The government is keen for more SMEs to supply goods and services to the public sector. Clare Murphy, dispute resolution partner in Birmingham, walks us through the process and looks at the pitfalls to avoid.
The government continues its commitment to support start-ups and SMEs by actively courting their involvement in the supply of goods and services to government departments and other public bodies.
The prospect of securing a potentially lucrative contract with a public authority is therefore an increasingly distinct possibility for smaller businesses hoping to displace the ‘big players’.
In reality, not all of these opportunities are for prime contracts, but the strategic importance of securing sub-contracts or “approved supplier” status through this channel can’t be underestimated.
There is a perception of heavy regulation surrounding the public procurement process that can be off-putting. Here we dispel some of the myths and look at the most significant considerations.
Where are the opportunities found?
You can find the opportunities within the UK in various places. The most frequently used are Contracts Finder (for lower value contracts worth over £10,000) and Find a Tender (for higher value contracts).
More specialist routes, such as Digital Marketplace and the Small Business Research Initiative can provide a springboard into opportunities for certain businesses. Contacting individual public bodies can be another quick way to identify potential avenues.
Contract type and value
Public bodies use various kinds of contractual arrangements. These can vary from one-off contract awards to framework agreements, under which a would-be supplier must tender to get onto a panel of providers. They must then bid in mini-competitions between suppliers in the framework to secure work, sometimes selecting from a series of ‘lots’. Contracts also vary in length, though four years is a pretty common duration.
Contract value determines what level of regulation has to be applied. Contracts that go above a prescribed value (taking into account the value of the whole contract for the period it will run) are subject to more complex regulations.
For contracts involving “works”, that value is currently c. £5.3m, but the value for contacts for “supplies and services” is considerably lower (generally just over £213,000). As always there are exceptions and there are complexities to be taken into account when looking at contract value. These figures also change periodically.
There is no one size fits all, so you need to fully understand what type of contract you are looking at. Critically, you should consider how much of the contract value you are going to be able to unlock (particularly where there are numerous lots which vary enormously in value). You may also need to think creatively about how you can deliver under the contract. For instance, might you stand a better chance of securing a good outcome as part of a partnership or consortium?
The public procurement process often gets a bad press for being unduly complex and cumbersome. This perhaps isn’t too far off the mark. It isn’t helped by the fact there are a range of procedures which can be adopted, all of which are very different. Some contracts follow a relatively straight forward ‘open’ procedure, often comprising just one bidding stage. Others require some form of prequalification steps to be undertaken before a business can bid for the contract. There are also other procedures (such as “Competitive Dialogue” or “Innovation Partnership”) where the means to the solution isn’t clear to the public authority and the tendering procedure needs to allow a large degree of flexibility.
Some services, such as health care, social care and education (amongst others) are subject to a “light touch regime” which is intended to be more straightforward. Certain industries (such as defence) are subject to separate regulations.
Once you have an understanding of the broad type of procedure you are dealing with, its imperative to get inside the detail. This will be set out in the initial documents issued by the public authority (often known as the Invitation to Tender, or ITT), and will be set in stone. Factors such as the dates, format of documentation etc are non-negotiable, so failing to meet a deadline or fill in every box on the form is likely to see you out of the running.
It’s worth mentioning that the public procurement process is under the spotlight at the moment. There are likely to be some changes (and hopefully simplifications) in the medium term, but there isn’t much clarity about what the new regime will look like as yet.
The ITT and other documents issued by the public authority will set out various questions. Critically, they will also detail the criteria against which any bid will be evaluated and how bids will be scored. There will be ‘pass’ or ‘fail’ questions (which will draw out matters which are likely to result in immediately exclusion – one example being where a bidder has a conviction for bribery). There will also be questions around financial standing, details of any joint bids etc.
Beyond that, it is imperative to give detailed thought to how the bid can be best presented to reflect the criteria to be applied (and also the weight each of the criteria carries in terms of scoring). It is worth remembering that a public authority isn’t just looking for the cheapest option. It is usually looking for the “most economically advantageous” bid. Price is of course a critical part of this, but the focus is intended to be wider than this to draw in “added value”. Factors such as quality, technical merit, social and environmental credentials are also taking on increasing importance.
With valuable contracts in particular the stakes can be high, and competition is fierce. It’s vital to stay alert for issues as the tender process progresses because timescales to challenge any decision can be very short, often no more than 30 days from the date a cause for complaint comes to light. If you see something you are unhappy with as the process unfolds, you need to move quickly, or the opportunity may be lost. Once a contract has been awarded, you may only have 10 days (not 10 working days) to do something about it.
Given the complexities of the regulations and the tight timescales that apply if there is a complaint or challenge, you should seek specialist legal advice immediately you become aware of a problem.
An alternative: public subsidy
Not all opportunities with public authorities come from the procurement process. Public authority support (whether financial or in kind) can be secured for certain projects. This is known as public subsidy (formerly State Aid). There are strict rules that govern public subsidies, with particular focus being on whether the support on offer is on market terms and whether giving the support is likely to distort or harm competition. Factors such as the value of the subsidy and whether it truly supports a specific public policy objective undertaken by the public authority are relevant.
There is still a good amount of red tape in this process and, as with procurement, specialist input is often needed or even required to ensure the public authority has everything it needs to work through this process and source the support sought. This is especially the case because the process is set to change (having not long changed post-Brexit) following the anticipated introduction of the Subsidy Control Act 2022.