Local Authority e-Procurement and SMEs

Opportunity or Threat? 

Martin ScarfeNational e-Procurement Project

London Borough of Newham

Background

• The move to e-Procurement by local authorities has already had an impact on smaller local companies

• A further move to shared service e-Procurement will add momentum to this, bringing more spend into regional or national contracts with major suppliers

• Government has recognised the damaging affect this could have on local SME businesses that supply the authorities

• The National Procurement Strategy for Local Government and the Priority Services Outcomes targets set out requirements for authorities to ensure that local businesses are included in all relevant procurement policies, for the good of the local community

• So how are we doing?

The Statistics(Spikes Cavell Observatory)

Noof

Orgs

No of Trade

Suppliers

Value of

Trade

No of Trade

Invoices

Trade with

SMEs

SMEs at Risk

% Companies Employees

National 93 165,981 £10bn 8.26m 59% 8% 7,827 110,710

London 19 45,363 £3.4bn 2.15m 56% 9% 2,460 34,761

Survey of Supplier Adoption

• Carried out to assess the progress being made by English local authorities in addressing supplier adoption issues

• 125 Counties, Metropolitans and Unitaries participated

• Scope of research:1. Compliance to National Procurement Strategy requirements

2. Achievement of Priority Services Outcomes “Excellent” e-government outcome for e-procurement

3. Status on Supplier Analysis

4. Progress with Supplier Portals

The NPS requirements

– Publish a Selling to the Council guide (website)– Relationship of procurement to community plan addressed– Workforce diversity, equality and sustainability issues

addressed– Diverse and competitive supply market encouraged– Sustainability built into procurement strategy, processes and

contracts– Concordat for SMEs and voluntary sector compact concluded– Invitation to bidders to demonstrate effective use of supply

chain included– Give bidders option to specify benefits under community plan

PSO “Excellent” e-government outcome

• Shared Service / National Priority:– promoting the economic vitality of localities

• “Excellent” e-government outcome for e-procurement:– Inclusion of Small and Medium Enterprises (SMEs) in e-

procurement programme, in order to promote the advantages of e-procurement to local suppliers and retain economic development benefits within local community

Supplier Analysis

• Identified as one of the key first steps in improving an authority’s procurement performance

• Best practice is for a group of authorities to use an external analytics service provider to obtain a full analysis

• This should ideally include data on:– common suppliers– local SMEs at risk

Supplier Portals

• Being planned or implemented by most authorities

• But little agreement on what a Supplier Portal should do, for the buying organisation and for its suppliers

• Considerable confusion and variation across the sector

• A review of Supplier Portal systems has been undertaken

Summary of Results

• 48% of councils scored reasonably well across the four supplier adoption questions

• + 25% report that they have plans to bring their supplier adoption programmes into line with national targets

• 27% !!!!!– 71% compliance to the supplier adoption requirements of the

NPS averages across the country– 52% are meeting the PSO ‘Excellence’ target but 25% have no

plans to do so and many did not know what they were!– 42% are using the data from supplier analysis to develop

collaborative contracts and assess local SME supplier risk– 28% have achieved a some level of interaction with suppliers via

a web-based supplier portal

Regional Status

• Leading overall:North East (63%),East (58%)

• South West and East Midlands are close behind with 56%

• In third place are West Midlands and Yorks & The Humber, at 54%

• In the last group are London (49%), South East (46%) and North West (42%).

• The role of Regional Centres is emerging as key to progress

Summary Table

AVERAGE EAST EM LON NE NW SE SW WM Y&H

% of authorities responded in sample 82% 70% 70% 81% 100% 77% 95% 93% 71% 73%

Compliance to NPS 71% 84% 63% 75% 83% 63% 64% 76% 73% 86%

Achievement of PSO 52% 57% 68% 52% 75% 38% 45% 58% 60% 64%

Supplier analysis 42% 57% 43% 43% 33% 34% 47% 56% 43% 39%

Supplier portal 28% 33% 49% 26% 62% 31% 27% 33% 40% 26%

Overall 48% 58% 56% 49% 63% 42% 46% 56% 54% 54%

Some Common Views

• Concerns about SMEs being squeezed out of collaborative contracts - 30% is local spend & voluntary sector – RCEs not working on this

• Confusion and conflict in EU regulations - can’t use the word ‘local’ (OGC Social Issues paper). Clarification and guidance needed – also assistance on wording of contracts

• How do you monitor and measure benefit/value of encouraging local firms?

• Reluctant to publish prime contractor details - data protection issues and fear of poaching

• Self-registration, PQQ online etc - Data Protection issues and fear of overload

• Need for national supplier portal, linked to regional and local

Newham KickStart Project Why?

• 59% of the borough’s trade suppliers are SMEs, a quarter of which are based in Newham - this has already dropped by 9% in a year as Newham shifts to using larger suppliers

• Taken together, Newham, Tower Hamlets and Waltham Forest buy £42m of goods and services from Newham-based suppliers, around 20% of which are significantly at risk as local authority supplier rationalisation continues

• Nearly £11m of Newham’s spend is with suppliers based in its Stratford Ward alone - with the local multiplier effect, the loss of this could mean up to £50m ultimately drained from the local economy

Newham Kickstart ProjectOutcomes

• The Newham KickStart project was set up to enable the council to maintain a sustainable level of local suppliers, while still meeting procurement improvement targets

• It has been successful in raising e-enablement among SMEs:

KickStart Outputs:

SMEs influenced 2,150

SMEs e-enabled 152

% increase in e-enablement among local SMEs

7.1%

SME InclusionWhat Now?

• It is important that councils, particularly in London, ensure that their small local businesses benefit from the build-up to 2012

• But if we exclude them from public sector trading, many won’t be there to take advantage of the opportunity

• The success of the KickStart project has confirmed that it needs to be made an integral part of how councils can help and support their business communities

• A scheme costing under £120k pa would provide support for 200 local SMEs every year

• These schemes could not realistically be self-funded

– we need further funding!!!