Northern Ireland Assembly Flax Flower Logo

Session 2009/2010

First Report

Committee for Finance and Personnel

Report on the Inquiry
into Public Procurement
in Northern Ireland

Together with the Minutes of Proceedings of the Committee relating to
the Report, Written Submissions, Memoranda and the Minutes of Evidence

Ordered by The Committee for Finance and Personnel to be printed 10 February 2010

Report: NIA 19/08/09R

Membership and Powers

Powers

The Committee for Finance and Personnel is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of the Belfast Agreement, Section 29 of the Northern Ireland Act 1998 and under Assembly Standing Order 48. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Finance and Personnel and has a role in the initiation of legislation.

The Committee has the power to;

Membership

The Committee has eleven members, including a Chairperson and Deputy Chairperson, with a quorum of five members.

The membership of the Committee since its establishment on 9 May 2007 has been as follows:

Ms Jennifer McCann (Chairperson)
Mr Peter Weir (Deputy Chairperson)

Dr Stephen Farry               Mr Fra McCann
Mr Simon Hamilton            Mr David McNarry*
Mr Mitchel McLaughlin        Mr Declan O’Loan
Mr Adrian McQuillan          Ms Dawn Purvis
Mr Ian Paisley Jnr**

*Mr David McNarry replaced Mr Roy Beggs on 29 September 2008

**Mr Ian Paisley Jnr replaced Mr Mervyn Storey on 30 June 2008

Table of Contents

List of abbreviations and acronyms used in the Report

Executive Summary

Key Conclusions and Recommendations

Introduction

Consideration of the Evidence

The Procurement Environment

Improving Policy and Processes

Maximising Social Benefit

Building Capacity for Purchasers and Suppliers

Local Government Procurement

Collaborative Procurement and Efficiencies

Litigation and Lessons Learned

Public Procurement Governance Arrangements

List of Appendices

Appendix 1

Minutes of Proceedings

Appendix 2

Minutes of Evidence

Appendix 3

Written Submissions

Appendix 4

Memoranda and Papers - Department of Finance and Personnel

Appendix 5

Memoranda and Papers - Others

Appendix 6

Research Papers

Appendix 7

Stakeholder Conference Report and Papers

List of Abbreviations and Acronyms used in the Report

BERR

Department for Business, Enterprise and Regulatory Reform

BiTC

Business in the Community

BSO

Regional Business Support Organisation (DHSSPS) (operational from April 2009)

CAJ

Committee on the Administration of Justice

CBI

Confederation of British Industry

CIFNI

Construction Industry Forum for Northern Ireland

CIGNI

Construction Industry Group for Northern Ireland

CIPS

Chartered Institute of Purchasing and Supply

CoPE

Centre of Procurement Expertise

CPD

Central Procurement Directorate

CSR

Comprehensive Spending Review

DEL

Department for Employment and Learning

DETI

Department of Enterprise, Trade and Investment

DFP

Department of Finance and Personnel

DHSSPS

Department of Health, Social Services and Public Safety

DoE

Department of the Environment

DTS

Delivery Tracking System

EC

European Commission

ECJ

European Court of Justice

ECNI

Equality Commission for Northern Ireland

EEN

European Enterprise Network

ELB

Education and Library Board

ESA

Education and Skills Authority

EU

European Union

FSB

Federation of Small Businesses

GB

Great Britain

GDP

Gross Domestic Product

GVA

Gross Value Added

HCSA

Health Care Supply Association

HSC

Health and Social Care

ICAGNI

Independent Consultant Adviser Group in Northern Ireland

ICT

Integrated Consultant Team/Information Communication Technology

ICTU-NI

Irish Congress of Trade Unions – Northern Ireland

IDBR

Inter-Departmental Business Register

IoD

Institute of Directors

IREP

Independent Review of Economic Policy

ISNI

Investment Strategy for Northern Ireland 2008 – 2018

IST

Integrated Supply Teams

ITI

InterTradeIreland

ITT

Invitation to Tender

KTPI

Knowledge Transfer Partnership Initiative

LGPG

Local Government Procurement Group

MEAT

Most Economically Advantageous Tender

MLA

Member of the Legislative Assembly

MOD

Ministry of Defence

MP

Member of Parliament

MSP

Member of the Scottish Parliament

NDPB

Non Departmental Public Bodies

NGO

Non-Government Organisation

NHS

National Health Service

NHSSC

National Health Service Supply Chain

NI

Northern Ireland

NIAO

Northern Ireland Audit Office

NICS

Northern Ireland Civil Service

NICVA

Northern Ireland Council on Voluntary Action

NIFHA

Northern Ireland Federation of Housing Associations

NIHE

Northern Ireland Housing Executive

NILGA

Northern Ireland Local Government Association

NIPS

Northern Ireland Prison Service

NIW

Northern Ireland Water

ODA

Olympic Delivery Authority

OFMDFM

Office of the First Minister and deputy First Minister

OGC

Office of Government Commerce

OJEU

Official Journal of the European Union

PAC

Public Accounts Committee

PfG

Programme for Government

PPG

Procurement Practitioners’ Group

PPP

Public Private Partnership

PQQ

Pre-Qualification Questionnaire

PR

Public Relations

PSA

Public Service Agreement

PTG

Procurement Task Group

PwC

PricewaterhouseCoopers LLC

QPANI

Quarry Products Association Northern Ireland

RICS

Royal Institution of Chartered Surveyors

RoI

Republic of Ireland

RPA

Review of Public Administration

RSUA

Royal Society of Ulster Architects

SBS

Small Business Service

SCA

Special Contract Arrangements

SEE

Social Economy Enterprises

SEN

Social Economy Network

SI

Statutory Instrument

SIB

Strategic Investment Board

SLA

Service Level Agreement

SME

Small and Medium Sized Enterprises

SPAP

Sustainable Procurement Action Plan

SROI

Social Return on Investment

SRPP

Socially Responsible Public Procurement

UCIT

Ulster Community Investment Trust

UK

United Kingdom

VAT

Value Added Tax

VCO

Voluntary and Community Organisation

VCS

Voluntary and Community Sector

VfM

Value for Money

WIN

Western Innovation Network

USEL

Ulster Supported Employment Ltd.

Executive Summary

Public procurement is an important element of the economy in Northern Ireland, with central and local government spending upwards of £3 billion annually on the purchase of supplies, services and construction works. This level of expenditure offers real potential in terms of maximising the economic and social outcomes for the local community.

The strategic direction of public procurement policy in Northern Ireland is set by the Executive; with the Procurement Board, chaired by the Minister of Finance and Personnel, overseeing the development and implementation of this overarching policy, supported by the Central Procurement Directorate within the Department of Finance and Personnel.

The Executive’s Programme for Government 2008-11,Building a Better Future, highlights the positive role that procurement has in furthering cross-cutting sustainable development and socio-economic objectives. The Executive has also placed an emphasis on “growing the private sector including small and medium enterprises" and on “developing the social economy". Whilst the predominance of smaller enterprises in the local economy is widely acknowledged, there is also now a growing awareness of the valuable role for social economy enterprises, in terms of operating a commercial business model for social, community or ethical purposes.

Moreover, it is internationally recognised that benefits can accrue for both the public sector and the economy as a whole, by increasing the involvement of small and medium enterprises in the government supply chain, including better value for money, business growth and innovation. Also, for social economy enterprises, access to a large and stable market provides a stronger basis from which they can deliver important social policy outcomes.

Mindful of these benefits and of the potential to use public procurement strategically, as a tool for supporting the longer-term economic and social well-being of Northern Ireland, the Committee for Finance and Personnel agreed, in November 2008, terms of reference for this Inquiry into Public Procurement Policy and Practice in Northern Ireland. Given the many facets of government purchasing, the Committee chose to focus on specific aspects of policy and practice, including the experience of small and medium enterprises and social economy enterprises in tendering for and delivering public contracts; and the ways in which the social and economic benefits of procurement can be maximised.

Following a call for evidence, the Committee received written submissions from a wide range of stakeholders and a number of these organisations subsequently provided oral evidence. Given the breadth of issues raised and the variety of interests, the Committee also hosted a Stakeholder Conference, which represented a new approach to gathering inquiry evidence. This event was highly interactive and included breakout sessions, inputs from procurement commentators from other jurisdictions, plenary discussions and digi-voting on priorities and recommendations. The Committee also received academic opinion on the output from the Conference, which further informed the evidence base for the Inquiry.

Arising from the Inquiry, the Committee has made a number of key findings and recommendations, which it considers will help to achieve priorities within the Programme for Government and will benefit the public sector, business and the third sector respectively.

Key Conclusions and Recommendations

The Procurement Environment

1. The Committee recognises the business opportunities presented to indigenous enterprises by the substantial expenditure on public procurement in the Northern Ireland, all-island, Great Britain and wider European Union markets. However, the Committee is also mindful that the Northern Ireland business economy overwhelmingly comprises smaller enterprises, many of which consider that the public procurement process requires more time, effort and cost than business would allow. As such, the Committee considers that it is incumbent upon the Executive and the Assembly both to create a public procurement environment that facilitates our smaller enterprises in realising their full potential and which maximises the economic and social impact from expenditure on procurement. (Paragraph 41)

2. The Committee believes that the implementation of the recommendations arising from this Inquiry will help to achieve key objectives of the Executive’s Programme for Government, not least the emphasis on “growing the private sector including small and medium enterprises" and “developing the social economy". As a prerequisite, however, the existing drivers for public procurement will need to be realigned in support of the Executive’s economic, social and environmental priorities. In particular, this will require a more balanced application of the twelve guiding principles governing the administration of public procurement in Northern Ireland, which, in turn, will help achieve “best value for money". (Paragraph 57)

3. The Committee recommends that the Procurement Board, in conjunction with the Department of Enterprise, Trade and Investment, considers refining the definition of small and medium sized enterprises in the Northern Ireland context, paying particular attention to those currently identified as small, or micro-businesses, when exploring ways of boosting access to procurement opportunities by local businesses. (Paragraph 71)

4. The Committee believes that a “win-win situation" will arise from increasing the number of indigenous smaller enterprises competing in the public sector supply chain. For the public sector there is the potential for better value for money, better levels of service and more innovative business solutions. For the smaller enterprises there is the benefit of access to a large and stable market. The Committee also believes that increased participation by indigenous small enterprises in providing services, supplies and works to government in Northern Ireland could encourage their growth and participation in public procurement markets elsewhere, with the added benefits of boosting employment and of raising the level of productivity/Gross Value Added within Northern Ireland. (Paragraph 79)

5. In light of the potential benefits, the Committee calls on the Executive to develop a strategic policy for using public procurement, as far as is permitted under the legislation, as a tool for supporting the development of our smaller enterprises and for stimulating economic growth in the longer term. The Committee considers that the implementation of such a policy will require further culture change on the part of government purchasers, which sees a stronger focus on “growing the economy" and creativity in developing procurement solutions which are sensitive to the needs of the economy, whilst also ensuring legal compliance. (Paragraph 81)

6. The Committee calls on the Procurement Board to ensure that the necessary data capture and management information systems are put in place across all the Centres of Procurement Expertise to enable the impact of procurement policy on the small business and social economy sectors to be monitored effectively. The Committee further recommends that the criteria used in the accreditation of Centres of Procurement Expertise should take account of the robustness of the data systems in this regard. (Paragraph 92)

Improving Policy and Processes

7. Whilst accepting that the Central Procurement Directorate and the other Centres of Procurement Expertise must comply with both European Union and United Kingdom legislation, the Committee is of the view that the Procurement Board should reconsider the distribution of risk within the procurement process and bring forward a policy on risk sharing, which takes account of the barriers to smaller enterprises accessing the supply chain. (Paragraph 115)

8. The Committee recommends that large-scale framework agreements should not be used in future unless the Procurement Board can first establish a robust evidence base for following such practice in the Northern Ireland context. (Paragraph 116)

9. The Committee recommends that the Procurement Board gives careful consideration to a procurement policy that advocates breaking contracts into lots as the first recourse of any procurement tender. The intention of such action should not be to avoid the application of the appropriate public procurement regulations, but rather to make a conscious effort to reduce barriers to access for small and medium sized enterprises and social economy enterprises. (Paragraph 123)

10. The Committee recommends that, when using framework agreements, the Central Procurement Directorate and the other Centres of Procurement Expertise develop frameworks reflecting various sizes of contracts and opportunities and, where appropriate, give consideration to regional contract variations to increase access to opportunities for smaller enterprises. (Paragraph 127)

11. The Committee recommends that the Procurement Board gives careful consideration to the full range of methods of procurement, including the use of alternatives to frameworks agreements and traditional contracts where appropriate. In particular members are keen to see a flexible approach taken to contract variance. (Paragraph 131)

12. The Committee recommends that the Procurement Board takes steps both to consolidate all Northern Ireland public sector procurement opportunities within the remit of thee-SourcingNI web portal, including local government tender notices, and to integrate tendering opportunities in Great Britain and the Republic of Ireland. (Paragraph 148)

13. The Committee recommends that the provision of timely and accurate information on the e-SourcingNI portal and the Investment Strategy Northern Ireland Delivery Tracking System should be written into both the business plans of each Centre of Procurement Expertise and the personal performance agreements of the responsible officials. Moreover, Centres of Procurement Expertise should also be required to publish their annual procurement plans on the e-SourcingNI portal to assist small and medium sized enterprises and social economy enterprises in forward planning. (Paragraph 151)

14. Notwithstanding the need for improved data collection by Centres of Procurement Expertise, the Committee believes that the Executive should keep under review the option of setting targets for increased participation by small and medium sized enterprises and social economy enterprises in the public sector supply chain, for possible future use in the event that the other identified policy interventions do not have sufficient impact. (Paragraph 155)

15. The Committee recommends that the Central Procurement Directorate encourages local small and medium sized enterprises and social economy enterprises to collaborate, where appropriate, by highlighting the benefits of such initiatives and by providing guidance on the legal and practical implications of joining consortia to facilitate joint tendering. In noting the ongoing work by the Construction Industry Forum for Northern Ireland on collaborative bids in relation to the construction sector, the Committee recommends that the Procurement Board considers the potential application of this model to also cover supplies and services and its extension to all Centres of Procurement Expertise. (Paragraph 160)

16. The Committee considers that purchasers should give more consideration to the overall supply chain when awarding contracts and calls on the Procurement Board to examine the scope for government to take greater control of sub-contract arrangements in public contracts, with a view to ensuring more open competition and added transparency. (Paragraph 167)

17. The Committee recommends that the Central Procurement Directorate and the other Centres of Procurement Expertise consider the scope both for greater use of up-front and interim payments, within the constraints of government accounting rules, and for the introduction of a requirement on main contractors to pay sub-contractors within 10 days of receipt of valid invoices, with a view to increasing the borrowing potential and/or easing the cash flow pressures on small and medium sized enterprises and social economy enterprises. (Paragraph 172)

18. The Committee recommends that the Minister of Finance and Personnel, in conjunction with the Minister of Enterprise, Trade and Investment, gives careful consideration to the establishment of a public procurement brokerage service as identified by the Ulster Community Investment Trust, which could also act as a “one-stop shop" for the social economy sector in terms of availing of public procurement opportunities. (Paragraph 176)

19. The Committee recommends that the Central Procurement Directorate reviews existing procurement guidance, in conjunction with local stakeholders, with a view to ensuring that it is fit for purpose and brought together as a central online resource for public sector procurement, which is linked to the eSourcingNI web portal. (Paragraph 184)

20. Whilst acknowledging that, whenever public funds are at stake, proper audit, monitoring and accounting arrangements are an unavoidable necessity, the Committee recommends that the Department of Finance and Personnel, in conjunction with the Department of Enterprise, Trade and Investment, takes steps to ensure that proportionate monitoring arrangements are applied, which are sympathetic to the ethos and needs of the social economy sector. (Paragraph 188)

21. The Committee is strongly of the view that pre-qualification processes and criteria should not be so burdensome as to deny both small and medium sized enterprises and social economy enterprises the opportunity to develop their business and thereby benefit the local economy. As such, the Committee recommends both that the principle of proportionality (i.e. the resources required to bid should be proportional to the size of contract) should be embedded into all public procurement tendering exercises and that the next review of Centres of Procurement Expertise, due to take place in 2013, places a particular focus on progress in improving pre-qualification processes. (Paragraph 198)

22. The Committee welcomes the development of a standardised pre-qualification questionnaire for works contracts, which is currently being taken forward by the Construction Industry Forum for Northern Ireland. The Committee recommends that, once an agreed approach has been established, the Procurement Board considers its application to all procurement sectors and across all Centres of Procurement Expertise. (Paragraph 200)

23. In noting that the Construction Industry Forum for Northern Ireland is actively considering the weighting of relevant experience in the assessment process for works contracts, the Committee recommends that the Procurement Board considers the potential for applying any lessons arising from this work across the other Centres of Procurement Expertise and to supplies and service contracts. (Paragraph 204)

24. The Committee recommends that feedback mechanisms across all the Centres of Procurement Expertise are standardised and aligned with good practice, with greater monitoring to ensure effectiveness. (Paragraph 208)

25. The Committee recommends that the Central Procurement Directorate provides specific guidance and support to government purchasers in relation to the social economy, including on Special Contracts Arrangements. Also, as more social enterprises enter the procurement market, tailored advice should be available to those organisations that would be eligible for supported status (i.e. where more than 50% of employees are registered as severely disabled). (Paragraph 212)

Maximising Social Benefit

26. The Committee senses a reticence amongst local commissioners and purchasers to pursue social benefit through procurement, which may be linked to a need for greater clarity both on the Executive’s policy intention in this area and on the definition and measurement of ‘social value’. (Paragraph 244)

27. The Committee recommends that the Executive translates its Programme for Government/Public Service Agreement commitments in this area into a clear policy directive on procuring social benefit, which sets out the priorities that should be pursued by the Procurement Board, the Centres of Procurement Expertise and individual commissioners and purchasers. The Committee further recommends that this policy directive, which should be underpinned by the necessary legal guidance, is reflected, as appropriate, in departmental business objectives, in the forthcoming Northern Ireland Public Procurement Handbook and in the personal performance objectives of commissioners and procurement professionals. (Paragraph 245)

28. The Committee notes the growing body of guidance on procuring social benefit and, in particular, welcomes the practical toolkit which has been published recently on behalf of the Strategic Investment Board. However, the Committee is concerned that this resource will be underutilised without the necessary policy direction from the Executive. (Paragraph 246)

29. In the meantime, and given the positive evaluation of the Procurement Board’s Pilot Project on Utilising the Unemployed in Public Contracts, the Committee recommends the use of clauses setting quotas for employing apprentices and the long-term unemployed in all suitable public contracts. Also, in recognising the need for further empirical evidence on best practice use of social clauses, the Committee recommends that the Central Procurement Directorate makes a rigorous assessment of the social clauses applied in recent construction contracts, with a view to identifying lessons and opportunities for further initiatives in this regard. (Paragraph 247)

30. The Committee is strongly of the view that, in future, value-for-money assessments must strike a balance between short-term monetary considerations and longer-term economic, social and environmental costs and benefits. This is especially important in the context of the constrained public expenditure environment, when departments must not lose sight of the Executive’s strategic priorities. As such, the Committee calls on the Department of Finance and Personnel to put in place a suitable model for systematically measuring, evaluating and incorporating wider social value considerations within economic appraisals and business cases, and which will inform public procurement processes. Moreover, the Committee recommends that socially responsible procurement should be included as a scored criterion in the next Centre of Procurement Expertise accreditation exercise. (Paragraph 253)

Building Capacity for Purchasers and Suppliers

31. The Committee is conscious that capacity building for both purchasers and suppliers will also be vital to maximising the outcomes from public procurement. The Committee is mindful that, whilst the Department of Finance and Personnel, through the Procurement Board, must take the lead in developing the capacity of purchasers, the Department of Enterprise, Trade and Investment has lead responsibility in terms of the small business and social economy sectors. (Paragraph 258)

32. The Committee urges the Procurement Board to consider the possibilities for introducing licentiate arrangements for procurement professionals across the public sector, with a view to ensuring greater uniformity in the professional competencies of purchasing staff. In addition, the Committee considers that it is essential that the continual professional development of procurement personnel should include awareness of the benefits of doing business with both the small business and the social economy sectors. (Paragraph 265)

33. The Committee calls on the Minster of Finance and Personnel to liaise with the Minister of Enterprise, Trade and Investment to ensure that sufficient funding is in place for measures to build the capacity of smaller enterprises to access the public sector supply chain. The Committee sees a vital role for the Central Procurement Directorate in contributing to procurement training and development for both small and medium sized enterprises and social economy enterprises and will wish to be apprised of plans for taking this forward. (Paragraph 274)

34. The Committee endorses the concept of a “Procurement Exchange Programme" and urges the Procurement Board to bring forward options on how this might be developed so as to facilitate cross-sectoral training and knowledge transfer across the public sector and the private sector. (Paragraph 277)

Local Government Procurement

35. In welcoming moves towards a more collaborative approach to local authority procurement, the Committee considers that, in the event of the proposed new local authority Centre of Procurement Expertise being established, then appropriate linkages should be developed with the central government procurement structures. Whilst recognising the independence and autonomy of local councils, the Committee urges greater synergy between central and local government purchasing policy and practice, with a view to achieving consistency in the application of good practice procurement across the public sector. (Paragraph 287)

Collaborative Procurement and Efficiencies

36. The Committee concludes that there is scope for more strategic co-ordination of the public procurement landscape in Northern Ireland to realise efficiencies, not only between central and local government but also in terms of arms-length public bodies. Moreover, the Committee proposes that the Executive explores opportunities to achieve additional efficiencies through collaborative government procurement on a North-South and East-West basis. (Paragraph 295)

37. The Committee reiterates its call for a new target to be set for achieving further efficiencies from public procurement, to include a monetary value and baseline for such savings, with an associated implementation plan which links to individual departmental efficiency delivery plans. (Paragraph 296)

38. In calling for a further efficiency drive through collaborative procurement, the Committee emphasises the need for such collaboration to be co-ordinated at a strategic level by the Procurement Board to avoid counterproductive localised efficiencies being pursued which have an adverse effect on the efficiency of the wider public sector and/or are detrimental to the local economy. (Paragraph 297)

39. The Committee recommends that, in reviewing the data capture and management information systems within Centres of Procurement Expertise, the Procurement Board also considers the position more widely across departments to ensure that robust systems are in place to facilitate evidence-based decision making in terms of the identification and monitoring of procurement efficiencies. (Paragraph 298)

Litigation and Lessons Learned

40. Given the cost of litigation and the associated disruption to capital projects and other procurement exercises, the Committee believes that a conciliatory approach is needed in resolving procurement conflicts and considers that the absence of an independent mediator between purchaser and supplier is a key deficiency within the procurement process in Northern Ireland. As such, the Committee recommends that the Procurement Board urgently examines the possibility of providing for a “Supply Chain Ombudsman" function in Northern Ireland, which would, amongst other things, fulfil this important mediation role. The Committee also believes that the proposal for licentiate arrangements for procurement professionals could help to reduce the level of litigation arising from failure to meet legal obligations. (Paragraph 312)

Public Procurement Governance Arrangements

41. The Committee calls on the Procurement Board to bring forward options for strengthening and formalising the relationship between the Central Procurement Directorate and the other Centres of Procurement Expertise, with a view to ensuring consistency in applying good practice procurement in support of the Executive’s key priorities. (Paragraph 319)

Introduction

Background

1. The Department of Finance and Personnel (DFP) has a lead role in public procurement, with the DFP Minister chairing the inter-departmental Procurement Board, and the Department’s Central Procurement Directorate (CPD) supporting the Board in the development and implementation of new procurement policy. CPD also provides a centralised professional procurement service to the Northern Ireland (NI) public sector and monitors and mentors the work of seven other Centres of Procurement Expertise (CoPEs).

2. Expenditure on public procurement by CPD and the other CoPEs represents approximately £2.4 billion[1] per annum, nearly 25% of the Executive’s budget. The services, supplies and works which are subject to the procurement process are also wide ranging. Government contracts include catering, transport, banking, construction, printing, telecoms, ICT (hardware), travel, vehicle maintenance, advertising, stationery, furniture/office equipment supply, security, messenger services, economic/research consultancy, staff recruitment, PR and event management, clinical and laboratory products, environmental monitoring equipment, and even helicopter hire.

3. In addition to the Executive’s annual expenditure of £2.4bn, the NI public procurement market also includes an estimated spend of £300m per annum on local government purchasing.[2] In terms of the all-island context, the combined procurement market is worth around €19 billion (£15.2 billion).[3] The potential is even greater in terms of the opportunities for NI enterprises to also engage the Great Britain (GB) public procurement market, estimated at over £175 billion,[4] and the wider European Union (EU) market which is estimated at € 2000 billion (£1600 billion) in 2007.[5]

4. The Committee recognises that, given the profile of the local business sector, it can be expected that Small and Medium Sized Enterprises (SMEs) will win the majority of public sector contracts in NI. However, as the Inquiry report will demonstrate, a sound rationale exists for encouraging new entrants into the procurement market from the small and micro enterprise sector and for enabling such firms to compete for higher value contracts. The Inquiry found that evidence exists internationally in support of this rationale. For example, the European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts[6] highlights the benefits of increasing SME involvement in public purchasing, commenting that it will “result in higher competition for public contracts, leading to better value for money for contracting authorities. In addition to this, more competitive and transparent public procurement practices will allow SMEs to unlock their growth and innovation potential with a positive impact on the European economy."[7]

5. The Committee notes that a 2008 consultation on the Small Business Act for Europe[8] suggested that the most important problem that European SMEs are facing, and which prevent their growth, is access to public procurement. Also, the Department of Enterprise, Trade and Investment (DETI) Matrix report has noted that across the EU, initiatives to encourage or facilitate the participation by small companies in government procurement in general have been very limited.[9]

6. The Minister of Finance and Personnel, in a document entitled Northern Ireland Public Procurement Policy, highlighted that “public procurement expenditure can be used to best effect to maximise the outcomes for the people of Northern Ireland".[10] The Committee for Finance and Personnel concurs with this view.

7. The public procurement process is complex and heavily regulated. Procurement law is driven by European directives, which are implemented in NI through regulations, including the Public Contracts Regulations 2006.[11] The regulations apply to all public bodies which are largely owned, managed or financed through public funds. This includes government departments and their agencies, non-departmental public bodies (NDPBs), hospitals and health sector purchasers, housing associations, education boards and institutions, various non-government organisations and district councils.

8. Other organisations in receipt of government sponsored funding for more than 50% of a project may also fall under the regulations for public procurement. For example, a community organisation seeking to build new premises must undergo a procurement process if government grant aid makes up more than half of the required funding package.[12]

9. Following an initial consideration of public procurement policy and practice the Committee identified a range of concerns. These included issues regarding the robustness of the process; compliance with legal requirements; the extent to which government contracts make provision for social clauses; the scope for increasing the capacity of SMEs and Social Economy Enterprises (SEEs) to compete for public contracts; and the consequences of undue delays in progressing procurement contracts, especially in terms of the impact on the construction sector of delays in planned capital expenditure.

Scope and Terms of Reference

10. At its meeting on 19 November 2008, the Committee agreed its terms of reference for an Inquiry into Public Procurement Policy and Practice in NI. Given the range and scale of public procurement, members chose to focus on specific aspects of the policy and process. Therefore the Inquiry terms of reference emphasise the end-user experience of SMEs and the social economy sector.

11. The Committee sought to:

a) examine the experience of SMEs and SEEs in tendering for and delivering public contracts;

b) consider the nature, extent and application of social clauses within public contracts;

c) identify issues to be addressed and which are within the remit of DFP;

d) assess progress by DFP in achieving associated objectives and targets, including those contained in the Programme for Government (PfG) and related Public Service Agreements (PSAs); and,

e) make recommendations to DFP for improvements to public procurement policies and processes, aimed at increasing access to opportunities for SMEs and SEEs and maximising the economic and social benefits for the local community, whilst taking account of the principles governing public procurement.

12. The Committee therefore expects that the recommendations arising from this Inquiry report will help to realise additional economic and social benefits for the local community from the public procurement process.

The Committee’s Approach

13. As a starting point, to inform its deliberations, the Committee received an introductory briefing from CPD officials at its meeting on 1 October 2008. At the same meeting, members also heard from Capita and the Ashton Community Trust, on the use of social clauses within procurement contracts, and the positive impact these can have on local communities. These evidence sessions informed the Committee’s terms of reference for the Inquiry.

14. The Committee issued a public call for written evidence in local newspapers and a total of 35 submissions were received by 27 February 2009. These reflected the broad spectrum of stakeholders involved in a variety of procurement processes throughout NI including SEEs, SMEs, construction companies, professional bodies and representative organisations. These submissions are included in the report at Appendix 3.

15. Following consideration of the submissions to the Inquiry, the Committee identified a number of organisations which were invited to provide oral evidence, and these evidence sessions took place between May and October 2009. The Official Reports of evidence sessions are included at Appendix 2, while other memoranda and papers from key stakeholders are included at Appendix 5.

16. At various stages throughout the Inquiry the Committee requested both written and oral evidence from officials in CPD. The Official Reports of these oral evidence sessions are also included at Appendix 2, while written papers and memoranda are available at Appendix 4. The Committee acknowledges the constructive engagement with CPD officials throughout the course of the Inquiry and understands that several of the issues raised are already being considered by them, in conjunction with industry groups. In addition to the written and oral evidence, the Inquiry was underpinned by a literature review of good practice procurement, including international examples where appropriate.

17. Given the wide range of stakeholders involved in the procurement process in NI and the breadth of issues raised in the oral and written evidence, the Committee agreed, at its meeting of 17 June 2009, to host a Stakeholder Conference. Following a procurement process, the Social Research Centre was appointed to facilitate the event.

18. The Conference, Maximising the Economic and Social Benefits from Public Procurement in Northern Ireland, was designed to supplement the Inquiry evidence base by:

19. Held on 21 October 2009, the Conference represented an additional and alternative approach to gathering inquiry evidence from the usual process of taking written submissions and holding oral hearings. The format included breakout sessions, short inputs from recognised procurement commentators and digi-voting[13] on priorities and recommendations. The Committee would like to thank Eileen Beamish of the Social Research Centre for facilitating the design and delivery of the Stakeholder Conference, which added value to the evidence base of the Inquiry.

20. Around 100 participants attended the conference, representing government purchasing bodies, SMEs, SEEs and umbrella bodies. Several “procurement commentators" also contributed, including: Paul Davis, Dublin City University; Professor Andrew Erridge, University of Ulster; Jenni Inglis, Social Return on Investment Network; Frank McGlone, Procurement Adviser; Dr Gordon Murray, Improvement and Development Agency (IDeA); and Martin Sykes, Chief Executive of Value Wales. They highlighted best practice and learning from other jurisdictions, whilst also challenging the practices and perceptions of both suppliers and purchasers. The Committee acknowledges the contribution and insight which each of the commentators has brought to this process.

21. The Committee invited two leading academics, Professor Chris McCrudden, Professor in Human Rights Law, Lincoln College, University of Oxford; and Dr Aris Georgopoulos, Lecturer in Law, Faculty of Social Sciences, University of Nottingham, to comment on the output from the Stakeholder Conference. The Committee welcomes these contributions which have been included, along with the full Conference Report, at Appendix 7 and referenced in the body of the Inquiry Report as appropriate.

22. Assembly Research also assisted the Committee by providing a number of research papers on a range of pertinent issues raised, in addition to background briefing. All Assembly Research papers relating to the Inquiry are available at Appendix 6.

23. The breadth and range of issues brought to the attention of the Committee reflects the broad reach and impact of procurement policy and practice throughout NI. The Committee extends its gratitude to all those from across the spectrum of the procurement community for giving evidence, both oral and written, participating in the Stakeholder Conference, and assisting in the Inquiry process.

24. In welcoming the constructive way in which stakeholders have contributed to the Inquiry and the positive proposals that have been suggested, the Committee also acknowledges that there may have been organisations reluctant to provide evidence, to avoid a perception of companies “biting the hand that feeds them". The Committee anticipates that the views of such businesses, however, have been reflected in the submissions, both written and oral, from the various umbrella and industry organisations working in this area.

Themes from the Evidence

25. The ‘Consideration of the Evidence’ section of the report reflects the themes emerging from the Inquiry evidence and discussions at the Stakeholder Conference. Much of the evidence can be grouped under the following themes:

i. Improving Policy and Processes

This includes concerns about the use of frameworks; onerous application processes often involving duplication of information; sourcing opportunities to bid; pre-qualification criteria; exclusion from contracts; and, complex tendering procedures. Given the broad scope of issues raised, this theme can be further broken down into the following areas:

a) Framework Agreements and Contracts

b) Opportunities to Bid

c) Tendering and Delivering

“Improving Policy and Processes" is discussed at paragraphs 93 – 212.

ii. Maximising Social Benefit

A key Inquiry aim was to consider the nature, extent and application of social clauses within public contracts. This brought responses from all stakeholders and included issues around definition; monitoring and evaluation; and, policy direction. “Maximising Social Benefit" is discussed at paragraphs 213 – 253.

iii. Building Capacity for Purchasers and Suppliers

Although not directly highlighted in the Inquiry terms of reference, building capacity for both purchasers and suppliers was an important issue emerging from the evidence. This included the need for cultural change within purchasing bodies, but also a call for local SMEs and SEEs to develop the appropriate skills necessary to compete for government contracts. This area is considered further at paragraphs 254 – 277.

26. These three broad themes informed the structure and content of the Stakeholder Conference (see Programme and Report at Appendix 7). The format of the Conference allowed the Committee to learn about further issues of concern to the local procurement community and also to hear suggestions for improvements.

27. A survey commissioned by the FSB during the course of the Committee Inquiry indicated that the majority of SMEs who responded, bid for contracts below £50k, and this mostly originates from local government.[14] While not directly within the remit of the Committee, a recurrent theme throughout the Inquiry has been the Review of Public Administration (RPA) and the potential impact on procurement policy and practice at local government level.

28. Given that the Inquiry terms of reference determined that the Committee would “make recommendations to DFP for improvements to public procurement policies and processes", it is appropriate for the Committee to consider the potential role of local government purchasing amongst the other concerns that have arisen. The Inquiry findings relating to local government procurement will be communicated to the Department of the Environment (DoE), via the respective Assembly committee, and to the Northern Ireland Local Government Association (NILGA) for consideration. Discussion on procurement and local government can be found at paragraphs 278 – 287, with an Assembly Research paper included at Appendix 6. The case for collaborative procurement and the scope for further efficiencies is examined at paragraphs 288 – 298.

29. Of particular concern to the Committee during the course of the Inquiry was the number of procurement exercises that are the subject of legal proceedings. Members received updates from CPD officials on the nature and progress of these cases, including lessons learned. This area is dealt with in the report at paragraphs 299 – 312.

30. Finally, the wider role of CPD in relation to public sector procurement was an issue brought to the attention of the Committee throughout the Inquiry. While CPD primarily has an advisory role, it appears that there is scope for greater consistency across public sector procurement processes. Further consideration of governance issues is discussed at paragraphs 313 – 319.

31. Before discussing the main themes from the evidence, however, it will be helpful to consider the context of the Committee Inquiry, in terms of the wider public procurement environment.

Consideration of the Evidence

The Public Procurement Environment

European Legal Framework for Procurement[15]

32. The rules governing EU public procurement directly affect how public bodies can purchase supplies, works and services. Such purchases by public bodies represent about 16% of the EU’s total gross domestic product (GDP) and in 2007 the value was estimated at €2,000 billion (£1,600 billion) (including procurements both above and below thresholds), while in 2006 nearly 32,000 contracting authorities published contracts worth €380 billion (£304 billion). Procurement is therefore regarded as a key single market issue.

33. Government purchasing bodies must consider three aspects of the EU legal framework when conducting procurement exercises, including primary and secondary legislation and case law. The primary law is essentially the EC Treaty within which the following three basic principles (sometimes referred to as the ‘fundamental principles’) are enshrined:

i. Openness and transparency of award procedures;

ii. Genuine competition in the award of contracts; and

iii. No unlawful discrimination on the grounds of nationality.

34. 34. One of the main consequences of these fundamental principles is that EU member states are not in a position to favour indigenous business over companies from elsewhere in the EU. Member states must be careful that social or ethical considerations do not operate as a disguised barrier to the free movement of goods and become a form of protectionism. This has recently been reiterated by the European Court of Justice (ECJ) in the Rüffert case[16]. Contracting authorities must pay particular attention to this, or risk a legal challenge.

35. Secondary law relates to European directives which must be transposed by member states into national law. The most relevant of these is Directive 2004/18/EC of the European Parliament and Council of 31 March 2004, on the co-ordination of procedures for the award of public works contracts, public supply contracts and public services contracts. This was transposed in NI through the Public Contracts Regulations 2006 (Statutory Instrument 2006 No.5).[17] The aim of the legislation is to reduce the administrative burden and associated costs, make procurement systems more transparent and easier for SMEs (in particular) to access, and encourage the use of IT systems to simplify the tendering process.

36. The regulations apply to all public sector bodies which are largely owned, managed or financed through public funds. This includes:

37. Thirdly, there is the case law of the European Courts. The introduction of the ‘Alcatel’ 10-day mandatory standstill period following a contract award is one of the more recent cases. Following this ECJ ruling a contracting authority must allow at least 10 days between the date of despatch of information to all bidders relating to the award decision, and the date on which it proposes to enter into the contract, or conclude the framework agreement. Unsuccessful bidders then have an opportunity to receive feedback and, if appropriate, query the decision of the contracting authority.[18] This has now been superseded by the ‘Remedies Directive’[19] which came into force in December 2009 and places greater emphasis on the standstill period.

The Scope of Public Procurement Practice

38. As already indicated, in 2008-09 expenditure on public procurement in NI accounted for approximately £2.4 billion of supplies, services and construction works in 2008-09 representing nearly 25% of all public expenditure.[20]

39. Figure 1 highlights the spread of procurement spend across all Northern Ireland Civil Service (NICS) departments in 2008-09. This does not include local government spend which is accounted for individually by councils and is not monitored by CPD.

Figure 1: Expenditure on public procurement across Northern Ireland Civil Service Departments[21]

Report Chart

40. The three largest spending departments are Regional Development, Health and Education. This reflects expenditure not only on large infrastructure projects but also on supplies and services. The research paper Public Procurement and the Social Economy included at Appendix 6, highlights the range of procurement expenditure incurred by Departments, Agencies and NDPBs from 2005 -2008. A comparative table on procurement spend across Departments over those three years is included in Figure 2.

Figure 2: Public Procurement Expenditure incurred by Departments, Agencies and NDPBs by Category 2005 – 2008[22]
Category 2005/06
£m		 2006/07
£m		 2007/08
£m
Construction/Maintenance Services
794
711
897
Medical/Surgical Equipment and Supplies
187
186
235
Consultancy Services
121
102
115
Energy
100
125
140
Public Utilities
77
71
Transport and Travel Services
53
63
72
Repair/Maintenance Services
53
60
67
Plant and Machinery (including tools and equipment)
45
43
59
Facilities Management
44
52
63
Rental, Leasing or Hire Services
42
24
54
Office Machines and Supplies
41
72
99
Transportation Equipment
30
61
78
Postal and Telecoms Equipment and Supplies
29
35
36
Food Stuffs
27
27
37
Chemicals/Reagents
23
21
21
Financial Services
22
17
21
Furniture and Fittings
13
17
19
Printing/Reprographic Services
13
14
14
Environmental Services
11
10
14
Publications
10
14
24
Clothing and Accessories
7
7
8
Land
19
Advertising
16
Recruitment and Personnel Services
15
Research and Development
8
Public Relations (including events/conferences)
6
Other Expenditure
70
162
65
Totals
1812
1895
2202

41.The Committee recognises the business opportunities presented to indigenous enterprises by the substantial expenditure on public procurement in the NI, all-island, GB and wider EU markets. However, the Committee is also mindful that the NI business economy overwhelmingly comprises smaller enterprises, many of which consider that the public procurement process requires more time, effort and cost than business would allow.[23] As such, the Committee considers that it is incumbent upon the Executive and the Assembly both to create a public procurement environment that facilitates our smaller enterprises in realising their full potential and which maximises the economic and social impact from expenditure on procurement.

Public Procurement Principles

42. In its evidence, CPD explained that the administration of public procurement in NI is governed by twelve guiding principles agreed by the Executive. These are:

i. Accountability,

ii. Competitive Supply,

iii. Consistency,

iv. Effectiveness,

v. Efficiency,

vi. Fair-dealing

vii. Integration,

viii. Integrity,

ix. Informed decision-making,

x. Legality,

xi. Responsiveness, and

xii. Transparency.

The Executive considers that these principles reflect the statutory obligations relating to equality of opportunity and sustainable development and link to the PfG. More information on the twelve principles can be found at Appendix 4.[24]

43. The Committee has been advised that the roles and expectations on commissioners and purchasers which arise from the twelve principles will be further clarified in the “Northern Ireland Public Procurement Handbook", currently being developed by CPD. The Committee welcomes this initiative as it believes that, given the aspirational terms in which the principles are cast, purchasers could find them difficult to interpret and implement without more specific instruction.

44. The Committee notes that the CPD guidance defines “best value for money" as “the optimum combination of whole life cost and quality (or fitness for purpose) to meet the customer requirements". More particularly, the guidance states that:

“While ‘best value for money’ is the primary objective of procurement policy, this definition allows for the inclusion, as appropriate within the procurement process, of social, economic and environmental goals, the three pillars of sustainable development".[25]

Also, the Committee notes with interest that the CPD guidance advisesthat when the twelve guiding principles“have been satisfied to an acceptable level then best value for money can be said to have been achieved".[26]

45. As outlined later in the report, evidence presented to the Committee during the course of the Inquiry suggests that, in comparative terms, public procurement practice in NI has a predominant focus on compliance (i.e. the Legality principle) and on narrow value-for-money considerations. While these considerations are undoubtedly important, the Inquiry report highlights the need for further development in good practice, which will see more weight given to some of the other guiding principles. In terms of the external perception, in its submission to the Inquiry, CBI highlighted the results of a survey which it carried out of 157 NI-based suppliers in 2008, which showed that 61% of respondents did not think that public procurement is resulting in value for money, compared with 16% who did. Some 64% felt that further fundamental changes are required.

46. The Committee notes that an underlying theme from the Inquiry evidence suggests that government evaluations and appraisals, including as part of the procurement process, tend not to attach sufficient weighting to longer-term qualitative/non-monetary benefits for the wider economy and society, which can be realised from capital investments and procurement exercises.

47. The Committee is aware that the “Integration" principle advocates that “in line with the NI Executive’s policy on joined-up government, procurement policy should pay due regard to the Executive’s other economic and social policies, rather than cut across them". Moreover, the CPD guidance highlights that one implication of adopting the twelve principles for the Executive’s policy on public procurement will be that “wider economic, social and environmental strategies and initiatives of the Executive should be more closely integrated into procurement policy".[27] However, the evidence presented to the Inquiry leads the Committee to conclude that there is insufficient integration in this regard and that a more strategic and widely defined consideration of “value for money" is needed, which has a focus on longer-term economic and social well-being.

48. In addition to the Integration principle, the Inquiry report will also highlight the need for greater emphasis on Consistency (i.e. to ensure uniformity of approach across CoPEs), Competitive Supply (i.e. greater action to realise benefits of SME involvement), Informed decision-making (i.e. to establish robust management information systems and to take sufficient account of social value) and Responsiveness (i.e. to the needs of SMEs and SEEs).

Organisational structures for the development and implementation of Procurement Policy in NI

The Northern Ireland Executive[28]

49. The development and implementation of procurement policy rests at various levels within government. The NI Executive is responsible for agreeing overall public procurement policy including the adoption of the twelve procurement policy principles. In its Programme for Government 2008 – 2011, Building a Better Future, the Executive highlighted the positive role that procurement has in furthering cross-cutting, sustainable development and socio-economic objectives.

50. The Committee notes that “growing a dynamic, innovative economy" is the cornerstone of the PfG; and, that there is a particular emphasis on “growing the private sector including small and medium enterprises" and “developing the social economy."

51. Within the PfG, the Executive recognises “the important contribution that such local economic activity promotes in both social objectives and in sustainable community development"[29]; and that there is a commitment to ensure that any government reforms and restructuring will be compliant with recognised best practice in social procurement guidelines.

52. The Committee welcomes the recognition within the PfG of the significant role that public procurement policy can play in advancing the overall aims and objectives of government, including achieving policy objectives under the cross-cutting theme of sustainable development[30] and in tackling patterns of socio-economic disadvantage[31].

53. Public Service Agreement (PSA) 11 specifically addresses these issues with its objective to “support the wider Public Sector in taking account of sustainable development principles when procuring works, supplies and services". In its ongoing scrutiny of DFP’s progress against PSAs in the PfG, the Committee will continue to closely monitor those PSAs specifically addressing procurement.

54. Detailed actions include the integration of sustainable development priorities; increasing access to public procurement opportunities for SMEs and SEEs; monitoring and reporting on compliance with guidance on integration of equality and sustainable development priorities within the procurement process; and basic training for all procurement staff in sustainable procurement processes.

55. Other PSAs with a focus on procurement practice include PSA 20 “Improving Public Services" which highlights “improved procurement practice" as a key target within the objective of taking forward the modernisation of the health and social services sector.

56. PSA 21 “Enabling Efficient Government" also impinges on procurement policy and practice in NI, as objective 5 commits to delivering the most economically advantageous outcomes in government procurement.

57.The Committee believes that the implementation of the recommendations arising from this Inquiry will help to achieve key objectives of the Executive’s PfG, not least the emphasis on “growing the private sector including small and medium enterprises’ and ‘developing the social economy". As a prerequisite, however, the existing drivers for public procurement will need to be realigned in support of the Executive’s economic, social and environmental priorities. In particular, this will require a more balanced application of the twelve guiding principles governing the administration of public procurement in NI, which, in turn, will help achieve “best value for money". This will be discussed in more detail later in the report.

Procurement Board

58. A Procurement Board, chaired by the Minister of Finance and Personnel, comprises the Permanent Secretaries of the 11 NI Departments, the Treasury Officer of Accounts, the Director of CPD and two external experts. The Board has particular responsibility in respect of developing overarching public procurement policy for NI Departments, their agencies and other public bodies. The Board is responsible to the Executive and accountable to the NI Assembly.

59. Procurement policy and practice in NI has been under increased Assembly scrutiny in recent months as a consequence of this Inquiry. The Procurement Board will wish to carefully consider the recommendations of this Report and the Committee looks forward to receiving a formal response to the findings and recommendations.

Central Procurement Directorate

60. CPD was established within DFP in April 2002 to support the development and implementation of public procurement policy and provides a centralised professional procurement service to the NI public sector. While CPD is available to local government purchasing bodies for advice and guidance, there is no imperative to engage with CPD during procurement exercises.

Centres of Procurement Expertise

61. In addition to CPD, seven other CoPEs exist to provide a more integrated service to bodies throughout the public sector. These are:

62. Public procurement policy in NI requires that the competency of CoPEs is reviewed by the Procurement Board on a periodic basis. The first review was carried out by PricewaterhouseCoopers LLP (PwC) in 2005 and a second review took place in 2009, also by PwC.[33] The twelve procurement principles are used to assess CoPEs against best value for money in their reaccreditation. This area is discussed in more detail later in the report, under the section on Public Procurement Governance Arrangements.

Procurement Practitioners’ Group

63. There also exists a Procurement Practitioners’ Group (PPG) where representatives from CPD and the other CoPEs meet to inform, test and develop policy and, where appropriate, operational issues.

64. Further information on the relationships and roles of the Executive, the Procurement Board, and the Procurement Practitioners’ Group can be found at Appendix 4.

Construction Industry Forum for NI Procurement Task Group

65. The Committee also notes the work of the Construction Industry Forum for NI Procurement Task Group (CIFNI PTG), which was recently formed in response to the economic downturn. Several principles underpinning the Group reflect the thrust of this Inquiry, including: maximising the opportunities for enterprises to benefit from public sector construction contracts through participation in the supply chain; reducing the cost and timescale of the pre-qualification process; and reducing the costs of tendering.

Social Economy Enterprise Procurement Group

66. The Committee notes from a recent draft of the Social Economy Enterprise Strategy 2010-11, that DETI, supported by CPD, will work with the Social Economy Network (NI) Ltd (SEN) to facilitate two meetings per year of the Social Economy Enterprise Procurement Group.[34] This will aim to increase awareness of the public sector tendering process amongst social enterprises and break down barriers to procurement.

Small and Medium Sized Enterprises in NI

67. SMEs in NI are primarily characterised by staff headcount, although the European Commission publication, The new SME definition: User Guide and Model Declaration,[35] also allows for annual turnover and balance sheet total to be taken into account. The Annual Report on EU Small and Medium Sized Enterprises notes that SMEs range from self-employed bookkeepers without personnel, to fast-growing, innovative and much-internationalised ICT firms with 200 employees, and everything in between.[36]

68. For the purposes of the Committee Inquiry, SMEs have been categorised as follows:

69. In its evidence to the Inquiry, the FSB highlighted that public bodies may consider that “they have 100% submission from the SME sector to tender notices, and a 100% success rate of award of contracts to SMEs – given that the standard definition of an SME relates to all businesses employing up to 250 people". During the Inquiry, it became clear that there is a lack of consistency in the definition of an SME used by buyers in the public sector market, an issue that was also highlighted, in terms of the all-island context in the recent InterTradeIreland report.

70. The Inter-Departmental Business Register (IDBR) – Edition 10 (20 June 2008)[37] shows that, of the 72,550 SMEs in NI, 7,870 businesses had more than 10 employees and, of this figure, only 1,240 employed more than 50 people. The remaining 64,680 (89%) businesses are classed as micro-businesses, employing fewer than 10 people. Fifty percent of all businesses in NI are registered as ‘Sole Proprietors’.[38] Micro-businesses therefore have a particularly prominent place in the local economy.

71. In recognising that nearly 90% of small businesses in NI are micro-businesses, the Committee would wish to highlight the concerns of those who responded to the Inquiry requesting clarity on the definition of SMEs. As such,the Committee recommends that the Procurement Board, in conjunction with DETI, considers refining the definition of SMEs in the NI context, paying particular attention to those currently identified as small, or micro-businesses, when exploring ways of boosting access to procurement opportunities by local businesses.

72. The Committee is aware that the high proportion of small and micro enterprises in the local business sector could be viewed as a structural weakness in the NI economy. Evidence at an EU level, for example, shows that SMEs, especially micro enterprises, have a lower labour productivity than large enterprises and contribute a considerably lower share to value added than to employment. That said, the Committee also notes that, at a UK level, a report from the Department for Business, Enterprise and Regulatory Reform has found that “the small business sector has become more dynamic" and that “productivity growth in small firms has exceeded that in large firms since 1998". [39] Also, the Committee is conscious that the EU research highlights compelling empirical evidence of how SMEs can have a positive impact on economic growth trends, particularly from a longer-term perspective.[40]

73. The Committee notes from this recent EU research that SMEs in general, and micro enterprises in particular, “contribute to the creation of new employment at a much higher rate than do large firms".[41] Also, in the context of developing the “knowledge economy" in NI, the Committee notes that SMEs contribute to the dynamism and innovative performance of an economy by providing the vehicle for “knowledge spill-over entrepreneurship", in terms of implementing and commercialising the new knowledge generated from investment in research at universities and other research institutes.[42]

74. The recent Independent Review of Economic Policy (IREP) indicates that local businesses “will remain the bed-rock of the NI economy."[43] The report also notes that NI is dominated by small firms, primarily due to a large agricultural sector, but also reflecting more small firms than the UK average in construction, retail, transport and extraction. [44] It is the view of the authors of the IREP that “it is important that in practice, public policy interventions/resources are increasingly targeted at overcoming the obstacles to business growth."[45]

75. The Committee is also aware that HM Treasury’s Office of Government Commerce (OGC) has concluded that much could be gained by enabling a greater number of smaller businesses to compete in the public sector supply chain. OGC cites benefits for both the smaller businesses and the public sector. In the case of smaller businesses, they can gain by having greater access to a large and stable market. The benefits for the public sector include: better value for money (i.e. greater competition reduces costs from all suppliers and the lower overhead costs of smaller business can result in lower prices); better quality of service; and innovative business solutions.[46] On the latter issue, both the DETI Matrix Group and Sir David Varney’s Review of the Competitiveness of NI have highlighted how government procurement can play an important role in driving SME innovation and growth.[47]

76. The Committee notes that the aforementioned benefits from greater participation by smaller enterprises in the government supply chain were reiterated in a report on Evaluating SME Experiences of Government Procurement, published jointly by CBI, FSB and the British Private Equity and Joint Venture Capital Association in 2008.[48] Also, the Committee is conscious that, as far back as 2001, the Review of Public Sector Procurement in NI recognised both the benefits of encouraging SME access to public contracts and the associated barriers.

77. In addition to the direct benefits from greater participation by smaller enterprises in the local procurement market, the Committee also understands that wider economic gains, in terms of increased Gross Value Added (GVA) in NI, could accrue from local SME entry into other public procurement markets, including RoI and GB.[49]

78. Given the profile of the local business sector, the Committee would expect that the majority of contracts in NI are awarded to small and micro enterprises. However, as discussed later, it has not been possible to establish comprehensive figures in this regard, including in terms of showing the extent and spread of the indigenous SMEs which are successful in winning government contracts. Nor has it been possible within the timeframe of this Inquiry to undertake a detailed examination of the reasons why some SMEs are successful, while others have either a negative or no experience of the public procurement market. Nonetheless, the Committee sees merit in encouraging new entrants into the procurement market from the small and micro enterprise sector and also in enabling such firms to compete for higher value contracts.

79.The Committee believes that a ‘win-win situation’ will arise from increasing the number of indigenous smaller enterprises competing in the public sector supply chain. For the public sector there is the potential for better value for money, better levels of service and more innovative business solutions. For the smaller enterprises there is the benefit of access to a large and stable market. The Committee also believes that increased participation by indigenous small enterprises in providing services, supplies and works to government in NI could encourage their growth and participation in public procurement markets elsewhere, with the added benefits of boosting employment and of raising the level of productivity/GVA within NI.

80. The Committee notes that, for some years now, the benefits from greater SME access to the public sector supply chain and the barriers to such access have been recognised and documented both locally and internationally. Given the current economic circumstances, the Committee believes that there is now an urgent need for accelerated action in this area. Progress on this front will support the drive for “Competitive Supply", which is included in the twelve guiding principles governing public procurement in NI.

81.In light of the potential benefits, the Committee calls on the Executive to develop a strategic policy for using public procurement, as far as is permitted under the legislation, as a tool for supporting the development of our smaller enterprises and for stimulating economic growth in the longer term. The Committee considers that the implementation of such a policy will require further culture change on the part of government purchasers, which sees a stronger focus on “growing the economy" and creativity in developing procurement solutions which are sensitive to the needs of the economy, whilst also ensuring legal compliance.

Social Economy Enterprises in NI[50]

82. A Social Economy Enterprise (SEE) is defined by DETI as ‘a business that has a social, community or ethical purpose, operates using a commercial business model and has a legal form appropriate to a not-for-personal profit status’.

83. The social economy sector in NI includes a range of organisations such as credit unions, housing associations, local enterprise agencies, community businesses, co-operatives, employee-owned businesses, community development finance initiatives, social entrepreneurs and social firms. Given the relatively low visibility to date and diversity of the sector, no firm, up-to-date, figures are available to quantify its overall size and scale.

84. According to the SEN, the sector in NI is not as well developed as it is in England and Scotland. However a UK-wide survey in 2005 estimated that there were around 600 SEEs in NI, employing in the region of 10,000 people.[51] The Committee welcomes the recent draft of the DETI Social Economy Enterprise Strategy 2010-11, which aims to ensure that the sector is valued, encouraged and supported. [52]

85. In oral evidence to the Committee, SEN highlighted that, for many organisations in the social economy sector, there is now a move away from funding based on government grant aid towards provision of supplies and services through a competitive tendering process. This marks a sea change for the sector in terms of funding arrangements, and a knowledge gap exists.

86. The Ulster Community Investment Trust (UCIT) told the Committee that there is evidence of a lack of awareness and understanding of the social economy on the part of departments, including of social enterprises and what they are doing in communities. In this regard, the Committee notes a suggestion made during the Inquiry that each Department should have its own Social Economy Sector champion, not only for procurement related issues but also for other concerns pertinent to the sector.

87. As part of its Inquiry, the Committee has been pleased to hear from SEEs which have a vital role to play in building sustainable communities economically, socially and environmentally; and is particularly keen that access to public procurement opportunities are opened up to the social economy sector.

Number and Value of Awards across the CoPEs

88. In order to obtain baseline data to help inform the Inquiry the Committee agreed to request information from CPD and the other CoPEs on:

a) The number and value of contracts awarded to local SMEs from 1 April 2004 to date, including a breakdown into medium, small and micro-businesses; and,

b) The number and value of contracts awarded to local SEEs from 1 April 2004 to date, including a breakdown into medium, small and micro-businesses.

Figure 3 below shows aggregated percentages for the numbers of contracts let by each CoPE by size of business over the three years from 2006-07 to 2008-09.[53]

Figure 3: Number and value of contracts by CoPE 2006-07 to 2008-09

Department of Health Social Services and Public Safety

Northern Ireland Housing Executive

Central Procurement Directorate*

Education and Library Boards

% of contracts
(n=4389)

% of value
(£516m)

% of contracts
(n=4050)

% of value
(£354m)

% of contracts
(n=1404)

% of value
(£1.29bn)

% of contracts
(n=12434)

% of value
(£478m)

Medium SME (NI)

6.0

87.0

69.8

77.9

89.6

88.7

3.5

23.4

Small SME (NI)

57.7

10.8

4.5

19.8

1.6

1.2

35.3

25.7

Micro SME (NI)

20.6

1.4

25.8

2.3

0.6

0.0

60.7

14.6

External SME/SEE

15.3

0.7

0.0

0.0

6.3

3.1

0.1

0.1

SEE (NI)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Non-SME (NI)

0.0

0.0

0.0

0.0

1.4

6.8

0.4

35.9

External Non-SME

0.5

0.1

0.0

0.0

0.5

0.1

0.0

0.2

Totals

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

* Figures for CPD cover both Construction Division (n=113) and Supplies and Services Division (n=1291). CPD has confirmed that Supplies and Services Division do not keep disaggregated data for small and micro SMEs.

89. While the data does not illustrate any clear patterns, some observations may be made, including:

a) the spread of contracting activity by size of business varies considerably between the CoPEs;

b) the number of contracts awarded to micro-businesses is higher in percentage terms than the value of those contracts. This indicates that, while micro-businesses may be winning significant numbers of contracts, these are only low in value;

c) few contracts are let to businesses from outside NI or to non-SMEs;

d) in the period covered by those CoPEs that were able to provide data, from a total of 22,277 contracts, only one was let to a NI-based SEE; and,

e) for both the Department of Health, Social Services and Public Safety (DHSSPS) and the Education and Library Boards, small numbers of contracts let to medium-sized businesses in NI accounted for relatively high proportions of the overall value of the contracts.[54]

90. There was some difficultly in obtaining data and several CoPEs, including Roads Service, Northern Ireland Water and Translink, were unable to provide the data requested. Weak information management across CoPEs was noted in the InterTradeIreland report which stated that some buyers do not know the size of their current supply base and concluded that this “may reflect the need for centralised management information on procurement, contracts awarded and associated profiles". The InterTradeIreland report also suggests that the new e-SourcingNI system operated by CPD has “limited scope to provide any longitudinal trend analysis."[55] This was further highlighted to the Committee during an evidence session with DFP officials on the Shared Services Organisation, which is bringing together HR, Financial and IT systems across the NICS. It is anticipated that, with the introduction of initiatives such as AccountNI, CPD might be in a better position to record and manage information relating to procurement spend.[56]

91. Through Assembly Research, the Committee has identified a possible model of good practice for information management, which CoPEs in NI may be able to follow in gathering information on the participation of small enterprises in the public procurement market. This is the system called Spikes Cavell, used by the Scottish Government which collects and collates management information on procurement spend, and which has become a Best Practice Indicator for Scottish public purchasing bodies to record spend on SMEs.[57] Belfast City Council has been using Spikes Cavell as an information management tool since 2007. Transaction data is sent to the system which cleanses the information and removes duplication. A number of different reports can be run, including information on the spend of individual departments or information on particular suppliers. The use of this information management system has allowed the Council to co-ordinate contracts more effectively, and has helped to realise efficiency savings.[58]

92. The Committee is concerned at the inconsistency and gaps in the data held by CPD and the other CoPEs on contracts awarded to SMEs and SEEs. As such,the Committee calls on the Procurement Board to ensure that the necessary data capture and management information systems are put in place across all the CoPEs to enable the impact of procurement policy on the small business and social economy sectors to be monitored effectively. Progress in this area will be in keeping with one of the twelve guiding principles of public procurement in NI, namely “Informed decision-making".The Committee further recommends that the criteria used in the accreditation of CoPEs should take account of the robustness of the data systems in this regard.

Improving Policy and Processes

Framework Agreements and Contracts

Background

93. CPD currently has a number of framework agreements in place, designed to facilitate the call-off of teams to undertake projects as the need arises, by means of a secondary competition between the teams appointed to the framework agreement[59]. Under the Public Contracts Regulations 2006, the maximum duration of a framework is currently 4 years (the Utilities Contracts Regulations 2006 do not contain a limit on framework duration).

94. In correspondence with the Committee, CPD cited a number of advantages that frameworks can offer contracting authorities including:

Also, the PwC review of CoPEs viewed frameworks positively in that they promote efficiency and also encourage competition amongst suppliers.

95. From the Inquiry, however, the Committee has detected an apparent contradiction between the theoretical benefits of frameworks and how they operate in practice. Most of the evidence presented to the Committee on frameworks highlighted a perception that they have a significant negative impact on the experience of SMEs and SEEs in tendering for, and delivering public contracts. The Royal Society of Ulster Architects (RSUA) felt that imposing frameworks on all kinds of procurement did not seem appropriate. The RSUA also suggested that, as the research evidence in support of frameworks was undertaken entirely in GB, their use remains to be proven in the NI context.

96. While acknowledging the rationale behind frameworks to bring together different interests, Carson McDowell solicitors pointed out that, in an area with a relatively small local market, frameworks were probably not the most helpful approach; and that in NI two large frameworks have ‘sucked up’ too much work. The Construction Industry Group NI (CIGNI) felt that the use of frameworks had led to a reduction in tendering opportunities, thereby reducing access for SMEs and SEEs. The Committee also notes that the InterTradeIreland evidence suggests that frameworks are renewed too infrequently.

97. In its written submission to the Committee, the Northern Ireland Federation of Housing Associations (NIFHA) outlined an emerging situation where housing associations were encouraged to align themselves into four procurement consortia to establish frameworks and let building contracts after ‘mini-competitions’. It is envisaged that, in the future, supplies and services will also be procured through consortia and frameworks. NIFHA, on behalf of its members, has expressed concern about this arrangement for a number of reasons, including budgetary constraints; threat of litigation due to the downturn in the construction industry; and difficulties in co-ordinating enough housing projects within a consortium at roughly the same time and in the same general area to confidently set up a framework.

98. Frameworks did however receive qualified support from some stakeholders. CIGNI told the Committee that frameworks do have a place and can be a useful system for subjects that are clearly identifiable, for example supplies of JCB diggers or dumpers. However, during their oral evidence the Committee heard that, in RoI, construction contracts had been intentionally excluded from framework arrangements. In a written submission to the Committee, Dr Aris Georgopoulos, University of Nottingham, suggested that only particular types of contracts are suitable for framework arrangements, such as those aimed at satisfying recurring needs for supplies and/or services.

99. Contract consultants, Quigg Golden Ltd, told the Committee that there are occasions where framework agreements are a good and useful practice. In its oral evidence to the Committee, the Confederation of British Industry (CBI) supported frameworks as an important way of reducing bidding costs, and supported aggregations only to the point where NI companies still have good opportunity of winning contracts. There was also a note of caution from a participant at the Stakeholder Conference who highlighted the enormous amount of work and resources required to be included on a framework and to dismiss that outright would be to negate a huge amount of positive economic activity.

100. Through the written and oral evidence, and at the Stakeholder Conference, a number of criticisms were levied at framework agreements and these are discussed below.

Framework lockouts leading to loss of experience

101. Representative organisations like CIGNI highlighted the fact that, if an SME is unsuccessful in making the framework agreement it can be locked out of those contracts for the length of the framework – usually a term of four years. Businesses therefore miss out on gaining any experience in that area of work and so have the potential to be doubly penalised when the framework is up for renewal. In other words, it may be even more difficult for a business to get on to a framework in the future.

102. This concern was echoed by the Royal Institute of Chartered Surveyors (RICS) both in its written submission and also during the oral evidence session on 24 June 2009. RICS also suggested that there is potential for a future negative impact on the construction skill base in NI caused by a damaging shortage of professional skills to manage the eventual upturn in the market. A similar view was expressed by the construction company, Martin and Hamilton Ltd, which contended that the longer the current framework system is in operation the more competitive advantage larger firms will accumulate. In turn, this will widen the gap between their growing capability and that of smaller firms who have missed out and lose out on the experience.

103. The Committee heard that frameworks have a particularly negative impact on professional services such as architects. The RSUA drew the Committee’s attention to a situation where an architect’s firm may, for a nominal fee or at no cost, provide advice and initial work for a local community organisation. However if the group’s public funding reaches a threshold of over 50% (of the contract value) then they must use the framework for aspects of the project. If that particular architect practice is not on the framework, they cannot compete for the work. This results in lost work and also the benefits that knowledge of the local community would bring to that project, not being realised.

Duplication of information and onerous pre-qualification criteria

104. Other respondents drew attention to the fact that framework arrangements can often give rise to duplication of information. Lestas Consulting, in a written submission, suggested that the primary process for frameworks does not in any way lessen the documentation for the secondary process, thus leading to a situation of double tendering. However, the Committee notes the written evidence from CPD that thee-sourcingNI portal has the ability to hold a supplier’s corporate information, thereby reducing the amount of information required from suppliers at the pre-qualification stage in the procurement process.

105. The construction company, Martin and Hamilton Ltd considered that framework arrangements penalised SMEs due to the minimum thresholds required, including company turnover and insurance compliance. This view was also highlighted by others including the RSUA which suggested that, once projects are bundled together, the selection criteria can be set to a much higher specification than is necessary for an individual job on that framework.

106. The FSB report on SME experience of accessing government contracts showed that 15% of SMEs believe that they would not meet the eligibility criteria to tender to public bodies and in particular the excessive insurance requirements. Nearly one in four of those who participated in the electronic voting at the Stakeholder Conference indicated that this was their primary concern in relation to framework arrangements.

107. The InterTradeIreland report highlighted best practice in Romania, where a guidance document has been published which points out that the minimum levels of ability required when awarding a framework agreement must be related and proportionate to the largest contract due to be concluded, and not the total amount of contracts planned for the entire duration of the framework agreement.[61]

Consequences of an SME/SEE not being the main contractor

108. The Committee welcomes the input from a number of statutory committees to its Inquiry. One area highlighted by the Committee for Employment and Learning is that local SMEs/SEEs can often find themselves as sub-contracted parties, doing the bulk of the work involved in a contract but for much less than the full payment. The Committee for Employment and Learning cited a particular case of a tender exercise undertaken by CPD, on behalf of the Department for Employment and Learning, as evidence of the need for the capacity of SMEs and SEEs to bid for these contracts to be greatly enhanced and supported by government. This issue was also raised by the Law Society of NI. It contended that “solicitor firms based in England and Wales, when awarded a contract to provide a Government Department in NI with legal services, often rely on Northern Irish based firms to provide knowledge and expertise in the local law".

109. A further concern was highlighted by the RSUA in both its oral and written evidence, over the use of framework agreements in procuring the services of architects. Its primary concern is that such frameworks have the potential to restrict professional architectural appointments to a small number of practices, mostly within the Greater Belfast area. In turn, this would have a significant negative impact on smaller practices in other parts of NI with the long term result being the concentration of public sector projects into a small pool of consultancies. The RSUA remains unconvinced that large scale framework agreements are necessarily the most efficient and effective method for the public sector to procure all consideration and design services.

Propensity to litigation

110. The RSUA also considered that large scale framework agreements will be more liable to challenge as the stakes are so high for companies who are unsuccessful. This view was echoed by Quigg Golden Ltd who highlighted that the frameworks currently being challenged are worth £1.5 billion, while the individual projects involved would be of much smaller value. The Committee notes that this also places another issue in the spotlight, namely that unsuccessful companies have no other recourse but to appeal to the courts over decisions they wish to challenge. There is further consideration of litigation issues at paragraphs 299 - 312.

Impact on Voluntary and Community Sector

111. The Northern Ireland Council for Voluntary Action (NICVA) highlighted that the trend towards the use of large scale contracts, leading to a rationalisation of the supplier base, rules out many voluntary and community organisations which might otherwise be eligible to tender for smaller scale projects. This was a view shared by SEN who indicated that aggregating contracts can exclude the social economy sector from a large number of procurement opportunities.

112. Many within this sector considered that purchasing organisations are risk averse when considering social economy suppliers. Some felt that more attention was paid to meeting EC directives and regulations than allowing less well established enterprises to bid for contracts. This is reflected in the PwC review of CoPEs where it was deemed that they had performed well in the extent to which they met EC directives and UK regulations.[62]

113. Lestas Consulting argued that one of the biggest barriers to small companies securing contracts through the frameworks is the lack of belief by the project managers in the capacity and capability of the smaller businesses to deliver on a contract. This was a perception shared by those attending the Stakeholder Conference with the digi-voting results indicating that the issue of most concern to those attending was the perceived risk aversion to SMEs/SEEs.

114. Procurement commentator, Professor Andrew Erridge, addressed the issue of risk specifically through the question he posed to participants at the Stakeholder Conference. He asked, “How much risk of legal challenge are you prepared to accept in order to assist local SMEs/SEEs to win government contracts?" Sixty-eight participants responded to the question, with more than 70% indicating that they would be prepared to accept a medium or high level of risk compared to just under 30% who responded “low" or “none". While this is solely indicative of those conference participants who chose to respond to this question, it points to an acceptance that some element of risk is unavoidable. However, rather than asking one side or the other to accept a greater burden of risk, a principle of “risk-sharing" was advocated.

115.Whilst accepting that CPD and the other CoPEs must comply with both EU and UK legislation, the Committee is of the view that the Procurement Board should reconsider the distribution of risk within the procurement process and bring forward a policy on risk sharing, which takes account of the barriers to smaller enterprises accessing the supply chain.

116. Further, while not rejecting the concept of framework agreements outright, the Committee recognises the concern of many respondents to the Inquiry, that large frameworks have presented a barrier to smaller enterprises accessing procurement opportunities, particularly in the current financial and economic climate. As such,the Committee recommends that large-scale framework agreements should not be used in future unless the Procurement Board can first establish a robust evidence base for following such practice in the NI context.

Frameworks and Contracts: Key suggestions

117. Those who contributed to the Inquiry evidence base made a number of constructive suggestions including:

(i) Splitting Contracts

118. This would involve a significant departure from the current framework protocols. The Committee heard from the Chartered Institute of Purchasing and Supply (CIPS) that, while it is essential that one considers all the work in a given area over the lifetime of a contract, it does not necessarily follow that there has to be one large contract. Indeed there could be many small contracts. The Western Innovations Network (WIN) suggested that large contracts should be split to allow for greater competition across SMEs and the Social Economy sector. Paul Davis, a procurement specialist from Dublin City University and commentator at the Stakeholder Conference advocated that breaking contracts into lots should be seen as the first recourse of any procurement tender. The Committee notes that this approach is also advocated in theEuropean Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts.[63]

119. Indeed, during the digi-voting on proposed solutions under Frameworks and Contracts during the conference, breaking up large contracts was one of three ideas considered to be most helpful. This approach was also advocated by InterTradeIreland in its evidence to the Committee on 17 June 2009, while Carson McDowell solicitors considered that this would encourage the participation of SMEs in the procurement process. Also, the Committee notes that, in hisReview of the Competitiveness of NI, Sir David Varney highlighted that public contracts in areas such as IT tend to be given to large, multi-national companies and concluded that “there may be further opportunity to achieve value for money by breaking down large contracts, or by linking contractors with sub-contractors more effectively, to make it easier for small companies to win business". As such, Varney recommended “reforming public procurement policy, subject to EU law, so that small and medium-sized companies can benefit where this can still give value for money".[64]

120. During the course of the Inquiry the Committee considered an article in UNITE Magazine Ireland which suggested that up to 20% of any contract can be exempt from the European tendering process, in effect a local placement allowance. The article pointed to other EU countries where contracts are unbundled into smaller lots to ensure they remain below the Official Journal of the European Union (OJEU) threshold. While the UNITE article was written with regard to procurement practices in RoI, the Committee requested a response from CPD on these issues. CPD advised members that it is not aware of any Articles within the EC procurement directives that would permit the application of a local placement allowance and expressed its view that such allowances would be a breach of these directives.

121. The Committee notes that the European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts observes that the “sub-division of public purchases into lots clearly facilitates access by SMEs, both quantitatively (the size of the lots may better correspond to the productive capacity of the SME) and qualitatively (the content of the lots may correspond more closely to the specialised sector of the SME)".[65]

122. In highlighting experience in RoI, the European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts also notes that there is evidence to show that the cost of disaggregating contracts is offset by increased SME involvement in the procurement process.[66]

123.The Committee recommends that the Procurement Board gives careful consideration to a procurement policy that advocates breaking contracts into lots as the first recourse of any procurement tender. The intention of such action should not be to avoid the application of the appropriate public procurement regulations, but rather to make a conscious effort to reduce barriers to access for SMEs and SEEs.

(ii) Range of Frameworks

124. While critical of the current operation of framework agreements, many of those who contributed to the Inquiry recognised that, with some amendment, frameworks do have a part to play in the procurement process. RSUA suggested that each CoPE should have a number of frameworks reflecting contract size. CIGNI suggested the development of separate minor works frameworks while others such as the Quarry Products Association Northern Ireland (QPANI) advocated packaging of contracts according to size and geographical location.

125. Similarly, RICS recommended the development of smaller frameworks that could be geographically based. Regionalising frameworks in this way would allow a company that has been unsuccessful in tendering for a project in Belfast to bid for a similar opportunity in a different region in NI. However a note of caution was raised during a breakout session at the Stakeholder Conference, in that, geographically, NI does not have the capacity to sustain such localised contract arrangements and would negate any proposed efficiencies which frameworks are designed to achieve. Notwithstanding this, the Committee notes that, under itsCharter for SME Friendly Procurement, the Welsh Assembly Government has given a commitment to “package large contracts into separate elements or make use of regional lots if appropriate, to ensure that SMEs are not excluded from tendering".[67] Dr Georgopoulos, University of Nottingham, has noted that such an approach may attract greater cross-border interest thus increasing competition for local SMEs. That said, the Committee is aware that increased competition is not necessarily a bad thing (certainly from the purchasers side) as it should lead to a more efficient market, with those businesses which are effective being more likely to grow.

126. Having a range of frameworks reflecting various sizes of contracts was perceived to be a helpful proposal during the Stakeholder Conference. During its oral evidence, Martin and Hamilton Ltd indicated that if frameworks were smaller then they would be viewed as just a different form of procurement.

127. In acknowledging the views of some stakeholders that frameworks have a place within the procurement process,the Committee recommends that, when using framework agreements, CPD and the other CoPEs develop frameworks reflecting various sizes of contracts and opportunities and, where appropriate, give consideration to regional contract variations to increase access to opportunities for smaller enterprises.

(iii) Alternative Procurement Methods

128. While splitting contracts and developing smaller scale framework contracts have the potential to open up the procurement market to a larger number of SMEs and SEEs, there was recognition amongst respondents and Conference participants that frameworks and contracts are not always the most appropriate method of procurement, particularly in relation to services.

129. In its evidence, Quigg Golden Ltd suggested that every project can be procured in a different way. Advice NI suggested that a competitive tendering approach to securing resources does not always foster an appropriately collaborative approach. SEN advocate that the purchasing method should be proportionate to the services required, while RSUA cited design competitions and the Performance Related Partnerships currently used by Health Estates as positive alternatives to frameworks.

130. A key suggestion arising from the Stakeholder Conference highlighted that in some instances it might be more appropriate and efficient to use mechanisms, other than frameworks, to procure services. This was felt to have particular relevance to the voluntary and community sector/social economy sector. Many such organisations are moving from a situation of reliance on government funding to service level agreements/contracts.

131.The Committee recommends that the Procurement Board gives careful consideration to the full range of methods of procurement, including the use of alternatives to frameworks agreements and traditional contracts where appropriate. In particular members are keen to see a flexible approach taken to contract variance.

Opportunities to Bid

Background

132. Robust and timely information on the availability of contracts is a key factor in increasing access to suppliers across the board. This was reflected by those who gave written and oral evidence to the Committee and was also a theme considered at the Stakeholder Conference. EU regulations stipulate that all contracts over certain thresholds (see Figure 4 below) must be advertised in the OJEU.

Figure 4: EU Procurement Thresholds Public Contracts – 1 January 2010[68]

Supplies

Services

Works

Entities listed in Schedule 1

£101,323
(€125,000)

 £101,3232
(€125,000)

 £3,927,260
(€4,845,000)

Other public sector contracting authorities

 £156,442
(€193,000)

 £156,442
(€193,000)

 £3,927,260
(€4,845,000)

Prior Information Notices (Regulation 11)

 £607,935
(€750,000)

 £607,935
(€750,000)

 £3,927,260
(€4,845,000)

Small lots (regulation 8 (12))

 £64,846
(€ 80,000)

 £64,846
(€ 80,000)

 £810,580

133. The Committee heard from InterTradeIreland that there is a lack of visibility to SMEs of lower value threshold contracts in each of the two jurisdictions and on a cross-border basis. However, it indicated that there is a higher visibility of RoI tender opportunities to NI SMEs than vice versa.

Sourcing Information/Highlighting Opportunities

134. A survey of SMEs undertaken by Lestas Consulting for the FSB in 2009 found that there is a low level of awareness among SMEs in NI on the sources of information for procurement opportunities, with almost 50% of those responding unaware of any information sources.[69] This concurs with a 2008 CBI survey of private sector attitudes and experiences of public procurement in NI, which found that 46% of respondents found it difficult or very difficult to obtain information on forthcoming tenders.[70]

135. The FSB report also found that a number of barriers prevent SMEs from identifying suitable procurement opportunities, primarily due to a lack of time and resources needed to source contracts. There was also a lack of clarity about which information sources to use when looking for opportunities. This was an area of particular concern within the social economy sector and was highlighted by NICVA and the Bryson Charitable Group. In this regard, the Committee welcomes a key action within a recent draft of the DETI Social Economy Enterprise Strategy 2010-11, which will see CPD working with the Social Economy Policy Group and the sector to “raise awareness of public tendering processes" and also to have “appropriate systems in place to allow access by … SEEs to opportunities for doing business with CPD".[71]

136. The Committee heard concerns from a number of witnesses about a lack of consistency in the publication of opportunities. This was predominantly the case for those contracts falling below EU thresholds which, as Dr Georgopoulos noted, tend not to attract interest from foreign competitors. Members also noted that these contracts were mostly within the realm of local authorities. CIPS supported wider publication of notices falling under EU thresholds in order to attract SMEs at lower levels of entry into the market. The Committee also heard about www.supply2.gov.uk, a UK Government sponsored national web portal that offers consolidated access to lower-value public sector contract opportunities from across the UK. The service is self-funded through subscription fees. However, the Committee notes that theEuropean Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts advocates that such services should be free to use.

137. Identifying current opportunities is not the only priority. The Committee heard that it is also important for SMEs/SEEs to know about future plans for procurement spend by public sector bodies in order to help them with forward planning. This point was emphasised in the written submission from the Committee for Regional Development, and was further highlighted by the RICS and participants attending the Stakeholder Conference. Perceived delays in the implementation of the Investment Strategy NI (ISNI) were of particular concern to the construction industry.

138. There was widespread support from all those submitting evidence to the Inquiry for a single web portal for all public procurement opportunities in NI. A single web portal approach was also advocated by Business in the Community (BiTC), the Committee for Enterprise, Trade and Investment (CETI), and CIPS. This was in line with the CBI survey, where 92% of companies supported the development of a web portal for all NI procurement. The CBI felt that the provision of such information would help SMEs. It is unsurprising therefore that a single portal/dedicated website was also one of the most popular proposals arising from the Stakeholder Conference.

139. During the Conference participants heard from Martin Sykes, Chief Executive of Value Wales, the procurement arm of the Welsh Assembly Government. Value Wales supports the following two procurement web portals, one specifically designed for suppliers and the second for government purchasing bodies:

The Committee notes that this parallel online information system for suppliers and purchasers allows for clarity of information and guidance.

140. The Scottish Government hosts an internet portal[72] which holds details of contracts with Scottish Local Authorities, NHS Scotland, Scottish Government, Agencies and NDPBs, Higher and Further Education Institutions and Emergency Services. Suppliers can browse available contracts and can also register to receive email alerts. Purchasers and suppliers both use the same website which also includes information on procurement legislation and regulations. In January 2010 the site had over 44,000 registered suppliers, 448 registered purchasing bodies and over 1,203 tender opportunities.

141. The Committee is also aware of evidence across the EU of good practice in relation to the use of a single centralised website. Latvia, Estonia and Lithuania all utilise a single web portal to advertise contract notices, with the latter offering users the option of accessing information in both Lithuanian and English.[73]

142. In its correspondence with the Committee, CPD highlighted that all its own procurement opportunities can be found on the e-SourcingNI web portal[74] which can be accessed via CPD’s own website. The portal provides a one-stop shop for all CPD procurement opportunities, is accessible 24/7 and links to both online and telephone help lines. CPD also pointed out that e-SourcingNI is part of a UK-wide system commissioned by OGC and available to public sector organisations throughout the UK. As such, local users of e-SourcingNI have access to other public contract opportunities across the UK including the 2012 London Olympics.

143. CPD also highlighted that it makes use of “Constructionline", the UK’s register of local and national construction and construction-related suppliers who are pre-qualified to work for public and private sector buyers. It is used to pre-qualify contractors for all contracts above £30k and below the Public Contract Regulations 2006 (“EU Regulations") threshold. Recently CoPEs have agreed with the construction industry that Constructionline would be used to select the suppliers invited to tender for contracts below the £30k threshold. Figure 5 below shows the number and type of NI companies registered with Constructionline as at June 2009.[75]

Figure 5: Number and type of NI enterprises registered with Constructionline at June 2009

Type of Enterprise

Number

Micro businesses

848

Small businesses

630

Medium sized businesses

147

Non SMEs

14

Total

1639

144. The Committee, however, heard from Martin and Hamilton Ltd that applications for tender can sometimes be missing from the portal, while RICS suggested that the database could be more inclusive, with information from the Ministry of Defence, Northern Ireland Prison Service and opportunities in local government currently absent from the site.

145. A more integrated web-based approach is advocated by InterTradeIreland, particularly for low value and sub-threshold opportunities (mostly those offered by local authorities). Invest NI already operates a tender alert system for those opportunities advertised in the OJEU and also sub-threshold opportunities, but at a cost to local businesses; while in RoI, thirty-two county councils have signed up to the LA Quotes system.[76] InterTradeIreland recommends the creation of an all-island e-sourcing system to ensure maximum visibility of opportunities. The Committee sees this as having the advantage of encouraging NI SMEs to bid for work in RoI, thereby increasing the potential for enhanced NI exports and productivity levels.

146. The Committee notes that, in GB, the Glover Report recommended that “by 2010, contract opportunities above £20,000 across the whole public sector should be advertised electronically with standard indicative contract value ranges, and accessible through a single free, easy to search online portal". The Review of CoPEs recommended that steps be taken to further embed e-technology plans and develop an integrated, CoPE-wide strategy to address e-procurement to support integration among CoPE members and, where possible, move to a common e-enablement platform.

147. The Committee welcomes the progress that CPD has made in establishing the e-SourcingNI web portal for all CPD procurement opportunities. However members are of the opinion that this facility is underdeveloped both in scope and content compared to the Scottish and Welsh equivalents and that there is significantly more to be done in developing a common portal for all public procurement opportunities. It will also be important to link e-sourcingNI with other public sector online business advice resources, including nibusinessinfo.co.uk, operated under the auspices of the DETI.

148. As such,the Committee recommends that the Procurement Board takes steps both to consolidate all NI public sector procurement opportunities within the remit of thee-SourcingNI web portal, including local government tender notices, and to integrate tendering opportunities in GB and RoI.

149. The Delivery Tracking System (DTS), under the auspices of the ISNI, was launched in June 2009 and is administered by the Strategic Investment Board (SIB). It also has a role in providing access to information, particularly for construction contracts. However, it came under criticism from some witnesses as the level of information was not always up to date and accurate. RICS felt that more pressure should be put on other government departments to regularly update the ISNI Delivery Tracking System. It is however recognised that, as the system is relatively new, some time is required to deal with any initial teething problems.

150. QPANI also highlighted that the resourcing, updating and general management of online systems is crucial to ensure that SMEs have access to accurate procurement and tender information.

151. Given the concerns raised in the evidence,the Committee recommends that the provision of timely and accurate information on thee-SourcingNI portal and the ISNI Delivery Tracking System should be written into both the business plans of each CoPE and the personal performance agreements of the responsible officials. Moreover, CoPEs should also be required to publish their annual procurement plans on thee-SourcingNI portal to assist SMEs and SEEs in forward planning.

152. The Committee notes the efforts made by CPD to facilitate sixteen “Meet the Buyer" events over the period June 2008 – September 2009, with the attendance of over 900 representatives of small business and social economy enterprises. CPD has also been working with a number of government, cross-border and representative bodies to increase awareness of local SMEs and SEEs of the opportunities to compete for public sector contracts for supplies and services. These include the Tender Support Programme part-financed by EU funds through INTERREG IIIA and also the InterTradeIreland Go2Tender Programme.[77]

Setting Targets for SME/SEE Uptake

153. The Committee heard a range of views from witnesses on the merits, or otherwise, of establishing targets for SME/SEE uptake of procurement contracts. The FSB, for example, advocated a target of awarding 30% of low value public procurement contracts to micro-businesses (fewer than 10 employees), while WIN suggested a target for awarding contracts to community enterprises. However, the CBI told the Committee that introducing such targets would be difficult and costly to measure. It contends that the best way to improve SME involvement in the procurement process is to improve information and raise awareness of opportunities. It also advocated a reduction in procurement bureaucracy, leading to reduced bidding costs as a fairer and more deliverable way of increasing SME involvement than setting targets. This is a view echoed in theEuropean Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, which suggests that “what is most needed in order to facilitate SMEs’ access to public procurement is not legislative changes in the Public Procurement Directives, but rather a change in the contracting authorities’ procurement culture".[78]

154. Early consultation with potential suppliers was also seen to be a key factor. NICVA identified this as a particular issue for the voluntary and community sector, specifically for those organisations with little or no experience in tendering in procurement competitions.

155. The Committee notes that opinion is mixed on the establishment of government targets as the most effective way to increase participation by smaller businesses and social enterprises in the public procurement market. The Committee has already commented on the deficiency in information management across CoPEs and acknowledges that establishing targets requires baseline information and more robust data collection. In particular, it considers that the PfG commitment to “grow the economy" must be measurable in this respect.Notwithstanding the need for improved data collection by CoPEs, the Committee believes that the Executive should keep under review the option of setting targets for increased participation by SMEs and SEEs in the public sector supply chain, for possible future use in the event that the other identified policy interventions do not have sufficient impact.

Collaboration/Joint Ventures

156. At various stages throughout the Inquiry, the Committee heard evidence about the experience of SMEs and SEEs that have collaborated to bid for contracts. In its oral evidence, FSB stated that encouraging SMEs to form clusters is not part of business culture. On the other hand, Advice NI felt there was merit in promoting a joined-up approach to working between advice providers given the specialist nature of this market.

157. The Committee also heard about the experience of those organisations that had chosen to go down this route. There was a consensus amongst suppliers that purchasing bodies were not confident in assessing consortium bids. This was reflected in views from organisations like the Independent Consultants Adviser Group NI (ICAGNI) which suggested that consortium bids should be considered whether or not they have worked together before. InterTradeIreland suggested that buyers should consider the joint turnover of all companies involved in a collaborative bid. This was also a view expressed at the Stakeholder Conference, where a participant perceived that buyers made their assessments against the “weakest" partner in a collaborative bid.

158. InterTradeIreland recommends that consideration is given to providing SMEs on the island of Ireland with support in relation to the formation of joint ventures/consortia for public sector tendering, which could include mentoring and workshops.[79] In this regard, the Committee is aware of a cross-border example of good practice in encouraging collaboration, in the case the Irish Central Border Area Network, which was established in 1995 as a group of NI and RoI councillors from the central border area. This concluded a successful programme involving 107 small businesses, which provided “individual, tailored training" and encouraged collaboration and was able to “create some remarkable results in terms of developing associate and cross border links, developing staff and actually winning public sector tenders".[80]

159. At a European level, the Committee notes that, within the EU, the Enterprise European Network (EEN) offers support and advice to businesses across Europe, including helping companies find business partners. In terms of GB, the Committee notes that collaboration received special attention in the Glover Report, which recommended that those tendering opportunities which may be particularly suitable for consortia of SMEs should be flagged by the procurer during the advertising process.

160. Whilst recognising that businesses instinctively compete rather than collaborate,the Committee recommends that CPD encourages local SMEs and SEEs to collaborate, where appropriate, by highlighting the benefits of such initiatives and by providing guidance on the legal and practical implications of joining consortia to facilitate joint tendering. In noting the ongoing work by CIFNI on collaborative bids in relation to the construction sector, the Committee recommends that the Procurement Board considers the potential application of this model to also cover supplies and services and its extension to all CoPEs.

Consideration of the Supply Chain

161. The Committee recognises that, for some SMEs, their place is not as the main contractor but is further down the supply chain. For large works contracts in particular, government purchasing bodies tend to use larger contractors which then sub-contract work. In recognition of this the IREP advocates “much greater integration between SMEs and the supply chains of larger, often inward investment, companies".[81]

162. The Committee would highlight two issues of concern in this area: firstly, large companies may sub-contract to their own preferred companies which may not be local; and, secondly, local sub-contracted parties can end up undertaking most of the work but lose out on the financial reward that comes from being the main contractor.

163. Elsewhere in the EU, it is enshrined in German law that the contracting authority must “stipulate in the documentation that the successful tenderer may not impose less favourable conditions on its sub-contractors than the conditions agreed on between him and the contracting authority, especially as far as payment arrangements are concerned".[82] In the UK, while there is no legislation in place, it is common practice for contracting authorities to encourage visibility of the supply chain.

164. In its evidence, CIGNI provided the Committee with the example of Health Estates which runs a performance related partnering system. They have insisted that, when major firms come over from GB, they partner with local firms to input experience to the local economy.

165. In his submission, Dr Georgopoulos, University of Nottingham was supportive of further examination of the supply chain, an idea arising from the Stakeholder Conference. He stated that “a proposal for the competent departments of the NI Executive to conduct an ex post examination (by means of a study perhaps) in order to ascertain the general level of involvement of SMEs and SEEs as sub-contractors in public procurement carried out by contracting authorities in NI, is an excellent idea"[83].

166. The Committee also notes that the CIFNI PTG report indicates that it will seek to maximise the opportunities for those enterprises to benefit from public sector contracts through participation within the supply chain. However, this initiative applies only to construction related procurement and, in the view of the Committee, there is a need to roll this out across other CoPEs and procurement areas. The Committee also believes that efforts should be made to monitor supply chain participation. This would enable CPD to have a fuller picture of SME and SEE involvement in public sector contracts in NI.

167.The Committee considers that purchasers should give more consideration to the overall supply chain when awarding contracts and calls on the Procurement Board to examine the scope for government to take greater control of sub-contract arrangements in public contracts, with a view to ensuring more open competition and added transparency.

Finance Constraints and Cash Flow

168. Concern around the issue of finance and, in particular, the availability of credit facilities for SMEs and SEEs, was a strong theme throughout the Inquiry. This was also reflected in the findings of a recent Institute of Directors’ (IoD) survey on banking lending, which was submitted to the Committee outside the remit of the Inquiry. The August/September 2009 survey showed that local businesses reported difficulties in a number of areas including:

169. Consequently, the Committee reiterates its call for local banks to be supportive in their treatment of local businesses and to avoid unnecessary obstacles which would be detrimental to their performance. In terms of developments elsewhere, the Committee notes that in Malta, for example, the bank guarantee requirement has been abolished for tenders below EU thresholds.

170. The CBI also raised this concern with the Committee in its written submission, calling for an assessment of the availability of finance to those SMEs seeking to provide public contracts. Frank McGlone, a commentator at the Stakeholder Conference, suggested that a supplier focused payment model, including up-front payments, would help to address the barrier to SMEs and SEEs with regard to credit facilities. In recognising the cash flow challenges for smaller enterprises, OGC guidance recommends that purchasers consider whether stage/interim payments (linked, for example, to work done) or advance payments could be used.[84] Also, the Committee understands that the Scottish Government has changed the terms and conditions of all new contracts, whereby main contractors are required to pay sub-contractors within 10 days of receipt of a valid invoice, which is in line with the current government targets for payments to main contractors.[85]

171. A member of the Committee tabled an Assembly Written Question to each Executive Minister on the action that departments are taking to ensure that the 10-day prompt payment scheme, currently in operation for public sector contracts, is passed on to sub-contractors by businesses who are receiving direct payments from departments and their related bodies[86]. The majority of departments referred back to the CPD guidance, which again highlights the significant role played by CPD in the procurement process across the NICS. The Committee is aware that supplies and services contracts require main contractors to enter into sub-contracts on the same terms and conditions as the main contract. Also, CPD is working with CIFNI PTG to ensure that main contractors pass on the benefits of prompt payment to sub-contractors.

172.The Committee recommends that CPD and the other CoPEs consider the scope both for greater use of up-front and interim payments, within the constraints of government accounting rules,[87] and for the introduction of a requirement on main contractors to pay sub-contractors within 10 days of receipt of valid invoices, with a view to increasing the borrowing potential and/or easing the cash flow pressures on SMEs and SEEs.

173. For the social economy sector, the issue of finance raises concerns that maintaining and developing asset bases may be neglected in the search for public sector contracts. Similarly, it was pointed out to the Committee that SEEs often hold a certain amount of cash in reserve as part of their good accounting practice. In some instances this can be a disadvantage when seeking to secure public sector contracts.

174. The Committee notes the proposal from UCIT for the development of a finance brokerage scheme specifically to enable SEEs to enter the procurement market. The initiative has the backing of key sectoral organisations including SEN, Bryson Charitable Group and the School for Social Entrepreneurs in Ireland. Similar initiatives exist in England and Wales, through Access to Finance and Business Support programmes, and in Scotland, through Access to Finance and Strategic Support programmes. In a written submission to the Inquiry, UCIT outlined the key objectives of the service, which would help like-minded social enterprises come together to win public service contracts including:

175. The Committee notes that the proposed public procurement brokerage service would establish a pool of expertise and resources associated with tendering for contracts – such as bid writing, financial modelling, contract negotiation and performance management. More generally, the Committee is aware that, a key action for DFP under the draft Social Economy Enterprise Strategy 2010-11 is to:

“consider responses to the recent consultation held on the Dormant Account Scheme to ensure that a focused set of priorities under the general definition of “social or environmental purposes" is established which provide real benefits to all communities across NI".[88]

176. The Committee looks forward to being apprised by DFP on how the social economy sector might benefit from the unclaimed assets in dormant bank and building society accounts. Related to this,the Committee recommends that the Minister of Finance and Personnel, in conjunction with the Minister of Enterprise, Trade and Investment, gives careful consideration to the establishment of a public procurement brokerage service as identified by UCIT, which could also act as a “one-stop shop" for the social economy sector in terms of availing of public procurement opportunities.

Tendering and Delivering

Background

177. A key topic in this theme centred on the actual tendering process including pre-qualification requirements, how tenders are assessed and the accessibility of guidance. This ranged from an emphasis on perceived onerous pre-qualification criteria, too rigid an interpretation of the value-for-money (vfm) test and inflexibility around the application of European directives, particularly in comparison with other EU countries.

178. In response to Committee queries, CPD highlighted that legislation requires that the tendering process be transparent with a robust audit trail. The InterTradeIreland report noted that in a number of EU members states contracting authorities are not allowed to request tenderers to provide information which the contracting authority can verify easily and free of charge. The same report also suggested that pre-qualification questionnaires often require excessive effort and are unnecessarily detailed.[89]

179. The FSB survey highlighted that 51% of SMEs found that bidding to the public sector is significantly more difficult than bidding to the private sector. This was attributed to the amount of formality, lack of responsiveness and unrealistic timescales. And, in answer to a different question, 50% of SMEs felt that the process of tendering for government contracts requires more time and resources than their business can allow. This reflects evidence from CIGNI, who told the Committee that the tendering process is too detailed, protracted and expensive.

Communication and Accessibility of Guidance

180. The Committee heard from a range of organisations about difficulties in accessing guidance around procurement policy and practice. These included professional bodies, such as CIPS, which referred to a “complex process with little guidance"; while Business in the Community highlighted that the language can be off-putting. Others, such as the Anderson Spratt Group, called for more clarity on tender documentation, while Employers for Childcare reflected their own experience of poor communication during the tendering process.

181. CPD has pointed out that, throughout the tendering process, bidders are encouraged to utilise the e-messaging system one-SourcingNI to seek clarification. Guidance is also available for both suppliers and purchasers through CPD’s own website www.cpdni.gov.uk. The Committee has, however, expressed its concerns about the adequacy and scope ofe-SourcingNI earlier in this report.

182. During the Stakeholder Conference, reference was made to the fact that there is much guidance available and that suppliers simply need help to access it. A key example would be the joint Equality Commission for Northern Ireland (ECNI) and CPD document titledEquality of Opportunity and Sustainable Development in Public Sector Procurement. This is designed to help both purchasers and suppliers understand what social value might mean in the local context, yet the guidance does not appear to be widely recognised. The Committee acknowledges the note of caution aired during the Conference, that there was no need for new guidance, just greater clarity and accessibility in terms of the guidance that already exists.

183. The Committee notes that, across the EU, there are various approaches to ensuring advice and information is accessible by SMEs. These include establishing information centres which provide general information on public procurement law, information on award procedures and offer consultation and training (Germany, RoI and Lithuania). In Italy a project on local help desks and structures is being developed in a bid to increase participation of SMEs and improve their familiarity with e-procurement tools.[90]

184. Whilst acknowledging that there is a range of procurement guidance available, the evidence received leads the Committee to believe that this is not easily accessible. Therefore,the Committee recommends that CPD reviews existing procurement guidance, in conjunction with local stakeholders, with a view to ensuring that it is fit for purpose and brought together as a central online resource for public sector procurement, which is linked to theeSourcingNI web portal.

Experience of Social Economy Sector in Public Procurement

185. Throughout the Inquiry, the Committee was interested to hear about the experience of the social economy sector when tendering for public sector contracts. It heard that SEEs feel particularly disadvantaged when tendering for public sector contracts.

186. In written evidence, NICVA indicated that the sector perceives that there is a failure amongst purchasing bodies to properly assess voluntary and community sector capabilities, accompanied by an insufficient recognition of its strengths and skills. NICVA was also one amongst several voices to highlight that public sector procurement focuses heavily on financial information and processes rather than outcomes. This can lead to a “one-size-fits-all" approach to auditing and monitoring which can be disproportionate and burdensome to the social economy sector.

187. In its evidence, Bryson Charitable Group, while highlighting that non-monetary costs are included in the Treasury Green Book guidance, nevertheless called for greater flexibility for newer organisations which may find it difficult to satisfy the requirements. WIN went so far as to recommend that the rule for new community enterprises to provide three years of accounts before being allowed to tender should be waived.

188.Whilst acknowledging that, whenever public funds are at stake, proper audit, monitoring and accounting arrangements are an unavoidable necessity, the Committee recommends that DFP, in conjunction with DETI, takes steps to ensure that proportionate monitoring arrangements are applied, which are sympathetic to the ethos and needs of the social economy sector.

Pre-Qualification Process and Criteria

189. A number of issues in relation to pre-qualification were brought to the attention of the Committee throughout the Inquiry. The most common concern was around the lack of standardisation of Pre-Qualification Questionnaire (PQQ) documentation in CPD and across the CoPEs.

190. During oral evidence sessions members heard from the CBI that upfront information can often be asked for in different formats by different bodies; InterTradeIreland highlighted the limited standardisation of PQQs across buyers; while Quigg Golden Ltd called for the simplification of the PQQ and Carson McDowell solicitors recommended greater standardisation.

191. Several organisations, including FSB, suggested that a universal PQQ would be the most useful way forward. ICAGNI recommended that this should be available through a universal web-portal. Streamlining the process also received considerable support at the Stakeholder Conference and was also a recommendation flowing from the Review of CoPEs which stated that “there is a need for a uniform tendering and contracting documentation across CoPEs where permissible". This echoes a recommendation in the Glover Report which proposed that, where qualification criteria are not specific to a sector, they should be standardised and incorporated into all pre-qualification questionnaires.[91]

192. A concern common to SMEs and SEEs is the cost involved in tendering, both in actual monetary terms and in the resources necessary to prepare a bid. On behalf of the voluntary and community sector, NICVA pointed to the high transaction costs of the bidding process, while CIGNI expressed the same views on behalf of the construction industry. They indicated that the tendering process is too detailed, too protracted and too expensive. For the Anderson Spratt Group, the relationship between bid cost and potential commercial return can often be unattractive. QPANI also called for a reduction in bidding costs.

193. Reflecting on the resource issue, ICAGNI suggested that PQQ be limited to contracts worth more than £50,000. This was echoed by the Early Years organisation which suggested that the resources required for pre-qualifying should reflect the size of the contract.

194. Pre-qualification criteria were also identified as an area of concern by many of the respondents to the consultation, though Dr Georgopoulos, University of Nottingham, pointed out that, while the issue of proportionality is important, the requirements are necessary to ensure a certain level of professionalism and reliability of the providers.

195. In its evidence, NIFHA felt that the pre-qualification criteria are often set in ways that effectively preclude smaller organisations, while Drilling and Pumping Supplies deemed the criteria unrealistic. In particular, it highlighted a situation where it had taken on an additional insurance burden to meet the pre-qualifying criteria of a specific contract, only to find that the tendering process stalled and the extra cost was incurred for no benefit. This point is also emphasised by InterTradeIreland in their report which found that stipulated levels of Professional Indemnity and company turnover are often too high for SMEs and not proportionate to the contract value.[92]

196. In an oral briefing to the Committee, Martin and Hamilton Ltd indicated that the information required at pre-qualification stage was often implicit in the certification demanded for a contract.

197. Both RICS and CIGNI highlighted that insurance requirements and company turnover were often set at levels beyond the capacity of most SMEs, particularly in the larger framework agreements. While, on the one hand, this may encourage collaborative bidding and joint ventures, on the other it is considered by many to be an unnecessary burden. RICS recommended that pre-qualification criteria should be proportionate to the nature and size of the workflow. It was suggested that over bureaucratic procurement practices can get in the way of project delivery which in turn has implications for the overall effectiveness and efficiency of the public procurement process. These views were also reflected during the Stakeholder Conference, when nearly 25% of those taking part in the digi-voting indicated that onerous pre-qualification criteria was of concern to both SMEs and SEEs.

198. The Committee recognises that the requirement for, and duplication of, information in the tendering process can be onerous for smaller enterprises, and may be exacerbated by a lack of knowledge or experience of the procurement process. Also,the Committee is strongly of the view that pre-qualification processes and criteria should not be so burdensome as to deny both SMEs and SEEs the opportunity to develop their business and thereby benefit the local economy. As such, the Committee recommends both that the principle of proportionality (i.e. the resources required to bid should be proportional to the size of contract) should be embedded into all public procurement tendering exercises and that the next review of CoPEs, due to take place in 2013, places a particular focus on progress in improving pre-qualification processes.

199. As highlighted earlier in the report, the Committee believes that access to procurement opportunities should be one way in which smaller enterprises are able to take the next step in growing their business. The Committee notes some positive steps being taken in the construction sector and welcomes the intention for a CIFNI working group to consider how SMEs can be given further opportunities for growth in public sector construction contracts.[93] The Committee also anticipates that work to streamline and standardise the pre-qualification questionnaire should help to reduce the costs involved in the tendering process.

200. In particular, the Committee welcomes the development of a standardised pre-qualification questionnaire for works contracts, which is currently being taken forward by CIFNI. The Committee recommends that, once an agreed approach has been established, the Procurement Board considers its application to all procurement sectors and across all CoPEs.

Demonstrating Relevant Experience

201. The Committee heard from a number of organisations about issues around demonstrating relevant experience when tendering for contracts. The Law Society contended that there is an overemphasis placed on experience gained in large scale government projects in other jurisdictions while experience gathered on smaller scale projects is often underestimated. CIGNI acknowledged that, while experience criteria may be set to encourage overseas bids in line with European guidelines, local companies may in turn be disadvantaged. CIGNI cited the Waterfront Hall, which was built by a local company with no previous similar experience in NI, suggesting that it would be harder to repeat that situation today.

202. Participants at the Stakeholder Conference suggested that experience gained in both the private sector and the social economy sector should be given equal weighting to experience gained in the public sector. This reiterated a point already made by ICAGNI that all relevant and demonstrably applicable experience should be considered when assessing contracts.

203. The Committee noted the UK example of the Small Business Service (SBS) receiving six proposals for a particular contract, one of which was from a consultancy of six employees. Although only established for less than a year, the previous experience of leading individuals was taken into account allowing the business to be awarded the contract, which was successfully fulfilled.[94] This reflects the view of the Glover Report that businesses should have the opportunity to detail all previous relevant experience when bidding for contracts.[95]

204.In noting that CIFNI is actively considering the weighting of relevant experience in the assessment process for works contracts, the Committee recommends that the Procurement Board considers the potential for applying any lessons arising from this work across the other CoPEs and to supplies and service contracts.

Feedback

205. The nature, consistency and level of feedback was a recurring theme in the Inquiry evidence base. The obligation to give feedback to tenderers is ensured by the Public Procurement Directives. CIPS argued that feedback should be open and transparent and suggested that it needs to work both ways, with suppliers having the opportunity to feedback to purchasing bodies as well as purchasers giving feedback to unsuccessful bidders. This was also a point raised by ICAGNI, which suggested that the evaluation and assessment process of responses to tender should be open to external scrutiny.

206. During oral evidence, the FSB indicated that businesses were not getting feedback on the reasons why contract bids are being turned down. However, InterTradeIreland informed the Committee that buyers themselves report that a large number of SMEs do not avail themselves of the debriefing process. The Committee believes that these points may not be mutually exclusive. If SMEs and SEEs consider the level of feedback to be inadequate and unhelpful then they are less likely to avail of this provision. These views were supported by the last Review of CoPEs, which found an inconsistent application of CPD policy guidelines across CoPEs, particularly with regard to whether or when to conduct face-to-face feedback to suppliers.[96]

207. The Committee notes that OGC has introduced a Supplier Feedback Service which provides “a clear, structured and direct route for suppliers and public bodies to raise concerns about significant or systemic instances of poor practice in public sector procurement".[97] It is also a vehicle through which reasoned feedback can be provided to enquirers on their concerns.

208.The Committee recommends that feedback mechanisms across all the CoPEs are standardised and aligned with good practice, with greater monitoring to ensure effectiveness. As outlined later in the report, the Committee believes that the creation of a “Supply Chain Ombudsman" may be one mechanism through which feedback arrangements could be improved.

Special Contract Arrangements

209. The Committee heard from a number of organisations, in particular SEN, about an “offer back" system, which is part of the Special Contracts Arrangements (SCA) introduced in 1994. SCA can be applied to UK contracts that are below the EU threshold and involve the contracting authority specifically reserving a contract for supported businesses where more than 50% of employees are registered as severely disabled. Such contracts cannot be reserved for one specific organisation but must be open to supported firms from anywhere in the EU.

210. SCA incorporates the “offer back" system under which a registered supplier whose tender is unacceptable on price alone should be given the opportunity to submit a revised tender for part, or all, of a contract. No information is given about the costs of the competing company. If on “offer back" the registered supplier is able to match the best offer, its revised tender should be accepted.[98]

211. The Committee was advised that there is only one company in NI, Ulster Supported Employment Limited (USEL), which would qualify under SCA. However, written correspondence from SEN indicates that, where USEL has tendered under SCA, there has been a lack of understanding of the system amongst purchasing bodies.

212.The Committee recommends that CPD provides specific guidance and support to government purchasers in relation to the social economy, including on Special Contracts Arrangements. Also, as more social enterprises enter the procurement market, tailored advice should be available to those organisations that would be eligible for supported status (i.e. where more than 50% of employees are registered as severely disabled).

Maximising Social Benefit

Background

213. In the Inquiry terms of reference, the Committee undertook to consider the nature, extent and application of social clauses within public sector procurement contracts. Of wider consideration is the aim of identifying improvements to procurement polices and practices with a view to maximising both the economic and the social benefits for the local community.

214. At the outset, the Committee would acknowledge the variable and sometimes overlapping or interchangeable terminology applied as regards the practice of using public procurement to achieve social outcomes. For example, terms such as “green procurement", “social procurement", “socially responsible procurement" and “sustainable procurement" are used in relation to the non-monetary, qualitative or longer-term social, economic or environmental considerations which can be applied in procurement exercises. The Committee is also aware of the growing body of local and international literature and guidance on procuring social benefits, including publications by OGC, the Cabinet Office, ECNI and, more recently, by SIB.

215. The Committee received a written submission from Professor Christopher McCrudden of Oxford University, whose work focuses on reconciling the “social" and “economic" approaches to public procurement. In highlighting some principles common to both approaches, Professor McCrudden concludes that the question is not whether to introduce social policy outcomes but how best to introduce social policies and which such policies should be integrated into the procurement process.[99]

216. As outlined earlier in the report, in terms of existing public procurement policy in NI, social value falls under the procurement principle of “Integration", which states that “in line with the NI Executive’s policy on joined-up government, procurement policy should pay due regard to the Executive’s other economic and social policies, rather than cut across them".[100]

217. The Committee is mindful that, at the strategic level, the Executive’s PfG recognises “the important contribution that … local economic activity promotes in both social objectives and in sustainable community development"[101] and also commits to ensuring that public sector reforms and restructuring will be compliant with recognised best practice in social procurement guidelines.[102] In its initial response to the Inquiry’s written submissions, CPD recognised the key role which it and the other CoPEs can play in the drive towards the integration of social considerations in the public procurement process in NI and also to embed the wider sustainable development considerations into its spending and investment.[103]

218. As alluded to earlier, the PfG also highlights the significant role for public procurement policy in advancing the overall aims and objectives of government. Procurement has a particular role in achieving policy objectives under the cross-cutting theme of sustainable development.[104] It acknowledges the positive role that procurement can play in the process of tackling patterns of socio-economic disadvantage.[105] This was highlighted in evidence presented by ECNI. Also, this context was reflected in the submission from the Committee for the Administration of Justice (CAJ), which stated that the rationale for social clauses has already been addressed and that the focus should now move towards implementation of guidance that already exists.

219. The Committee noted that the Treasury Green Book, which governs public sector spending and provides guidance on the assessment of business cases and economic appraisals, states that:

“Wider social and environmental costs and benefits for which there is no market price also need to be brought into any assessment. They will often be more difficult to assess but are often important and should not be ignored simply because they cannot easily be costed."[106]

It is therefore already established in principle that non-monetary benefits, including social value should be taken into account when assessing bids. However, SEN was just one organisation to highlight that monitoring and auditing of public procurement tends to be primarily fiscal, taking account of outputs rather than the broader view of outcomes.

Definition of Social Value

220. Despite the high level aims in the PfG/PSAs, the Committee has repeatedly heard concerns about a lack of definition of social value. Indeed this was the one issue of most concern identified by participants at the Stakeholder Conference during discussion of social value. This was reflected in the response to the question posed by Jenni Inglis of the Social Return on Investment (SROI) Network. In answer to her question about what actions had the greatest potential to unlock social value from public contracting, most participants indicated that developing an understanding of social value would be most beneficial. Dr Gordon Murray, another procurement commentator at the Stakeholder Conference, also highlighted that policy direction is required on areas of delivery of social value.

221. In its oral evidence InterTradeIreland suggested to the Committee that a little more understanding of what social value actually means is needed on behalf of both buyers and suppliers. NOW, a social economy enterprise operating in North and West Belfast, identified a nervousness and lack of clarity around the subject of social outcomes especially in relation to procurement or government contracting.

222. There was evidence to suggest that, for those involved in the construction industry, social value centres on compliance with health, safety, equality and environmental considerations, as suggested by the written submission from QPANI. The Irish Congress of Trade Unions NI recommended that, in awarding any public procurement contract, there should be an obligation to engage and train apprentices. Considering social value in this regard lends weight to the view, as held by CIGNI, that social clauses are more applicable to construction contractors rather than professional bodies.

223. In its written evidence NICVA advocated that procurement should be used as a vehicle to deliver the sort of society that we hope to create in NI. Other witnesses cautioned against using social clauses in procurement contracts as a means for SMEs to address the perceived failings in government policy initiatives.

224. In its written submission to the Committee, UNISON advocated that equality of opportunity and sustainable development policies in the public sector should be mainstreamed through procurement contracts, while ECNI signposted its guidance on equal opportunities and sustainable development, which was developed in conjunction with CPD. The Committee notes that some stakeholders view social value simply in terms of the inclusion of specific clauses within procurement contracts whilst others cite wider considerations as indicated in the PfG.

Social Clauses

225. An emerging theme from the evidence was that, while the PfG recognises the role that public procurement can have in reducing inequalities and promoting social inclusion, this is not being reflected to any significant extent in procurement contracts. The Committee heard a range of views from witnesses on the use of social clauses within public procurement contracts. Employers for Childcare stated that, in their experience, there is no recognition of social clauses within any public contract. Similarly, NIHFA were unaware of any public procurement exercises in NI that have included social/environmental clauses, while NICVA felt that they were underused. SEN spoke of the limited use of reservation of contracts for organisations providing supported employment opportunities to people with a disability, where appropriate.

226. While many of those contributing to the Inquiry were in favour of social clauses, there was an element of realism about their use. SEN, for example, considered that it would be possible to recognise wider social issues within a procurement process as long as they are part of the primary purpose of the contract, a view echoed by Dr Georgopoulos of the University of Nottingham. However, this would require an understanding of social value that could then be embedded in the practice and processes of public procurement and the application of specific weighted criteria for social value to be incorporated into specifications for tenders. At the other end of the spectrum, Employers for Childcare advocate that all public sector contracts should include a social clause which clearly states that recognition and reward will be given to those suppliers who bring added social value.

227. In response to specific queries from the Committee, CPD indicated that the Public Contracts Regulations 2006[107] provide the scope to take account of social issues where they are relevant to the subject or performance of the contract and fit with the detailed rules for specifications, selection and award. CPD emphasised, however, that procurers must still meet their value-for-money and EU obligations in awarding their contracts.

228. In reviewing the outputs from the Stakeholder Conference, Professor McCrudden of Oxford University also sounded a note of caution as to the limits that European law places on the use of procurement to advance social policy and stated his view that “it is … not legally permissible to construct the social policy to be advanced so as to seek to benefit, or to have the effect of benefiting, a local area or a local population primarily".[108] The example was cited of the ECJ permitting social clauses to encourage the use of long-term unemployed, but not the use of only local long-term unemployed as that is likely to be protectionist.[109]

229. During oral evidence, CPD officials indicated that, since April 2009, several contracts had been awarded with specific reference to the training of apprentices and providing opportunities for the long-term unemployed. The officials pointed out that, at the time of appearing before the Committee on 25 November 2009, twelve apprenticeships had been secured and jobs provided for four previously unemployed people as a result of conditions within public procurement contracts. The Committee is aware that, while such opportunities are open to any citizen within the EU, in practice the most likely beneficiaries will be local people.

230. The Committee also heard about examples of good practice in the use of social clauses elsewhere. The Committee for Employment and Learning indicated that the Scottish Government has used social clauses effectively in public procurement. Carson McDowell solicitors were amongst several witnesses to highlight the London 2012 Olympic Delivery Authority (ODA) as an example of good practice in several areas including social value. The ODA is the public body responsible for building the new venues and infrastructure for the Olympic Games and their subsequent use. The ODA’s work is underpinned by six priority themes: design and accessibility; employment and skills; equality and inclusion; health safety and security; sustainability; and legacy. [110] These priority themes represent the promotion of social value through the capital projects associated with the Olympic Games.

231. In its evidence, Bryson Charitable Group argued that appropriate social clauses provide added value to public procurement. UCIT stated that such clauses should not be so onerous that they disadvantage others. CBI acknowledged that social clauses may add to the complexity of a contract but this could be mitigated if the clauses are relevant to the procurement contract and a proportionate approach is required.

232. In its oral evidence, Quigg Golden Ltd considered that the biggest problem with social clauses is affordability, while SEN identified the lack of available metrics around social value as a key barrier to access for the social economy sector. Also, there was a recognition amongst stakeholders that the lack of an accepted definition of social value or consistent application of social clauses within public sector contracts means that it is subsequently very difficult to monitor their usage and effectiveness.

233. That said, the Committee is aware of the Pilot Project on Utilising the Unemployed in Public Contracts,[111] which was approved by the Procurement Board and taken forward in conjunction with the University of Ulster. The project commenced in June 2003 and ran for two years, which was also during a period of unprecedented high employment levels in NI. The subsequent project evaluation found that the pilot demonstrated that public procurement policy in relation to social goals, specifically unemployment, can be achieved economically, efficiently and effectively. Importantly, it also noted that the process was “compliant with EU rules". Other significant findings from the pilot project include 90% of respondents on the contractor side indicating that the pilot did not lead to an increase in direct costs, while on the client side over 64% considered that the pilot did not result in any significant increase in workload. There were however concerns about displacement.

234. In its submission, the Committee for Employment and Learning cited a recommendation, arising from its Inquiry into the Way Forward for Apprenticeships, that a quota of apprentices be incorporated into the workforce assigned to public procurement contracts.[112] From the InterTradeIreland report, it was noted that the construction industry has attempted to create one apprenticeship position, either directly or through the supply chain, on each project for every £2m of capital spend, and to create one job for a previously long-term unemployed individual for every £5m of capital expenditure.[113] Also on this issue, CPD advised that a CIFNI Sustainability Task Group has agreed proposals that could promote the economic, social and environmental elements of sustainable development through sustainable procurement in construction. The Committee understands that the Sustainability Task Group identified seven key social objectives which could be pursued through construction projects including:

The Committee welcomes this initiative and is also encouraged to learn that, between April to October 2009, five construction contracts awarded through CPD have included requirements for both apprenticeships and the long-term unemployed.

235. In its evidence, CIPS described social clauses as a ‘double-edged sword’, while RICS felt that it may be difficult to comply with social clauses in the current economic climate. If contractors have strict targets for bringing long-term unemployed into work or are required to take on a number of apprentices, this may involve laying off experienced employees. The issue of loss of skills base is also a factor which RICS felt should be considered. It was the view of CIGNI that social clauses have little applicability to professional appointments. In its evidence, the construction company Martin and Hamilton Ltd told members that it had missed a contract as the social contribution element of its proposal had not emphasised sufficiently that local labour would be employed in the scheme.

236. The Committee had an opportunity to consider an Assembly Research paper on Integrating Social Issues, which outlined the stages at which social benefits can be considered (see Appendix 6). On this issue, CBI recommended that social clauses should be built in by commissioning bodies at the very beginning of the procurement process rather than simply tagged on at the end, and this point was reiterated by Carson McDowell solicitors.

237. As mentioned earlier, Professor McCrudden concluded that the question is not whether to link social policy outcomes to public procurement but instead it is about how best and which such policies should be integrated into the procurement process. In his submission to the Inquiry, Professor McCrudden identified the theoretical pros and cons of using social considerations in public procurement contracts (which he terms “procurement linkages"). Whilst arguing that, on balance, a positive theoretical case can be made for procurement linkages, Professor McCrudden highlights some potential disadvantages, including the following points:

238. The Committee considers that, in pursuing social benefits through public procurement, it will be important to be mindful of such pitfalls. The Committee also notes that Professor McCrudden has pointed to the dearth of empirical information available on which to judge “procurement linkages". In this regard, however, Professor McCrudden highlighted the local case of the Pilot Project on Utilising the Unemployed in Public Contracts, referred to earlier, the assessment of which “provides strong evidence that the advantages may considerably outweigh the predicted disadvantages, if the policy is implemented sensitively".[115]

239. The Committee notes that Professor McCrudden has also set out criteria for applying such “procurement linkages", which can be paraphrased as follows:

240. Finally, the Committee notes that amongst the issues which Professor McCrudden has identified as requiring empirical research in the future are the questions of whether procurement linkages make it more difficult for SMEs to tender successfully, and whether an approach based on award criteria would be more effective in practical terms than one based on contract conditions. The Committee believes that these are highly pertinent issues in the context of this Inquiry.

241. Immediately prior to finalising this Inquiry report, the Committee noted the publication of the SIB’s guidance and “toolkit" on delivering social benefits through public procurement.[117] This is accompanied by a dedicated website, which includes case studies, legal guidance and other resources. The toolkit cites emerging evidence to support the view that social benefits do not mean increased costs and states that:

“Although procuring social benefits can have resource implications for the procurer, social benefit clauses do not have to add any cost to the contract. You can ensure that there are no, or minimal cost impacts for the contract by requiring only social benefits that are appropriate to the size of the contract and the expertise of the contractors."[118]

242. The Committee believes that this latter point regarding the need for a proportionate approach should help to ensure that social clauses do not have an excessive impact on smaller enterprises. On a different tack, the Committee has queried what scope exists for using social clauses in support of smaller enterprises and believes that this remains an area for investigation.

243. The Committee also notes that the SIB guidance advises that the best way to achieve and deliver social benefit is to ensure that it is “woven consistently through each stage of procurement" including: at the business case stage before advertising the contract; in the first notification to potential bidders; within the tender documents; as part of the evaluation; within the contract; and as part of the contract monitoring and management.

244. The Committee is mindful of the complexities of achieving social policy outcomes through public procurement and of the different approaches available, including the application of specific social clauses and the measurement and use of social value in assessments of proposed capital projects and in contract award criteria. That said, NI appears to lag behind other jurisdictions both in applying the principle of maximising social benefit from public procurement and in the use of social clauses. From the evidence provided,the Committee senses a reticence amongst local commissioners and purchasers to pursue social benefit through procurement, which may be linked to a need for greater clarity both on the Executive’s policy intention in this area and on the definition and measurement of “social value".

245. As such,the Committee recommends that the Executive translates its PfG/PSA commitments in this area into a clear policy directive on procuring social benefit, which sets out the priorities that should be pursued by the Procurement Board, the CoPEs and individual commissioners and purchasers. The Committee further recommends that this policy directive, which should be underpinned by the necessary legal guidance, is reflected, as appropriate, in departmental business objectives, in the forthcoming NI Public Procurement Handbook and in the personal performance objectives of commissioners and procurement professionals.

246.The Committee notes the growing body of guidance on procuring social benefit and, in particular, welcomes the practical toolkit which has been published recently on behalf of SIB. However, the Committee is concerned that this resource will be underutilised without the necessary policy direction from the Executive.

247.In the meantime, and given the positive evaluation of the Procurement Board’s Pilot Project on Utilising the Unemployed in Public Contracts, the Committee recommends the use of clauses setting quotas for employing apprentices and the long-term unemployed in all suitable public contracts. Also, in recognising the need for further empirical evidence on best practice use of social clauses, the Committee recommends that CPD makes a rigorous assessment of the social clauses applied in recent construction contracts, with a view to identifying lessons and opportunities for further initiatives in this regard.

Measuring Social Value

248. As alluded to earlier, the Treasury Green Book acknowledges that the valuation of non-market impacts is a challenging but important element of appraisal; it advises that “costs and benefits that have not been valued should also be appraised; they should not be ignored simply because they cannot easily be valued".[119] The Green Book also explains that the most common technique used to compare both unvalued costs and benefits is weighting and scoring, which involves assigning weights to criteria, and then scoring options in terms of how well they perform against those weighted criteria.[120] The Committee also notes with interest that the Green Book advises that decisions on the weightings to be given to key non-monetary factors “cannot be decided by ‘experts’" and advocates the involvement of stakeholders and decision makers.[121]

249. In addition to the aforementioned evidence on the need for both the economic appraisal and the public procurement processes in NI to take greater account of the value of qualitative or longer-term social and economic considerations, the Committee also received evidence from the Ministerial Advisory Group for architecture and the built environment (MAG) on the importance of including design quality in the assessment of building projects. The Committee notes that this is also recognised in the Treasury Green Book. Indeed, the Committee is aware that the difficulties around assessing value for money are not unique to NI. A recent report on Sustainable Government Procurement in Australia, for example, has noted that, in that context, “current value for money calculations also fail to consider the long term benefits and foregone costs (such as future environmental repair) associated with choosing more sustainable products and services that may be initially more expensive than less sustainable alternatives. [122] In another example from Australasia, the Committee notes that guidance from the Tasmanian Government on public procurement allows for ‘wider benefits to the state’ to be part of the evaluation criteria for contracts.[123]

250. The Committee is aware that Social Return on Investment (SROI) is one methodology for measuring the impact of non-monetary benefits and, in this context, members particularly welcomed the input from the SROI Network Director, Jenni Inglis, at the Stakeholder Conference.

251. SROI is a framework for measuring and accounting for this much broader concept of value; it seeks to reduce inequality and environmental degradation and improve wellbeing by incorporating social, environmental and economic costs and benefits. [124] Value is quantified in monetary terms as a ratio between the finance invested and the social value created. An SROI analysis can take many forms and it can encompass the social value generated by an entire organisation, or focus on just one specific aspect of the organisation’s work. In essence, SROI seeks to put financial value on the important impacts identified by stakeholders that do not have market values. The Committee is aware that the SROI Network, in conjunction with the UK Cabinet Office, recently published guidance for commissioners and suppliers on measuring social value.[125]

252. Whilst the evidence to the Inquiry suggests that work on SROI is currently most advanced in England and Scotland, the Committee notes some local initiatives. A written submission from the Committee for the Office of the First Minister and deputy First Minister (COFMDFM) highlighted the work, which was at that stage still underway, by SIB, in conjunction with Deloitte MCS Ltd, on the development of social value measurement within contracts. As referred to earlier in the report, in 2008, CPD collaborated with ECNI to develop a guidance document for purchasers and suppliers on Equality of Opportunity and Sustainable Development.[126] Also, the evidence from Bryson Charitable Group referred to a Knowledge Transfer Partnership Initiative (KTPI) with the University of Ulster, which involves the development of suitable metrics for the measurement of social value. In addition, the Committee received a written submission from the social enterprise NOW, which has developed GAUGE, a social enterprise business designed to help organisations understand, measure and communicate their value.

253.The Committee is strongly of the view that, in future, value-for-money assessments must strike a balance between short-term monetary considerations and longer-term economic, social and environmental costs and benefits. This is especially important in the context of the constrained public expenditure environment, when departments must not lose sight of the Executive’s strategic priorities. As such, the Committee calls on DFP to put in place a suitable model for systematically measuring, evaluating and incorporating wider social value considerations within economic appraisals and business cases, and which will inform public procurement processes. Moreover, the Committee recommends that socially responsible procurement should be included as a scored criterion in the next CoPE accreditation exercise.

Building Capacity for Purchasers and Suppliers

Background

254. A theme cutting through all the issues already discussed is the need to build the capacity of both purchasers and suppliers in the procurement process. There is also a recognition that CPD and other public procurement personnel are under a huge resource pressure. The Committee noted that CBI took the view that procurement expertise is spread too thinly over a wide range of procurement bodies.

255. The Committee also heard from organisations which considered that engagement with senior CPD officials was generally positive. In oral evidence, Carson McDowell solicitors stated that they believe procurement practices in NI to be fairly good and would rank these quite high in comparative terms. However, the Committee also heard of inconsistencies across CoPEs when dealing with those involved in the practical daily running of procurement services.

256. From the evidence it is clear to the Committee that the social economy sector is at the early stages of accessing the public sector supply chain and work is still needed to increase confidence of both purchasers and suppliers in this area. Several organisations highlighted that this sector is undergoing a sea change regarding funding, having traditionally been reliant on government grants. More of these organisations are now turning to social economy models as a means to more sustainable methods of funding. The Committee commends the voluntary and community sector in its attempts to move away from a dependency on government grant aid towards a social enterprise model and would encourage the sector as it moves forward in this way. However, most social enterprises have no experience in tendering for public procurement contracts and find that those they are dealing with have no experience of the sector itself.

257. Although many SMEs are experienced in tendering for public procurement competitions, the evidence suggests that some need to raise awareness of the ways in which they can maximise their chance of winning public sector contracts, while others lack knowledge or understanding of how to approach the market.

258. In highlighting aspects of procurement policy and practice for improvement,the Committee is conscious that capacity building for both purchasers and suppliers will also be vital to maximising the outcomes from public procurement. The Committee is mindful that, whilst DFP, through the Procurement Board, must take the lead in developing the capacity of purchasers, DETI has lead responsibility in terms of the small business and social economy sectors. As this latter area falls outside the Committee’s direct remit, it could only be incidental to the Inquiry considerations.

Training & Capacity Building for Contract Managers

259. A key suggestion put forward by Dr Paul Davis at the Stakeholder Conference was the development of a licentiate approach for procurement professionals. Such licensing could be graded according to the level of spend involved. There was support for this approach from purchasing bodies at the Conference. CIPS, in evidence to the Committee, also suggested that professionally trained procurement people should be at the forefront of delivering procurement initiatives. The Committee is also aware that opportunities for training and guidance for contracting authorities, including increasing professionalism in procurement, is supported by the European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts.[127]

260. CPD currently has a Procurement Competence Career Path Framework,[128] which has been in place since 2005. This was introduced following the first review of CoPEs, which highlighted the need to introduce an effective public sector career path structure that would facilitate an increase in the proportion of staff with procurement skills appropriate to their level of responsibility.

261. In a briefing to the Committee, CPD acknowledged there is a need to consider the skills within individual departments through which individual contracts are often managed. In contrast, all branches within CPD are required to have a member of staff with a professional procurement qualification. CPD also informed members that discussions are taking place about the development of a Masters degree in commercial skills in construction, in conjunction with the University of Ulster.

262. The Committee notes that Housing Associations in NI find themselves on both sides of the procurement equation. On the one hand, they submit tenders for public contracts while, on the other, they invite tenders for multi-million pound contracts for the construction of social housing. In its evidence, NIFHA acknowledged that “more training is required to enable all the relevant stakeholders, including housing associations, to understand the relevant principles, rules, procedures and terminology".

263. Increasing purchasers’ understanding of the voluntary and community sector was a key priority especially for those speaking on behalf of the social economy sector. NICVA pointed to the OGC publication, Think Smart/Think Voluntary Sector[129] which has an emphasis on training public sector commissioners and procurement professionals in the role of the voluntary and community sector. The importance of providing such training was also echoed by Early Years.

264. Lestas Consulting advocated a similar educational process for contract managers on the opportunities provided by SMEs in delivery of public contracts. More specifically, QPANI suggested regular training in partnership with industry trade organisations, to ensure public procurement officials are aware of new construction product standards, quality, safety and environmental standards. In its submission, CBI highlighted the results of a survey which it carried out of 157 NI-based suppliers in 2008, which showed that 49% of respondents described the commercial skills of public procurement professionals as poor or very poor, while only 12% described them as good or very good.

265. While acknowledging the requirement within CPD to have professionally trained personnel within each branch, the Committee is unclear as to how this might be replicated across all CoPEs. As such, the Committee urges the Procurement Board to consider the possibilities for introducing licentiate arrangements for procurement professionals across the public sector, with a view to ensuring greater uniformity in the professional competencies of purchasing staff. In addition, the Committee considers that it is essential that the continual professional development of procurement personnel should include awareness of the benefits of doing business with both the small business and the social economy sectors.

Training & Capacity Building for Suppliers

266. As alluded to earlier, the Inquiry terms of reference did not have a focus on the capacity of suppliers, including the reasons for success or failure of particular SMEs or SEEs in accessing the public sector supply chain. While the Committee believes that this should be the subject of separate research, it did nonetheless note some related points from the Inquiry evidence, including discussions during the Stakeholder Conference.

267. In its written evidence, NICVA suggested that there has been a lack of investment in preparing voluntary and community organisations to bid for contracts. In turn this has led to a lack of knowledge and experience of government procedures alongside difficulties in breaking into the market. SEN suggested that, while the social economy sector may lack an understanding of procurement, purchasers also lack an understanding of how SEEs work and what they can bring to the table.

268. In its submission to the Inquiry, the Committee for Enterprise, Trade and Investment suggested that the social economy sector might benefit from the development of case studies demonstrating effective delivery of public service contracts by SEEs. Another suggestion was that CPD should provide training and support for voluntary organisations to assist them in understanding and bidding for contracts.

269. The Committee notes that the potential development of a Procurement Brokerage Service, discussed earlier in this report, would also have the potential to assist SEEs in accessing public procurement contracts. Another organisation, BiTC, suggested that a toolkit be developed for social enterprises.

270. The evidence also highlighted the case for providing further training and information to local SMEs. The FSB suggested that SMEs are not always aware of ways in which they can maximise their chances of winning public sector contracts. In terms of international models of good practice, the Committee notes that in Austria, a checklist has been developed for suppliers which aims to prevent the most common mistakes made by suppliers when submitting a bid.[130] This could be applied to both SMEs and SEEs alike.

271. From a cross-border perspective, InterTradeIreland has found that there is a lack of knowledge or understanding of how to approach both the local and the cross-border markets. Its Go-2-Tender programme seeks to assist SMEs in this regard. InterTradeIreland also advocates support for SMEs in terms of “intelligent" tender writing.

272. At the Stakeholder Conference, procurement commentator Frank McGlone suggested that suppliers can often feel isolated and without a voice. In terms of international approaches, the role of Italian Chambers of Commerce, which provide support to local SMEs, was cited as a possible model of good practice.[131]

273. The Committee notes with interest the recent statement to the Assembly by the Minister of Enterprise, Trade and Investment on DETI’s response to theIndependent Review of Economic Policy.[132] In particular, the Committee considers that the planned development of a small business unit within Invest NI to provide a more dedicated resource to supporting small businesses throughout NI, including opening up supply chain opportunities, could in conjunction with CPD also provide support for companies involved in public procurement. Furthermore, the Committee sees the potential for the online business advice servicenibusinessinfo.co.uk to link closely with online procurement facilities.

274. Given the importance of addressing weaknesses in the supply side through training and capacity building for SMEs and SEEs, the Committee believes that further research is needed to assess the needs of both sectors and to identify potential solutions, including resource requirements. In this regard, the Committee notes recent DETI initiatives, including the draftSocial Economy Enterprise Strategy 2010-11 and the plan to create a small business unit within Invest NI to, amongst other things, develop the supply chain capabilities throughout the NI business base.The Committee calls on the Minster of Finance and Personnel to liaise with the Minister of Enterprise, Trade and Investment to ensure that sufficient funding is in place for measures to build the capacity of smaller enterprises to access the public sector supply chain. The Committee sees a vital role for CPD in contributing to procurement training and development for both SMEs and SEEs and will wish to be apprised of plans for taking this forward.

Cross-Sectoral Training

275. A theme which emerged both from the written evidence base and the Stakeholder Conference was the opportunity for cross-sectoral training. QPANI advocated opportunities for public sector officials to experience at first hand working in the private sector environment. In their contributions, both Dr Gordon Murray and the CBI also endorsed more exchange and secondments between the private sector and the public sector as a means of improving procurement capabilities.

276. The Procurement Competence Career Path Framework, published in 2005 advocated the establishment of a Procurement Exchange Programme within CPD and the CoPEs. However the most recent Review of CoPEs noted that there is a minimal degree of cross-functional staff development, an area which all CoPEs would need to improve upon to foster deeper and widespread knowledge of public procurement among the CoPEs.

277.The Committee endorses the concept of a “Procurement Exchange Programme" and urges the Procurement Board to bring forward options on how this might be developed so as to facilitate cross-sectoral training and knowledge transfer across the public sector and the private sector.

Local Government Procurement

278. While matters pertaining to local government are not within the remit of this Committee, it is appropriate to make comment, not least because many of those making submissions to the Inquiry did not make a distinction between local and central government procurement. Indeed, several stakeholders expressed their concern over the uncertainty of the impact of the RPA on local government procurement. This was particularly evident during the Stakeholder Conference. Given the division of responsibilities, however, the Committee will wish to communicate its findings in this area to DoE and the Northern Ireland Local Government Association (NILGA), via the Assembly Committee for the Environment.

279. While CPD aims to “develop and promote best practice in procurement within the Northern Ireland Public Sector"[133] district councils comply with the guidance and policy on a voluntary basis. There is no compulsion for local authorities to adhere to the policy direction of CPD. This was highlighted to the Committee by those stakeholders that engage with both local and central government. NIFHA considered that the procurement rules for local authorities seem to be different from those of central government and its agencies.

280. The Committee understands that public procurement within local authorities will continue to be within the remit of DoE following the reorganisation due to take place in 2011. It is also anticipated that, under the new structures, local councils will have some responsibility for developing the social economy. In light of this, the Committee welcomes a proposal in DETI’s draftSocial Economy Enterprise Strategy 2010-11 that SEN will engage with local councils to promote SEEs as potential suppliers of goods and services.

281. The Committee notes that the total value of local government purchasing per annum in NI is estimated between £220m - £300m[134] and the majority of procurement opportunities are valued below the EU thresholds for advertising. A recent survey by the FSB found that the majority of SMEs “bid for contracts below £50,000 with most of the work being provided to Local Authorities."[135] This was reflected at the Stakeholder Conference, where the visibility of lower value contracts was one of the top three concerns highlighted by participants.[136]

282. Newry and Mourne District Council was identified by NILGA[137] as an example of good procurement practice at local level. Since 2003 its procurement process has been available online, allowing for greater openness, competitiveness and increased savings. Tenders have been broken down into separate contracts to ensure that local SMEs can compete, and the Council also aims to provide detailed and constructive feedback to unsuccessful SMEs to ensure that they are better informed when bidding for future tenders. In 2004 and 2005 the Council received awards for excellence in public procurement.

283. As highlighted earlier, the Committee believes that local government procurement contracts should be included on the eSourcingNI single web portal to maximise the communication of procurement opportunities to SMEs and SEEs and to realise value-for-money through increased competition.

284. The Inquiry also found that another general concern amongst suppliers is a perception that local government bodies will opt to keep services in-house following the Review of Public Administration, and build capacity within their own organisations rather than stimulating the economy by outsourcing to SMEs and SEEs. Again, this was highlighted at the Stakeholder Conference.

285. Collaborative procurement is one option available within the proposed new structures and the Committee considered an Assembly Research paper[138] which highlighted examples across local authorities in England, Scotland and Wales. Such arrangements are already underway for local authorities in NI in the area of Waste Management. Members noted that benefits included both cashable savings and non-cashable process savings. However the process of collaboration is initially resource intensive and requires trust between the bodies concerned. There exists already a Local Government Procurement Group (LGPG), where local procurement officers can come together to consider ways of collaborative working and also to share best practice. One representative organisation highlighted difficulties in making contact with the LGPG. This was considered to be essential for ensuring that best practice in procurement is embedded in the planning stages of the amalgamation process.

286. The Committee is aware that, in late 2009, DoE held a consultation on options for local government service delivery.[139] One option under consideration is the creation of a Business Services Organisation which would consolidate a number of services including ICT support, transactional services and procurement. The model proposed envisages the creation of one local authority CoPE accountable to its clients (local councils) through service level agreements and management/board representation. However, local councils would retain the option to procure locally for low value contracts. It is estimated that annual savings of between £10m and £20m could be achieved through this model.

287.In welcoming moves towards a more collaborative approach to local authority procurement, the Committee considers that, in the event of the proposed new local authority CoPE being established, then appropriate linkages should be developed with the central government procurement structures. Whilst recognising the independence and autonomy of local councils, the Committee urges greater synergy between central and local government purchasing policy and practice, with a view to achieving consistency in the application of good practice procurement across the public sector.

Collaborative Procurement and Efficiencies

288. Whilst the issue of collaborative procurement and the scope for realising further efficiency gains in procurement was touched on in the Inquiry evidence, the Committee will be giving this more detailed consideration as part of a separate investigation into efficiency savings in general. To inform this exercise, the results of which will be published shortly, the Committee has been receiving written and oral evidence from a range of expert witnesses and the issue of procurement efficiencies has featured in the deliberations.

289. As indicated above, the Committee also considered an Assembly research paper[140] that focused on collaborative local government procurement but which also outlined the various models of collaboration, including centralisation/decentralisation, consortia and shared services. This research has also highlighted evidence that “aggregation of demand does not always require aggregation of supply", which the Committee sees as important in terms of any concerns that SMEs may have around collaborative procurement.

290. The Committee also notes the findings from a recent Treasury report which show both that suppliers, including SMEs, are disadvantaged by a disjointed approach from government to supply markets and that SMEs play an important role in the delivery of greater efficiency through collaborative procurement. The report states that “successful collaborative procurement commercial strategies must consider approaches to all existing markets, including disaggregating government spend to capture the best SME expertise available". As an example of this in GB, the Treasury report cites “a framework agreement in the professional services category, which has been awarded to a consortium of SMEs and is now available nationally to all government departments".[141]

291. In its evidence to the Committee investigation into efficiency savings, the Northern Ireland Audit Office (NIAO) considers procurement to be a key area for the achievement of efficiency gains and informed the Committee that Treasury has identified the potential to make savings of almost £6 billion by the use of more collaborative procurement. Indeed, the Committee notes that the Procurement Board Strategic Plan 2008 – 2011 cites the following as its first objective: “Departments to ensure that the procurement process plays an optimal role in achieving efficiency savings while continuing to base procurement on best value for money".

292. Also, the Committee notes that CPD guidance on the implications of adopting the twelve guiding principles governing the administration of public procurement in NI states that:

“In order to optimise efficiency gains, greater emphasis should be placed on integrating the North/South, as well as the UK and European-wide procurement markets, and there should be greater collaboration between NI public bodies, but only to the extent that it meets the wider social, economic and environmental goals of procurement policy".[142]

293. The Chartered Institute of Public Finance and Accountancy (CIPFA) also provided the Committee with written evidence in relation to achieving efficiency savings in NI government departments. In terms of good practice, CIPFA identified a number of ways efficiencies could be made including through improving the management of the procurement function; and, adopting IT-enabled procurement techniques, such as e-marketplaces, online auctions and purchasing cards. CIPFA also recommended partnering more closely with the voluntary sector, a point which relates to the earlier discussion on the potential for increased involvement of SEEs in the procurement process.

294. From 2005 – 2008, CPD and the other CoPEs achieved estimated value-for-money savings on procurement of £250m, a specific target set for that period. That target has not been carried forward under the current efficiency programme, despite a recommendation in the Committee’s Report on the Executive’s Draft Budget 2008 – 11 for a new target to be set which includes monetary value for further savings. In its evidence, the NIAO informed the Committee that “it is clear that improved procurement by competitive tendering, collaborative purchasing and the use of e-procurement mechanisms has the potential to drive out considerable efficiency savings".[143]

295. Committee members have expressed concern at the lack of joined-up thinking on procurement between central and local government. In response, NIAO stated that there must be scope for greater joined-up thinking between CoPEs; including the centre in local government and those in central government, and that the RPA will provide an opportunity for a shared service facility under the procurement discipline. Thus,the Committee concludes that there is scope for more strategic co-ordination of the public procurement landscape in NI to realise efficiencies, not only between central and local government but also in terms of arms-length public bodies. Moreover, the Committee proposes that the Executive explores opportunities to achieve additional efficiencies through collaborative government procurement on a North-South and East-West basis.

296. Also,the Committee reiterates its call for a new target to be set for achieving further efficiencies from public procurement, to include a monetary value and baseline for such savings, with an associated implementation plan which links to individual departmental efficiency delivery plans.

297. In the evidence from expert witnesses to the Committee’s ongoing investigation into efficiency gains, the point has been emphasised that there is a risk of localised efficiency savings (e.g. at a CoPE or departmental level) having a negative effect on the efficiency of the whole system.In calling for a further efficiency drive through collaborative procurement, the Committee emphasises the need for such collaboration to be co-ordinated at a strategic level by the Procurement Board to avoid counterproductive localised efficiencies being pursued which have an adverse effect on the efficiency of the wider public sector and/or are detrimental to the local economy.

298. In recommending further procurement efficiencies, the Committee is mindful of the findings in a recent Treasury report on collaborative procurement, which highlights the need to improve management information on procurement spend in the context of achieving greater efficiencies.[144] In light of this,the Committee recommends that, in reviewing the data capture and management information systems within CoPEs, the Procurement Board also considers the position more widely across departments to ensure that robust systems are in place to facilitate evidence-based decision making in terms of the identification and monitoring of procurement efficiencies.

Litigation and Lessons Learned

299. A number of witnesses highlighted the impact of legal challenges on local public procurement processes, particularly in relation to construction projects. Throughout the course of the Inquiry, CPD provided the Committee with regular oral and written updates on current legal challenges and the lessons that had been learned. Also, the Committee notes that reducing the likelihood of legal challenge was an issue considered by the CIFNI PTG.

300. One witness described NI as “the market leader for litigation" while another more euphemistically noted that “NI is the UK leader in dealing with procurement issues". Many felt that the stakes were so high in relation to frameworks that often businesses considered legal action to be their only recourse.

301. In its evidence Quigg Golden Ltd explained that, while contract size and an over emphasis on quality can lead to challenges from unsuccessful bidders, such challenges “will fail unless there has also been a failure to follow the regulations or common law obligations". Quigg Golden Ltd cited the following failures:

i. issues not relevant to Most Economically Advantageous Tender (MEAT) taken into account at award stage;

ii. criteria not being set out in advance;

iii. unequal treatment;

iv. subjective criteria not being used;

v. failing to publish correct notices;

vi. failing to take into account relevant issues; and

vii. ambiguous tender documentation.

302. Whilst recognising that the rules are to some extent complex, Quigg Golden Ltd took the view that “they are not so complex that competent professionals cannot comply with them". The Committee believes that the proposal, outlined earlier in the report, for a licentiate approach amongst procurement professionals could assist in this regard.

303. InterTradeIreland, in itsAll-Island Public Procurement Competitiveness Study, suggested that, with an increased number of companies tendering for opportunities (partly as a consequence of the economic downturn), there was also an increase in the number of legal challenges and litigious behaviour amongst suppliers. They estimate that claims are up on average by 50 – 70 per cent. This is reflected in the information submitted to the Committee by CPD. The first submission relating to legal challenges in April 2009 indicated that legal proceedings were underway in 12 cases since 1 April 2007. However, by October 2009 this had increased to 23, although 12 had already been concluded.

304. Another factor which may have increased the propensity for legal challenges is the introduction through the 2006 Regulations of the Alcatel 10-day mandatory “standstill" period at the award stage before contract signature to permit unsuccessful tenders to consider taking action in the courts.

305. However it is not only large frameworks or construction projects that attract legal challenge. The Committee heard evidence from one organisation that had instigated legal proceedings against a Department following a procurement exercise. While the case was subsequently withdrawn, the incident highlighted the shortcomings arising from the lack of an appeals mechanism within the procurement process in NI.

306. Frank McGlone, a commentator at the Stakeholder Conference, highlighted that the legal process is only open to those organisations that can afford to go down that route and emphasised the need for an independent appeals process. During the course of the Conference, he posed the question whether an independent appeals process might potentially build the trust of SMEs and SEEs in the procurement process. The majority of those Conference attendees who voted agreed that an independent appeals process would help build the trust of SME/SEEs.

307. As mentioned earlier in the report, another question, this time posed by Conference commentator Professor Andrew Erridge, asked participants to consider how much risk of legal challenge they would be prepared to accept in order to assist local SME/SEEs win government contracts. Just over one-quarter of those participating in the digi-voting indicated that they would be prepared to accept low, or no risk at all. The overwhelming majority of those who voted therefore indicated they would be prepared to accept medium to high risk. This acceptance of risk in principle does not correlate with the number of legal challenges in practice, which again suggests that the stakes are too high in relation to winning contracts. A further suggestion arising from the Conference was that, rather than loading risk on one party in particular, risk should be shared amongst those involved in the procurement process, both purchasers and suppliers.

308. In correspondence with the Committee, CPD acknowledges that the legal process requires the allocation of resources until a case is resolved, which can have a consequential knock-on effect on the delivery of public services. However, with regard to the construction framework, CPD has, on legal advice, continued to deliver contracts on a project-by-project basis.

309. The Committee was interested to note that, in its written evidence, CPD indicated that the CIFNI PTG has been working on developing an early warning system for potential disputes and an alternative dispute resolution procedure that will mitigate the need for legal action.[145] In terms of existing arrangements, CPD outlined the two-stage appeals process, which includes assessment by the relevant director followed by referral to the Director of CPD. Officials are also investigating a possible route with the OGC, whereby it could look at a complaint that has been made to the Director of CPD and the award of contract could be suspended. Currently suppliers can approach the NI Ombudsman if there is a specific issue regarding process, but if the complaint is about the award decision itself then legal action is the only recourse.

310. In providing evidence to the Inquiry, CIPS informed members of a “Supply Chain Ombudsman" within Sellafield UK. Subsequently, the Sellafield Supply Chain Ombudsman provided the Committee with more information about the role, which was established in 2005 and has a number of facets. These include:

i. providing a confidential and unbiased route for the supply chain to raise issues pertaining to procurement at Sellafield;

ii. acting as the first point of contact for the supply chain and developing improvements to Sellafield Ltd’s supplier communication and engagement, through events and also through an internet presence;

iii. acting as an interface between Sellafield Ltd and various business support and development agencies and also local authorities;

iv. encouraging new entrants to the market through various means; and,

v. developing the supplier area of the website to provide useful, relevant and timely information for suppliers.

311. The Committee welcomes the positive response from CPD in relation to the idea of an independent “Supply Chain Ombudsman", including its suggestion that such a post could provide a confidential and unbiased route for the supply chain to raise issues pertaining to procurement across all public sector bodies in NI. CPD further suggested that the Ombudsman’s role could also include local supplier development; encouraging new entrants and public sector opportunities outside NI, working in conjunction with InvestNI and InterTradeIreland.

312.Given the cost of litigation and the associated disruption to capital projects and other procurement exercises, the Committee believes that a conciliatory approach is needed in resolving procurement conflicts and considers that the absence of an independent mediator between purchaser and supplier is a key deficiency within the procurement process in NI. As such, the Committee recommends that the Procurement Board urgently examines the possibility of providing for a “Supply Chain Ombudsman" function in NI, which would, amongst other things, fulfil this important mediation role. The Committee also believes that the proposal for licentiate arrangements for procurement professionals could help to reduce the level of litigation arising from failure to meet legal obligations.

Public Procurement Governance Arrangements

313. As noted earlier in the report, “Consistency" is one of the twelve guiding principles of public procurement in NI. The principle states that “suppliers should, all other things being equal, be able to expect the same general procurement policy across the public sector". Arising from the Inquiry, it became clear to the Committee that, while public procurement policy has a prominent place within the PfG and high level governance through the Executive and the Procurement Board, there are inconsistencies in practice at the level of CPD and the other CoPEs. It was also evident that there is a lack of clarity on the strategic policy aims in relation to procurement. As highlighted earlier, this was most apparent in the discussion of social value and the uncertainty as to the agenda to be pursued.

314. Members also heard of a lack of co-ordination and lesson learning in the procurement of ICT. The evidence from one SME, with experience of tendering for ICT projects, suggested that such projects tend to be managed on a one-off basis, with selection committees that are often inexperienced. The SME considered it a weakness that there did not appear to be any methods in place to assess the success of each procurement against objectives or to determine if the procurement represented value for money. The SME also pointed out that potential suppliers have no point of contact for having their systems evaluated and assessed for potential applied use within the wider NICS.[146] The Committee will wish to seek assurances that the establishment of IT Assist, a shared service centre for all ICT services in the NICS, will go some way towards addressing these issues and ensuring joined-up procurement in this area.

315. During the Stakeholder Conference, Dr Gordon Murray called for high-level cultural change. He reminded participants that procurement professionals implement the policy direction and that the commitment to change is required from the political leadership. In this regard, Conference participants voted for the top three areas which they considered would require improvement to maximise the socio-economic benefit for SMEs/SEEs. The most popular results were:

i. Political and management commitment to make changes;

ii. Culture of public sector; and,

iii. Competence of public procurement

316. It became apparent during the Inquiry that the relationship between CPD and the other CoPEs is not tightly bound. This was clear not only through the varying standards of data collection and management information across the CoPEs, discussed earlier in this report, but also when information was requested by the Committee which fell within the remit of other CoPEs or departmental structures. At times there has appeared to be a discrepancy between the pursuit of objectives at a departmental or organisational level and the pursuit of overall procurement policy objectives. For suppliers this inconsistency was evident in the requirements for documentation for tenders in the first instance, and at the final stages of the process in varying experiences regarding feedback.

317. As noted earlier in the report, there is a requirement that the competency of CoPEs be reviewed on a periodic basis. The first review was carried out by PwC in 2005 and a second review took place in 2009, also by PwC.[147] The twelve procurement principles are used to assess CoPEs against best value for money in their reaccreditation. The Committee notes, in particular, a recommendation from the 2009 review that: “CoPE organisations should consider appointing an in-house, dedicated resource to drive procurement compliance and conformity to CoPE requirements". The review report also highlighted the need for “further improvements in knowledge sharing of best practice and greater interplay across all CoPE organisations to avail of collaborative procurement opportunities with support from the Procurement Practitioner’s Group".[148]

318. All CoPEs were included in the 2009 review apart from the Education Sector, in anticipation of the move towards a single Education Skills Authority (ESA). The ESA will be assessed separately twelve months after it has been established. However, the Committee is mindful of the findings of a Public Accounts Committee (PAC) report in 2009,[149] which noted that all the ELBs failed the independent assessment of their CoPE status in 2005, although all were reaccredited in 2006. The report went on to recommend that CoPEs which demonstrate persistent poor practice should have their status removed “if the concept of ’Centre of Procurement Expertise’ is to mean anything". The Committee for Finance and Personnel concurs with this PAC recommendation and intends to closely monitor both the robustness of further reaccreditation exercises and the implementation of recommendations arising from such reviews.

319. Whilst acknowledging the need for flexibility within the public procurement process to allow CoPEs to meet the differing needs of commissioners, the Committee also recognises the benefits of standardising practice, both for suppliers (in terms of making the process less complicated across the system) and for purchasers (regarding information and data management).The Committee calls on the Procurement Board to bring forward options for strengthening and formalising the relationship between CPD and the other CoPEs, with a view to ensuring consistency in applying good practice procurement in support of the Executive’s key priorities.

[1] “Executive Public Procurement spend hits £2.4 billion", Department of Finance and Personnel Press Release,
12 November 2009.

[2]Collaborative Procurement in Local Government Northern Ireland, Assembly Research Paper, 20 November 2009, p.5.

[3]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p.9.

[4] HM Treasury, 2009,Operational Efficiency Programme: Collaborative Procurement, p.3, OPSI: London.

[5] This figure includes above and below threshold procurements and defence spending. Source: Presentation on EC Procurement Law; European Public Procurement Seminar; European Institute of Public Administration, Maastricht April 2009.

[6] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.12, (ec.europa.eu/internal_market/publicprocurement/docs/sme_code_of_best_practices_en.pdf ).

[7] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.2, (ec.europa.eu/internal_market/publicprocurement/docs/sme_code_of_best_practices_en.pdf ).

[8] http://ec.europa.eu/enterprise/policies/sme/small-business-act/

[9] Department of Enterprise, Trade and Investment, 2008; Matrix Report: Vo.l 7:Public Procurement of InnovativeScience and Technology Solutions, p. 12.

[10] Department of Finance and Personnel, 2009, Northern Ireland Procurement Policy
www.cpdni.gov.uk/pdf-public_procurement_policy.pdf

[11] http://www.opsi.gov.uk/si/si2006/20060005.htm

[12] Northern Ireland Assembly Committee for Finance and Personnel – Minutes of Evidence, 16 September 2009.

[13] During the conference the Social Research Centre made use of digital voting to seek the views of participants at various points throughout the day. While this was a useful indicator of the views of those attending on the issues raised and proposed solutions, it is not a statistically valid sample of all the stakeholders in the procurement process and should not be taken as such. The results of the digital voting are referred to from time to time throughout the report as they accurately reflect the views of conference participants who voted on the issues and proposals put to them.

[14] Federation of Small Businesses NI/Lestas Consulting, September 2009,Evaluating SME Experiences of Government Procurement in NI, p.5.

[15] Department of Finance and Personnel, Written Submission, 2008,Minimising the Risks/Maximising the Benefits of Public Procurement; Public Procurement & SMEs, Northern Ireland Assembly Research Paper, 24 November 2008;The Integration of Social Issues in Public Procurement, Northern Ireland Assembly Research Paper, 24 February 2009.

[16] Correspondence with Professor Chris McCrudden, Lincoln College, University of Oxford, 12 January 2010.

[17] The Public Procurement Regulations 2006, SI No.5, www.opsi.gov.uk/si/si2006/uksi_20060005_en.pdf

[18] Office of Government Commerce, 2008 10 - Day Mandatory Standstill period: OGC revised guidance note for public sector contracts: www.ogc.gov.uk

[19] http://www.ogc.gov.uk/procurement_policy_and_application_of_eu_rules_guidance_on_the_UK_regulations.asp

[20] “Executive Public Procurement spend hits £2.4 billion", Department of Finance and Personnel Press Release,
12 November 2009.

[21] Correspondence from Department of Finance and Personnel, Central Procurement Directorate, 12 November 2009.

[22]Public Procurement and the Social Economy, Northern Ireland Assembly Research Paper, 24 February 2009.

[23] Federation of Small Businesses NI/Lestas Consulting, September 2009,Evaluating SME Experiences of Government Procurement in NI, p.11.

[24] Department of Finance and Personnel, 2009,Northern Ireland Procurement Policy.

[25] Department of Finance and Personnel, 2008,Procurement Practice in NI: Minimising the Risks and Maximising the Benefits, p. 4.

[26] Department of Finance and Personnel, 2008,Procurement Practice in NI: Minimising the Risks and Maximising the Benefits, p. 4.

[27] www.cpdni.gov.uk/index/guidance-for-purchasers/12-procurement-principles.htm

[28] Department of Finance and Personnel, 2009,Northern Ireland Procurement Policy
www.cpdni.gov.uk/pdf-public_procurement_policy.pdf

[29] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.8.

[30] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.7.

[31] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.17.

[32] Department of Finance and Personnel:Procurement Practice in NI – Minimising the Risks and Maximising the Benefits, p. 5.

[33] PricewaterhouseCoopers, 2009:Review of Centres of Procurement Expertise Status and Policy Implementation (included at Appendix 4).

[34] Department of Enterprise, Trade & Investment, January 2010, Social Economy Enterprise Strategy 2010 - 2011, p.28.

[35] http://ec.europa.eu/enterprise/policies/sme/files/sme_definition/sme_user_guide_en.pdf

[36] European Commission, Directorate General Enterprise and Industry, January 2009, First Section of the Annual Report on EU Small and Medium Sized Enterprises, p.5. http://ec.europa.eu/enterprise/policies/sme/files/craft/sme_perf_review/doc_08/spr08_annual_reporten.pdf

[37] Contains information on all businesses which are VAT registered or operating a PAYE scheme.

[38] Correspondence from Central Procurement Directorate, 4 September 2009.

[39] Enterprise: Unlocking the UK’s Talent, Department for Business, Enterprise & Regulatory Reform and HM Treasury, March 2008, p. 6.

[40] European Commission, Directorate General Enterprise and Industry, January 2009, First Section of the Annual Report on EU Small and Medium Sized Enterprises.

[41] European Commission, Directorate General Enterprise and Industry, January 2009, First Section of the Annual Report on EU Small and Medium Sized Enterprises, p.37.

[42] European Commission, Directorate General Enterprise and Industry, January 2009, First Section of the Annual Report on EU Small and Medium Sized Enterprises, pp. 38-39.

[43] Department of Enterprise, Trade and Investment, September 2009,Independent Review of Economic Policy; DETI & Invest NI, Chairman: Professor Richard Barnett, p.5.

[44] Department of Enterprise, Trade and Investment, September 2009,Independent Review of Economic Policy; DETI & Invest NI, Chairman: Professor Richard Barnett, p.33.

[45] Department of Enterprise, Trade and Investment, September 2009,Independent Review of Economic Policy; DETI & Invest NI, Chairman: Professor Richard Barnett, p. 112.

[46] Office of Government Commerce, 2005,Smaller supplier…better value, pp.5-7.

[47] Department of Enterprise, Trade and Investment 2008; Matrix Report: Vo.l 7:Public Procurement of Innovative Science and Technology Solutions;Review of the Competitiveness of NI, Sir David Varney, April 2008, p.109.

[48]Evaluating SME Experiences of Government Procurement, published jointly by CBI, FSB and the British Private Equity and Joint Venture Capital Association, 2008, pp. 20-21.

[49] At NUTS1 level (Government Office Regions and Wales, Scotland, Northern Ireland), GVA estimates are presented on a residence basis. This means that earnings of individuals are allocated to the region in which they live. Therefore, if NI businesses win contracts in RoI (or indeed anywhere else outside NI) it is allocated in the statistical calculation as contributing to NI GVA on the basis of residence.

[50] Northern Ireland Assembly Research:Public Procurement and the Social Economy & Public Procurement and SMEs, 24 February 2009.

[51] www.socialeconomynetwork.org

[52] Department of Enterprise, Trade and Investment, DraftSocial Economy Enterprise Strategy 2010-2011.

[53] It is not possible to compare data across a longer period because one of the Education and Library Boards could not supply data prior to 2006-07.

[54] Source: Northern Ireland Assembly Research

[55]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p.31.

[56] Northern Ireland Assembly Committee for Finance and Personnel, Minutes of Evidence, 27 January 2010.

[57] www.spikescavell.net Source: private communication with Scottish Government official.

[58] Source: private communication with Belfast City Council official.

[59] www.cpdni.gov.uk

[60] Correspondence from Central Procurement Directorate, 4 September 2009.

[61]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p. 56.

[62] PricewaterhouseCoopers 2009:Review of Centres of Procurement Expertise Status and Policy Implementation.

[63] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.7.

[64]Review of the Competitiveness of NI, Sir David Varney, April 2008, p.110.

[65] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.7.

[66] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.7.

[67]Opening Doors: The Charter for SME Friendly Procurement, Welsh Assembly Government, 2008 http://wales.gov.uk/dpsp/publications/bettervalue/smarterpurchasing/openingdoors/openingdoorse.pdf?lang=en

[68] http://www.ogc.gov.uk/procurement_policy_and_application_of_eu_rules_eu_procurement_thresholds_.asp

[69] Federation of Small Businesses NI/Lestas Consulting, September 2009,Evaluating SME Experiences of Government Procurement in NI.

[70] CBI Submission to the Assembly Finance Committee: SMEs and access to Public Procurement, February 2009.

[71] DETI, DraftSocial Economy Enterprise Strategy 2010-2011, p. 25.

[72] www.publiccontractsscotland.gov.uk

[73] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.11.

[74] https://e-sourcingni.bravosolution.co.uk/web/login.shtml

[75] Correspondence with Central Procurement Directorate, June 2009.

[76] www.laquotes.ie - an online quotation solution that has been developed to streamline the annual quotation process and deliver real benefits to both Local Authorities and suppliers. The solution was developed by Kerry County Council in partnership with the other participating Local Authorities.

[77] Correspondence with Central Procurement Directorate 4, September 2009.

[78] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.2.

[79]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p. 14.

[80]Evaluating SME Experiences of Government Procurement, published jointly by CBI, FSB and the British Private Equity and Joint Venture Capital Association, 2008, p.25.

[81] Department of Enterprise, Trade and Investment, September 2009,Independent Review of Economic Policy; DETI & Invest NI, Chairman: Professor Richard Barnett, p. 40.

[82] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p. 10.

[83] Correspondence with Dr Aris Georgopoulos, University of Nottingham, see Appendix 7.

[84] Office of Government Commerce, 2005,Smaller supplier…better value, p. 18.

[85] Private communication with Scottish Government official.

[86] Northern Ireland Assembly Written Answer Booklet, 11 December 2009, & Northern Ireland Assembly Written Answer Booklet, 8 January 2010.

[87] The Committee also notes the example of Peace II funding, which involved a percentage up front and further payments released on evidence of spend.

[88] DETI, DraftSocial Economy Enterprise Strategy 2010-2011, p.33.

[89]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p. 57

[90] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p. 12.

[91] HM Treasury 2008:Accelerating the SME economic engine: through transparent, simple and strategic procurement (Glover Report), p.5.

[92]All-island Procurement: A Competitiveness Study: InterTradeIreland, October 2009, p.55.

[93] Correspondence with Central Procurement Directorate, April 2009.

[94] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p.15.

[95] HM Treasury 2008:Accelerating the SME economic engine: through transparent, simple and strategic procurement (Glover Report), p.5.

[96] PricewaterhouseCoopers 2009:Review of Centres of Procurement Expertise Status and Policy Implementation, p.10.

[97] http://www.supply2.gov.uk/ogc_feedback.shtml

[98] Independent Living Funds: ILF Contract Brings ‘Supported Business’ Success, Press Release, 27 February 2009. (http://www.ilf.org.uk/cms_media/files/ilf_supported_business_news_release1.pdf)

[99] McCrudden, C, 2007.Buying Social Justice: Equality, Government Procurement & Legal Change, Oxford University Press, London, p. 578.

[100] CPD,Procurement Practice in NI: Minimising the Risks and Maximising the Benefits, p. 4.

[101] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.8.

[102] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.18.

[103] Correspondence from Central Procurement Directorate, 4 September 2009.

[104] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.7.

[105] Northern Ireland Executive 2008 : Programme for Government 2008 – 2011 : Building a Better Future, p.17.

[106] HM Treasury,The Green Book: Appraisal and Evaluation in Central Government, 2003, p.19.

[107] http://www.opsi.gov.uk/si/si2006/20060005.htm

[108] Correspondence with Professor McCrudden, 12 January 2010.

[109] Correspondence with Professor McCrudden, 12 January 2010.

[110] http://www.london2012.com/about-us/the-people-delivering-the-games/the-olympic-delivery-authority/index.php

[111] http://www.cpdni.gov.uk/pilot_case_study_on_integration-2.doc

[112] Northern Ireland Assembly Report 42/08/09R, Committee for Employment and Learning: Inquiry into the Way Forward for Apprenticeships.

[113] Northern Ireland Assembly Report 42/08/09R, Committee for Employment and Learning: Inquiry into the Way Forward for Apprenticeships, p.39.

[114] Correspondence with Central Procurement Directorate, 4 September 2009.

[115] Written submission by Professor Christopher McCrudden, 10 January 2010 – see Appendix 7.

[116] McCrudden, C, 2007.Buying Social Justice: Equality, Government Procurement & Legal Change, Oxford University Press, London, p. 578.

[117] Investment Strategy NI,Delivering social benefits through public procurement: a toolkit. Deloitte MCS Ltd. Consulting for the Strategic Investment Board, 2010. Also,Achieving Social Benefits through Public Procurement, Deloitte MCS Ltd. Consulting for the Strategic Investment Board, Draft Report, December 2009. See website www.sibni.org

[118] Investment Strategy NI,Delivering social benefits through public procurement: a toolkit. Deloitte Consulting for the Strategic Investment Board, 2010, p.5. See website www.sibni.org

[119] HM Treasury,The Green Book: Appraisal and Evaluation in Central Government, 2003, p.34.

[120] HM Treasury, The Green Book: Appraisal and Evaluation in Central Government, 2003, p. 35.

[121] HM Treasury,The Green Book: Appraisal and Evaluation in Central Government, 2003, p.35.

[122] Sustainable Government Procurement – an assessment of current policies, practices and opportunities for improvement, Leigh Martin http://www.sustainableprocurement.com.au/Portals/16/docs/Martin_Leigh.pdf

[123]http://www.purchasing.tas.gov.au/buyingforgovernment/getpage.jsp?uid=2E55DD5E3A197EF4CA256C9200097261

[124] Cabinet Office: Office of the Third Sector, 2009:A Guide to Social Return on Investment.

[125] www.sroi-uk.org

[126] Central Procurement Directorate/Equality Commission for Northern Ireland, 2008:Equality of Opportunity and Sustainable Development.

[127] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, pp12-13.

[128]Procurement Competence Career Path Framework for the Northern Ireland Public Sector: http://www.cpdni.gov.uk/procurement-career-path-framework-oct2008.pdf

[129] http://commercial.homeoffice.gov.uk/documents/thinksmart.pdf

[130] Commission of the European Communities, 2008,European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts, p. 14.

[131] http://www.chamberofcommerce.it/index.asp

[132] Northern Ireland Assembly, Official Report, Monday 25 January 2010, Vol. 47, No. 5.

[133] www.cpdni.gov.uk/index/about-cpd.htm

[134]Collaborative Local Government Procurement, Assembly Research paper.

[135] Federation of Small Businesses NI/Lestas Consulting, September 2009,Evaluating SME Experiences of Government Procurement in NI, p.5.

[136] Three proposals voted most helpful in relation to “Opportunities to Bid" were: Having a single portal/dedicated website; increasing purchasers’ understanding of SMEs/SEEs; providing access to smaller contracts (SMEs).

[137] See NILGA submission at Appendix 5.

[138]Collaborative Local Government Procurement, Assembly Research paper, November 2009. See Appendix 6.

[139] Local Government Service Delivery: Economic Appraisal October, 2009, www.doeni.gov.uk/index/local_government/local_government_service_delivery-2.htm

[140]Collaborative Local Government Procurement, Assembly Research paper.

[141] HM Treasury, May 2009,Operational Efficiency Programme: Collaborative Procurement (hm-treasury.gov.uk/d/oep_collaborative_procurement_pu731.pdf )

[142] www.cpdni.gov.uk/index/guidance-for-purchasers/12-procurement-principles.htm

[143] Northern Ireland Assembly Committee for Finance and Personnel, Minutes of Evidence, 18 November 2009.

[144] HM Treasury, 2009,Operational Efficiency Programme: Collaborative Procurement.

[145] Correspondence from Central Procurement Directorate, 14 October 2009.

[146] Correspondence from SCM received October 2009, at Appendix 5.

[147] PricewaterhouseCoopers, 2009:Review of Centres of Procurement Expertise Status and Policy Implementation.

[148] PricewaterhouseCoopers, 2009:Review of Centres of Procurement Expertise Status and Policy Implementation, p.7.

[149] Northern Ireland Assembly Public Accounts Committee Report 01/09/10:Investigation of Suspected Contract Fraud within Education and Library Boards.

List of Appendices

Appendix 1 – Minutes of Proceedings (extracts)

1 October 2008
5 November 2008
12 November 2008
19 November 2008
26 November 2008
11 February 2009
18 March 2009
22 April 2009
29 April 2009
06 May 2009
13 May 2009
20 May 2009
27 May 2009
10 June 2009
17 June 2009
24 June 2009
9 September 2009
16 September 2009
23 September 2009
30 September 2009
7 October 2009
14 October 2009
4 November 2009
11 November 2009
18 November 2009
25 November 2009
2 December 2009
9 December 2009
6 January 2010
20 January 2010
27 January 2010
10 February 2010

Appendix 2 – Minutes of Evidence

26 November 2008
Federation of Small Businesses

26 November 2008
Quigg Golden Contract Consultants

11 February 2009
Carson McDowell Solicitors

18 March 2009
DFP Central Procurement Directorate

29 April 2009
DFP Central Procurement Directorate

13 May 2009
Ulster Community Investment Trust

20 May 2009
DFP Central Procurement Directorate

20 May 2009
Construction Industry Group Northern Ireland Professional College (CIGNI)

27 May 2009
Confederation of British Industry (CBI)

10 June 2009
Martin and Hamilton Ltd

17 June 2009
InterTradeIreland

24 June 2009
Royal Institute of Chartered Surveyors

16 September 2009
Royal Society of Ulster Architects

30 September 2009
Chartered Institute of Purchasing and Supply

14 October 2009
Social Economy Network
Bryson Charitable Group

25 November 2009
DFP Central Procurement Directorate

Appendix 3 – Written Submissions

1. Western Innovations Network

2. Drilling & Pumping Supplies Ltd

3. Committee for Employment and Learning

4. Independent Consultant Adviser Group in Northern Ireland

5. Committee on the Administration of Justice

6. Northern Ireland Council for Voluntary Action

7. Lestas Consulting

8. Royal Institution of Chartered Surveyors

9. UNISON

10. Committee for the Office of the First Minister and deputy First Minister

11. Early Years

12. Chartered Institute of Purchasing and Supply

13. Committee for Enterprise, Trade and Investment

14. Construction Industry Group

15. Equality Commission for Northern Ireland

16. Martin and Hamilton Limited

17. Royal Society of Ulster Architects

18. Confederation of British Industry

19. Federation of Small Businesses

20. Bryson Charitable Group

21. Business in the Community

22. Law Society of Northern Ireland

23. Anderson Spratt Group

24. Northern Ireland Federation of Housing Associations

25. Fold Housing Association

26. Employers for Childcare

27. Committee for Regional Development

28. Health Care Supplies Association

29. Quarry Products Association Northern Ireland

30. Irish Congress of Trade Unions

31. DFP Central Procurement Directorate

32. Carson McDowell Solicitors

33. Advice NI

34. Social Economy Network

35. Ulster Community Investment Trust

Appendix 4 – Memoranda and Papers from Department of Finance and Personnel

1. Procurement awareness session

2. Interim Report of the Construction Industry Forum for Northern Ireland Procurement Task Group

3. CPD paper on SME Access to Public Procurement Opportunities

4. DFP follow-up to issues raised at CPD evidence session

5. DFP response to Committee for Employment and Learning report on “The Way Forward for Apprenticeships"

6. DFP Response to the Committee’s Inquiry into Public Procurement

7. Contracts awarded to SMEs and Application of Public Contracts Regulations 2006 to the procurement of social housing

8. DFP Update on InterTradeIreland Report & Output from the Construction Industry Forum for NI

9. DFP Response to suggestion for establishment of Supply Chain Ombudsman

10. DFP: Completed templates from Construction and Supplies & Services contracts and from Belfast Education and Library Board

11. DFP: Completed templates from NIHE & Health Estates

12. DFP: Correspondence on Procurement Issues

13. DFP: Final Report on the re-accreditation of the Centres of Procurement Expertise

14. DFP: CPD Response to Follow up issues arising from session on 25 November 2009

15. DFP: Letter from Minister regarding impact of Executive’s advertising policy on local press

16. DFP: Procurement Governance Review

17. DFP: Legal Challenges against Government Procurement

Appendix 5 - Memoranda and Papers from Others

1. Federation of Small Businesses Briefing Paper

2. Federation of Small Businesses: Press Release “Don’t ignore Glover recommendations"

3. QuiggGolden Ltd: Current issues Affecting Construction Procurement

4. CBI Briefing Paper: Public Procurement - What is a World Class Client?

5. InterTradeIreland: All-Ireland Competitiveness Study

6. Ulster Community Investment Trust Briefing Paper

7. CBI: Follow up information arising from evidence session

8. Royal Institution of Chartered Surveyors briefing paper

9. Ulster Community Investment Trust - The Need for a Public Procurement Brokerage Service

10. Committee for Employment and Learning: Committee Report on the Way Forward for Apprenticeships

11. RICS: Response to Design and Build Query

12. FMS (NI) Ltd: Procurement Concerns and Issues

13a. MAG: Request to brief Committee

13b. MAG: Further letter to Committee

14. Unite Union: SME access to public contracts in NI

15. Federation of Small Businesses: Evaluating SME Experiences of Government Procurement in Northern Ireland

16. CIPS: Opening statement to the Committee for Finance and Personnel (14/10/2009)

17a. DETI: Letter from Arlene Foster to Alban Magennis re Matrix Report on Public Procurement

17b. DETI: Matrix Report on Public Procurement

18. Public Accounts Committee - Composite Reports on Public Procurement

19. Social Economy Network: summary briefing paper to the Committee for Finance and Personnel

20. Bryson Charitable Group: Opening statement to the Committee for Finance and Personnel

21a. Social Economy Network: Special Contracts Arrangements

21b. Social Economy Network: Letter to Committee regarding Special Contracts Arrangements

22. Committee for the Environment: Procurement methods used by the Department of the Environment’s Local Government Division to appoint consultants or agencies

23. NOW: Information on Gauge Social Return and Investment

24. George Simpson: Procurement of IT Systems

25. Stakeholder Group: Advertising Policy Undermining Viability of Local Press

26. NILGA: Local Government Procurement Policy

27. Sellafield Ltd: UK Supply Chain Ombudsman

28. Dr Stephen Farry: Public Procurement Issues

29. Citizens Advice: Committee inquiry into procurement for Social Economy organisations

Appendix 6 – Northern Ireland Assembly Research Papers

1. Public Procurement and SMEs

2. Public Procurement and the Social Economy

3. The Integration of Social Issues in Public Procurement

4. Public Procurement and SMEs - An Update

5. Collaborative Procurement in Local Government

Appendix 7 –Stakeholder Conference

1. Social Research Centre: Report on Public Procurement Stakeholder Conference

2. Social Research Centre: Conference Presentation

3. Professor Christopher McCrudden: Comments on the Public Procurement Conference Stakeholder Report

4. Extract fromBuying Social Justice, Professor Chris McCrudden 2007, Oxford University Press

5. Dr Aris Georgopoulos: Comments on the Public Procurement Conference Stakeholder Report

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