A depressing case study in public procurement

I gave advice via LinkedIn some months ago to a firm who had bid for an IT contract with a public body in the wider public sector (the firm asked me to anonymise the story).  The supplier was told they were too small to be considered. The hurdle set in the PQQ was that the potential supplier must have a turnover of at least £30 million. And the contract value - £200K.  Absolutely ridiculous and disproportionate. I suggested they took it to the Cabinet Office Supplier Feedback Service, who I was confident would get this organisation to see sense (the Feedback Service has a track record of sorting out this sort of thing).

I don't believe in any hard and fast rules for turnover in these situations (and I have written guidance for the UK Government on this in the past), but if you insist, then something like 3 times contract value is not too daft a starting point (ie for a £200K contract you should have revenues of £600K). But £30M? Crazy.

Unfortunately, in this case, the Cabinet Office hasn't had much luck. The most they've got from the public body is some vague words around explaining their decisions better next time! But no change to the policy, apology or reasoning given. Now, I can think of three possible explanations.

The first  is incompetence. They just really don't understand. And won't admit they're wrong.

The second is a possibility that would generate a little sympathy from me. Perhaps this is an organisation that just hasn't got the resources to handle many bids so needs to reduce the numbers. Or they've had a track record of smaller firms screwing up, which means the Chief Constable has said "get me a big firm". And the poor procurement person knows what they are doing is bad practice but has been forced into this situation.

And the third - I don't really want to get into that, given libel laws. You can draw your own conclusions.

This also exposes the limitations of Cabinet Office, the Government CPO and even Francis Maude, who are powerless to enforce Cabinet Office procurement "policies" once they move beyond the narrow confines of Whitehall and central Government.

Yet in a funny sort of way, it justifies Maude's stance and his focus almost exclusively on central Government. If he can't influence this very clear example of bad procurement, why even attempt to control all the mavericks in hospitals, local authorities, or Police Forces across the wider public sector? Why waste time, political capital and energy trying?

But at the end of the day, we have an organisation taking bad decisions that leave suppliers thinking that public procurement is incompetent.  And that seems a shame for everyone - taxpayers, citizens, the procurement community...

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Voices (10)

  1. life:

    A fourth one might be that they are lazy, cut and pasted the section from a previous larger tender, and are now too embarrassed/frightened to change it.

  2. Dan:

    Nobody ever got fired for following the standard procedure. Much simpler than waiving the procedure, appointing the wrong contractor anyway and having to deal with awkward questions.

    1. Plan Bee:

      They did, many many times

  3. Clark Kent:

    Doesnt make this example any less curious.

  4. Clark Kent:

    My feeling is that Cabinet Office have no interest in setting the guidance in this area. As you say, it’s not hard. They seem to be pursuing a policy of we’re not going to tell you what the answer is but reserve the right to criricise if we think you’re wrong. Lovely to have your cake and eat it.

  5. Dr Gordy:

    Thanks Pete, you are spot on.
    Over the last few weeks I’ve listened to horror stories of dealing with public procurement from various third sector organisations. It really makes you ask how is there such a disconnect between ‘what should happen’ and ‘what does happen’.

  6. bitter and twisted:

    Did the winner do a decent job at a reasonable price?

    1. Brettsinclair:

      Most local authorities insist that the contract value is no more than 20-25% of turnover. We have been using a 35% threshold on some service contracts where we believe the risk is low in order to encourage SMEs to participate. Can’t see the sense in the need for a £30m turnover for a £200,000 contract.

      Bit like asking consultants for Professional Indemnity Insurance of £2m for a contract worth £10,000. In most cases this isn’t necessary but appears to be the blanket approach without thinking through the level of risk attached.

      1. Final Furlong:

        The contract cost may indeed be only £10k, but if the ‘advice’ they provide results in a costly (negative) outcome (lets say, for example, that you received legal advice stating that you can press ahead with evaluation criteria in a public procurement, which is subsequently successfully challenged), you would want to know that you can recover such costs through the adviser’s PI…

        I agree that it should be proportionate, and that a supplier’s turnover needs to be measured against the inherent risk of what is being supplied.

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