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Future Britain – Council procurement procedures
Altogether it’s a very poor deal for the council tax payers AND for our local businesses.
I finally understand where it all goes wrong in procurement.
There’s a professional procurement team who are disciplined to follow the guidelines……. Precisely and totally. They are disliked by their ‘client’ departments in the council for ‘interfering.’
They negotiate contracts and their job is to get Best Value. So what’s the problem?
The core problems are:
– they are over-worked so to minimise the amount of work the procurement team want contracts, specifically contracts for supplies or maintenance, that last for a long time say 3 years. As a result the calculation of the value of a contract for £1,000 per month is £36,000. The contract can be cancelled at three months notice, so calculated on that basis the contract risk is only for £3,000.
If the contract was cancellable at one months notice then the risk is only £1,000.
Certainly the annual value is only £12,000.
This ‘value’ is critical as the procurement team have specific ways of working dependent of whether the contract is for less than £5000; upto £20,000; upto £40,000; upto £135,000 and over £135,000.
If the contract value is calculated on the minimum risk basis then in the example chosen the requirements for bidding change dramatically and are much less onerous because the contract is for £1,000 rather than £36,000.
– In preparing to bid companies are required to complete a Pre-Qualification Questionnaire. The procurement team are only interested in bids where the bid represents less than 25% of the company turnover, subject to a minimum turnover of £50,000.
On the contract value calculation above of £36,000 then the turnover needs to be £144,000 whereas on the lesser risk value of one month’s notice the turnover needs to be only £4,000.
AND why have a minimum turnover of £50,000.
– In completing the Pre-Qualification Questionnaire the procurement team specify that the bidding company provide ‘audited accounts’. By law small companies with a turnover of less than £5,600,000 do not need to have their accounts audited, so the procurement team automatically exclude most small companies or worse still the small companies automatically exclude themselves.
(The procurement team started by saying this was the only document required, though later they changed to say “There’s a briefing letter which requires the relevant documents to be attached to the PQQ.” These documents include the accounts together with the ‘Policy Documents’. I know one organisation where there are three hundred and twenty Policies!)
– The procurement team also said they would give preference to companies providing one invoice per week for all their services. I don’t see how this would reduce or simplify their work as there will still the same no. of item lines to be checked and approved. In fact it’ll be more likely that the invoice will contain an item to be challenged and therefore more likely for payment to be deferred. I think they should be giving preference to companies providing their invoices electronically.
– Because the procurement exercise is divorced from the ‘client’ department and because the contract is “in force” for say 36 months, the operation and control of the contract is outside the client department’s remit, whereas on a ‘one month notice’ contract calculation the contract could be handled by themselves and the supplier terminated almost immediately if the service, quality or price is poor.
In total because the contract is awarded for 36 months the supplier has no pressure to deliver quality goods and service to a good price every month, worse still there is no easy control by the client department to ensure that they do; and small local companies are automatically excluded from the business opportunities with their own council for services in their area.
Altogether it’s a very poor deal for the council tax payers AND for our local businesses.