Making councils a friend of enterprise

Council procurement managers aren’t the enemy of enterprise, Mr Cameron. But with your help they could do more to support local businesses, says Matthew Jackson

In the government’s latest crusade against the functions of local government, prime minister David Cameron proclaimed at the weekend that the third of the ‘enemies of enterprise’ were ‘the public procurement managers who put contracts with big business before opening up markets for small enterprise’. For me and probably many in local government, this sweeping statement is wrong on a number of accounts.

First, it is central government that’s the worst culprit for favouring big business when it comes to procuring goods and services. A look at the list of the top 100 suppliers to 15 central government bodies, also released last week, reveals spend of £4bn on BAE Systems; £1.6bn on Hewlett Packard; and £1.3bn on Serco. Hardly small enterprises.

Second, local government is still restricted in supporting small enterprises and particularly local enterprises by European Procurement Law and centrally prescribed tender rules which prevent enterprises from bidding for procurement opportunities because their turnover is not big enough or they have not been operating for long enough. Central government needs to be stronger in Europe when representing the views of small UK enterprise and deciding upon the thresholds for procurement contracts.

Third, the statement is unfair on many of the local authorities CLES has worked with over the last three years who have sustainable procurement principles and priorities at their heart. In our work with Manchester Council we have seen not only commitments to and evidence of enabling local economic, social and environmental benefit through the process of procurement but also strong support to the very small to medium sized enterprises (SMEs) Mr Cameron is talking about.

Around 33% of all the council’s procurement spend on its top 300 suppliers is with organisations that can be classified as SMEs. This is above the emerging government target of 25%. Additionally, it is offering a range of support to SMEs to encourage them to bid for contract opportunities including: meet the buyer events; a supplier network; an online portal; gap analysis; and capacity building in underserved parts of the city.

That’s not to say to say the situation is perfect. There are local authorities where cultural, political and bureaucratic barriers restrict the engagement with, and use of, small enterprise. Anecdotally these are often the authorities which have outsourced many of their services to the big business Mr Cameron also refers to. To enable better practice in procurement in the future and to enable maximum benefit for SMEs, and indeed communities, four things need to happen:

First, we need to move away from the obsession with efficiencies to think about cost benefits across the procurement cycle, from identifying the need to monitoring and evaluating the effectiveness of the service. At each of these phases procurers need to not only consider the cost of the service or good but also the potential benefit it brings in local economic (suppliers, enterprise), social (tackling unemployment, apprenticeships) and environmental terms (mitigating climate change). For too long cost and efficiencies have been paramount in the choice of supplier. Instead, community benefits need to be given more prominence.

Second, we need to recognise the importance of the supplier’s role in maximising economic, social and environmental benefit. The local authority is effectively the enabler and strategist when it comes to procurement and benefit. It is the supplier that holds the real key to wider benefit. They are not restricted by EU procurement law when it comes to their spending practices or use of local labour so are crucial to enabling wider benefit. But local authorities can use their influence to highlight to suppliers what their corporate priorities are, where their priority areas of deprivation and worklessness are and what they expect in added value through the delivery of goods and services. It is then up to the supplier to meet these requirements through their employment, supply chain and environmental choices.

Third, we need to ensure the function of procurement is centralised but also cross-departmental. CLES’ work in many authorities has found inefficiencies arise when individual departments are responsible for procuring goods and services. To enable greater benefit procurement departments need to work with other departments, particularly economic development. Procurement officers need to talk to economic development officers to understand the key issues, the gaps in delivery by local suppliers, the capacity requirements of business, and the skills of the local business base and their ability to deliver. These all need to be considerations in how procurement engages with existing and potential suppliers.

Fourth, we need to both recognise the importance of SMEs but also identify who they are and provide capacity building. The key to this is intelligence – there is little understanding within procurement departments of who SMEs are, what they do, the types of services they deliver and the support they need in order to bid. Procurement and economic development must collaborate to identify gaps in local delivery by ward and sector and work with those organisations to prepare them for the tendering process.