Working Towards a More Open and Accessible Public Sector Marketplace – for Suppliers and Buyers

 "... government markets are supposed to be open - the fact is, the government market is one of the most closed in the world, with significant barriers to entry and massive knowledge and information asymmetries. Many suppliers find it too difficult to penetrate, and end up walking away* from the complexity, costliness and unyielding regulations. At the same time, government buyers and government contracting professionals have neither the time nor the resources for sufficient market research. Add to that an environment where avoiding failure at any cost is better than smart risk-taking, and we are stuck in a cycle of suboptimal outcomes.”

These are the words of Raj Sharma, entrepreneur but foremostly a visionary of public sector effectiveness. He strongly believes that, because governments around the world are the custodians of 10 trillion dollars which are not being spent efficiently, public procurement has the power to influence change at scale, for those who need it the most.

He has accumulated 15 years of being entrenched in public procurement (or government contracting as some may call it), policy and networks, and during this time has built up the expertise and motivation to make a difference. “Even if we could improve the effectiveness of a small proportion of that spend, it could do a lot of good to a lot of people, and I believe create a better world for everyone,” he told us.

Multinational institutions (the World Bank included), he observes, have been working at it, but it isn’t enough to make a difference at scale. Procurement, however, as we know, touches everything in an organisation, and likewise, touches on everything in government, whether that be outsourcing, finding the right innovators to partner with, drawing on the right expertise to help take on the challengers of health care, infrastructure, or public services – all the areas that have a direct impact on people. As well-intended as the policy frameworks that come out of central government or multinational institutions are, he believes they don’t take into account the need to eliminate bureaucratic complexity in order to drive meaningful change, resulting in more complexity and therefore the same ongoing problems.

“If we really want to initiate change, we need to build systems from the middle-up: systems that therefore will allow people at the mid and lower levels of government to have more control to take on the challenges. Political leaders come and go, terms end, goals change, new leaders bring in their own agendas. But it is the civil servants, like those in procurement, who are steadfast, those in transactional roles, like the contracting officers, who stay around long enough to effect change.”

The public sector, he believes, doesn’t have the stability in the same way the private sector does. Companies can look at strategic transformation through the eyes of a 5- or 10-year plan, but not so in the public sector. Most political cycles run between 2 and 5 years and leaders inevitably are driven by special interests and party politics. Suffice to say, the real power to drive change comes from those at the coal face.

government market researchThis is the whole idea behind GovShop – democratising market and supplier information, giving it away for free, arming people with the tools to drive a change in thinking – in GovShop’s case, this is in finding the right partners with like-minded ambitions.

Through years of broad public sector market research, albeit predominantly in North America, followed by several months of meetings and talking to frontline buyers in government about their challenges, he has discovered a universal core set of issues related to government market research. These are:

1 Lack of time – government market research, and the funding required to train to do it well, is not treated as a critical aspect of public procurement. Complying with rules and ‘paper pushing’ takes precedence over spending time on more high-value tasks, like searching for and engaging with suppliers. Time is one key issue and people don’t have enough of it.

2 Fast changing markets – by nature this applies to both the public and private sectors. From what he’s seen, government doesn’t have a defined role for market research. Where people might have a responsibility to build contracts, work with customers and manage supplier relationships, they aren’t necessarily monitoring the market at all times. The market is moving, and as suppliers enter and leave it, it’s impossible for someone to keep track of it all.

3 Data fragmentation – even if they had the time to do the market research and keep an eye on market movements, the fact is, data around suppliers, in terms of who is out there, what they do, their experience and  real credentials, including certifications for the critical regulations governments may have, is patchy. While some open data sources exist, many are incomplete, often with surface-level information that is not useful towards qualifying and selecting suppliers.

“We understand,” says Raj, “that the issues in Europe are of a similar nature, and probably across the globe too. So we are expanding our data sets used in GovShop, which has seen substantial success in the US, and creating APIs to tap into data sources that will give us information on over 100 countries, including all of Europe.”

The overall mission is “to create open government markets” by creating the ‘Google’ of supplier research for government, for the long term. Like Google, it will provide information and the ability to search across everything, but with a more specialised focus. The idea is to help governments, all over the world, to research and discover the best partners for any need, for any outcome. “And our hope is that, as suppliers find access to government easier, it will drive down costs and deliver better outcomes for the challenges governments are tackling now.”

To help drive this initiative forwards, Raj would love to hear your views on what you believe are the core public sector issues in Europe – how do they affect you? What are you experiencing? What would you like to see happen to help resolve them? Please leave your comments, or email us via our ‘contact us’ page.

 

A note about Raj Sharma:

From a personal perspective, Raj, who grew up in India, has been no stranger to experiencing hardship and witnessing extreme poverty. Having become a successful entrepreneur in the private sector, he moved into the public sector primarily because he ‘wanted to give something back.’ “Regardless of your political philosophy,” he says, “the fact is that any government plays a huge role in shaping society. There are many people who genuinely need help in today’s world, inequalities are growing, and those with opportunity should use it to influence and improve the well-being of others.”

After founding his own successful consultancy Censeo, Raj went on to found Public Spend Forum in 2013. He also plays an important role in many other not-for-profit ventures. The 'Forum' encourages more two-way public procurement interaction, but the wider goal is, as he says:

“… to drive long-term sustainable change ...  to create an open, efficient and innovation-driven public sector market, so we can help government and suppliers better work together to solve problems, use our taxpayer money in the best manner possible, and ultimately improve the lives of citizens around the world."

 

*New research from TheyBuyForYou partner Openopps shows public tenders across Europe are becoming increasingly uncompetitive with 25% of tenders receiving only one bid. Of concern, is that the trend toward uncompetitive single-bid tenders is increasing, up by 44% between 2016 and 2017. The total estimated value of these uncompetitive contracts has grown from €41trn to more than €100trn in the same period.

 

First Voice

  1. Jag Patel:

    Government markets are not only one of the most closed in the world with significant barriers to entry, but they are also seriously uncompetitive, with public procurement contracts often handed out to the Select Few on a preferential basis. What’s more, it is the ill-considered policies of previous governments, including that of Tony Blair, that exacerbated the problem of concentration in the UK economy.

    Consider the market in defence equipment for the Armed Forces.

    The dominance of just a handful of manufacturers, the Select Few, has been a distinctive feature of the defence equipment market for as long as anyone can remember.

    Unlike the market in consumer goods and services, there is only one customer for defence equipment – the government. Consequently, the purchasing decisions taken by the government has a significant bearing upon the composition and diversity of players in the defence equipment market. And because taxpayers money is used by the government to procure military equipment for the Armed Forces, the condition of the defence equipment market should be of concern to anyone who has an interest in the proper functioning of open and free markets, and in securing best value for money, as it relates to the expenditure of public funds.

    Nowhere is the market in defence goods more concentrated than in the naval shipbuilding sector, as exemplified by the number of bidders who entered the competition to build the Type 31e general purpose frigates for the Royal Navy. It is the first time that a contract for combat ships has been competed openly on the global market, to identify the bidder that will construct the five Type 31e frigates. Hitherto, the contractor to receive such a single-source design and build contract has always been selected on a preferential basis (from the Select Few) – by successive generations of people in the pay of the State who have a poor understanding of how free markets work, not least, because they have not spent a single day of their lives in the private sector.

    The consequence of this misguided attempt at shaping the shipbuilding industry has been an unmitigated disaster. Only three industry teams have responded to the (second) announcement to submit an expression of interest for consideration by the procuring authority, the Ministry of Defence – this, after the government went out of its way to relax the demanding technical specification requirements incorporating stringent naval standards, specifically to attract commercial shipyards. A minimum of seven bidders are required to run the winner-takes-all competition efficiently. See this illustration pic.twitter.com/RUToAZ6thx.

    It may be that foreign companies do not believe the government’s word when it says that it will run a genuinely fair competition open to all-comers, including offshore yards – only to then surreptitiously favour domestic contractors, as has happened so often in the past.

    For an island nation with a long tradition in naval shipbuilding going back centuries, such an outcome is a huge disappointment and it leads one to conclude that there is a serious lack of competitiveness in the naval shipbuilding sector. It is the number of bidders entering a competition that determines how competitive a product market is – the higher the count, the healthier and more vibrant the market, and the keener the desire on the part of contestants to win the contract.

    This dire situation has come about because successive governments, going back decades, have sought to protect domestic equipment manufacturers from being exposed to the full rigours of the free market, that is to say, shield them from ‘feeling the heat’ of competitive market forces – which has, in itself, led to this market concentration.

    The creation of the monolithic entity called BAE Systems which dominates the defence equipment market today – from the acquisition of various business units of Marconi Electronic Systems in 1999 with the tacit acquiescence of the Blair government, without referring the merger to the then Competition Commission – further reduced the number of independent participants in the market.

    BAE Systems then went on to use this dominant market position to stifle competition and coerce the Brown government into signing a 15-year Terms of Business Agreement* in secret which, in effect, hands out a series of cost-plus, naval shipbuilding contracts worth £3,450 million up to 2024. In so doing, future governments have been denied freedom of manoeuvre in the management of public finances.

    What’s more, in common with concentration elsewhere in the UK economy, the defence equipment market monopolised by the usual suspects is plagued by excessive mark-ups, insignificant investment in innovation, R&D and product development and persistently low wages for the vast majority of its workers.

    @JagPatel3

    * Fully examined in briefing paper for the Public Accounts Committee, Inquiry into Defence Equipment Plan 2017-27, HC 880, Session 2017-19, Written evidence from Jag Patel, published 13 March 2018, PDF file (294 kB): http://data.parliament.uk/…/public-accounts-committee/defence-equipment-plan-201727/written/79612.pdf

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