That might lead to more success for UK firms – or it might help Italian or Danish firms more. We can’t know that. But nothing here supports the initial hypothesis / claim.

So, as far as we can see, the comment about “bias” (in our “shopping”.... ggrrrr)  has no foundation. It was we suspect a purely political comment to give a good headline and make UK businesses feel that the Government is looking out for them.

At least Maude didn’t say it was public “shoppers” being deliberately horrible to UK firms. But indirectly at least, the poor old public sector procurement community are made into the scapegoats again, and unfairly, with their suppposed  “practices inadvertently disadvantaging UK suppliers”.

Voices (4)

  1. Paul:

    The suggestion in the Henley/Future Purchasing report for a cabinet minister to scutinise all public sector spend might help to get an more objective view. At the moment I think the coalition government came in convinced that there was waste and inefficiency all around them, and has set about tackling them – but without doing the ground work of working out precisely what waste and inefficiency they are targeting. Likewise they have a view that bureaucratic rules stop smes, without a clear vision of precisely which ones need changing and which ones need retaining.

  2. Dan:

    I think public procurement needs a spokesperson or representative body – local government procurers have SOPO, but i’m not aware of any pan-governmental body. CIPS represents the private sector too, and is focussed on spreading its business globally, so i would say its stretched too thin to do the job.

  3. Dr Gordy:

    Thanks Pete, I’d be interested to hear what CIPS have to say on this given that the CX appeared quick to join those throwing stones at public procurers – why didn’t the professional body take up the challenge rather than some of it’s members?
    I too have a lot of respect for Maude’s commitment to procurement but I’m sorry that whoever wrote the speech seemed shoddy on the research – perhaps they were bought on lowest price. Either way the cavalier speech hasn’t done anything to help and I doubt if the ‘revolutionary initiatives’ announced will ever be subjected to any meaningful impact evaluation. The outcome is therefore likely to be that Maude’s own credibility as a change leader will have been compromised just when he had shown so much promise.

  4. Final Furlong:

    Makes you wonder (about Minister Maude’s outer office, that is). He clearly needs a strategic procurement adviser to filter away some of this crap, so he doesn’t shoot himself in the foot too often. (I thought that he had at least five, but apparently not.)

    And ‘UK-based firm’, as you’ve initimated previously Peter, doesn’t necessarily mean ‘British’. Like Bombardier, for example: a Canadian firm, based in the UK. Or the vast army of ‘foreign-owned’ companies which win public sector contracts with a small contingent in the UK… Or those owned by the ever-so fragile venture capitalists, the HQs of which, are often based in tax efficient countries, to avoid paying too much corporation tax and VAT.

    Like, erm, Mapeley. In case you’ve forgotten, they deliver tax-efficient estates and FM services for “one of government’s biggest tax avoiders” (Edward Leigh, former Chair of the PAC, 2005), HMRC. I imagine Bermuda must be nice this time of year…
    http://www.mapeley.com/aboutus/portfolio/HMRC/default.aspx

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