Putting policy into practice

Anthony Flynn Anthony Flynn considers how policy is being opened up to SMEs as part of the reform process.

As Ireland’s Chief Procurement Officer, Paul Quinn, discussed in last month’s issue, reform of the public procurement system took centre stage in the immediate wake of the financial crisis. There are two main thrusts to the reform agenda. The first involves optimising value for money. The second is about using procurement as a policy lever.

The Office of Government Procurement was established as part of delivering on value for money. It has already achieved some impressive results to date through a number of framework agreements now operative across major spend categories. Based on current trends, additional savings will be realised in the coming years. The OGP is also helping to bring greater co-ordination, professionalism and a sense of strategic purpose to purchasing across the public sector.

The second part of the reform agenda – the use of procurement as a policy lever – has been around for many years. Most recently, it has come to be understood in terms of supporting SME growth and competitiveness. The European Commission has been to the fore in making the case for why greater SME participation in the public procurement marketplace is desirable.

The logic is simple: SMEs are indispensable to economic competitiveness. They were responsible for creating almost nine of out ten jobs created in the European Union between 2002 and 2010. They are also fundamental to sustaining local economies and generating innovative products and services. At the same time it is recognised that SMEs are under-represented in the public procurement marketplace. This is a missed opportunity for both the SME sector and public sector organisations.

Policy initiatives in Ireland linking procurement to the SME agenda mirror those at European Union level. In 2010, the Department of Finance issued Circular 10/10, which set out a number of positive measures designed to facilitate more SME involvement in contract competitions. These measures were reiterated earlier this year in Circular 10/14.

Importantly, the objective of these measures is not to discriminate in favour of SMEs. Instead, it is to create ‘a level playing field’ on which firms of all sizes can compete. The policy measures can be seen as a response to long-standing problems cited by SMEs when competing for public sector contracts, such as difficulty in identifying opportunities, excessive form filling, ill-considered qualification and assessment criteria, and an in-built bias towards larger, more established firms.

There is some evidence that these measures are having a salutary impact on SMEs. Research undertaken on SMEs’ tendering activity by DCU Business School, for example, found that over 50 per cent were sourcing three out of every four contracts through the eTenders site in 2013. Among European Union member states, Ireland is out in front in utilising e-procurement to facilitate more SME competitors.

Policy recommendations to reduce the time and effort required to tender are also taking effect. Allowing firms to self-declare at the initial phase of a competition that they have the financial capacity to undertake a contract and that they can secure the appropriate insurance cover is now fairly standard. The use of model tender and contract documents by public buyers is also increasing.

There are other policy recommendations which are more far reaching in their likely impact on SMEs. These include dividing contracts into lots where feasible and showing greater willingness to engage with the supply marketplace before public buyers initiate the formal tendering process.

Amid the various ‘SME-friendly’ policy initiatives, we should not lose sight of the fact that it is what happens in practice that counts. For public procurement to live up to its potential as a lever for promoting SMEs policy has to translate into practice. This can take time, training and a degree of adjustment on the part of public buyers and their organisations.

As in other areas of public administration, the financial crisis acted as a catalyst for change in public procurement. The challenges it presented have not always been easy to deal with. However, some years into the reform agenda progress is being made and public procurement is now on a firmer footing than at any time previously.

Anthony Flynn is a PhD researcher at Dublin City University Business School.

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