Appendix 3

Written Submissions

Western Innovations Network
Kevin Taylor

Committee for Employment and Learning

Ms Sue Ramsey MLA,
Chairperson,
Committee for Employment and Learning
Room 283, Parliament Buildings,
Stormont,

Belfast BT4 3XX

Telephone: (028) 9052 0379
Fax: (028) 9052 1433
E-mail: cel@niassembly.gov.uk

Mr Mitchel McLaughlin MLA
Chairperson
Finance and Personnel Committee
Room 428
Parliament Buildings
Stormont
Belfast
BT4 3XX

21 January 2009

Dear Mitchel,

Re: Scrutiny of Public Procurement Practice in Northern Ireland

As you are aware through the informal discussions that we have had, the Committee for Employment and Learning holds considerable concerns about the public procurement process and its practice here. It is on that basis that the Committee welcomes your scrutiny of public procurement policy and practice.

In the last session, as you are aware, the Committee undertook an inquiry into Training for Success, which replaced Jobskills as the Department for Employment and Learning’s primary professional and technical training programme in September 2007. Early on in the Inquiry, the Committee became aware of problems surrounding the procurement exercise for the programme. These problems surfaced in the evidence of a number of witnesses from whom the Committee had sought views. The Committee realised that there was a significant problem with the procurement exercise.

The Committee had a particular concern that local providers, often from the community and voluntary sectors, which have a proven record of working successfully with departments are not being awarded contracts as the lead provider. In many cases they are having work sub-contracted to them by an external organisation with more experience in bidding for high-level contracts. This leaves the local Small and Medium Enterprises (SMEs) and Social Economy Enterprises (SEEs), doing the bulk of the work entailed by the contract, but for much less than the full payment awarded for it. The Committee is anxious that the Finance and Personnel Committee’s scrutiny of public procurement should highlight the need for the capacity of SMEs and SEEs to bid for these contracts to be greatly enhanced and supported by government. Assisting local SMEs and SEEs to build capacity and understanding in relation to public procurement tenders, would give them a more realistic chance of winning sizeable public contracts on the basis of open competition, and would keep work within the local economy with organisations whose activities are well-known to government. This, in turn, might help prevent the problems surrounding the awarding of contracts such as that to Carter and Carter under the Training for Success programme. I will not rehearse the background to that issue here, as the Central Procurement Directorate (CPD) in the Department of Finance and Personnel (DFP) will be able to supply your Committee with all the details.

The Employment and Learning Committee understands that much of the public procurement process is subject to European Union Directives and legislation; however, it is clear that a great deal can be done by CPD to build greater understanding of the tendering process by local SMEs and SEEs without having to break any rules.

As a result of its concerns surrounding the Training for Success procurement exercise, the Committee made six recommendations to the Department for Employment and Learning, in conjunction with CPD. However, the recommendations, while made in respect of the Training for Success procurement, are generally applicable to any procurement exercise:

• Put in place mechanisms to ensure that stated agreements in contract bids are supported with formal written documentation clearly demonstrating the willingness of third-parties to be considered as part of the substantive bid (and which provide details of the level of resources agreed to be provided) and that these bids are subject to rigorous qualitative assessments;
• Provision of a programme of support to local prospective training suppliers aimed at improving their understanding of the tendering process particularly the tender requirements when competing at a pan-European level;
• Ensuring that, in the assessment of single contracts which cover the whole of Northern Ireland, that consideration is given to the geographic dispersity of the proposed locations for the contract delivery;
• Consideration of methods of streamlining contract awards to ensure they are appropriate and meaningful to both suppliers and trainees [users] geographically and across training levels [or the equivalent of any contract where provision is split];
• Review the current scope and criteria for select tendering procedures; and
• Utilise Sectoral experience within the tendering process.

The Committee is content to make the Training for Success Inquiry report and all the evidence gathered for it available to your inquiry through our respective Clerks.

More recently, the Committee has had concerns about the procurement exercise for the Department for Employment and Learning’s Steps to Work programme. This programme rolled out in September 2008 with area contracts; however, in some localities there were issues with tenders and there were delays in the tender being awarded. The Committee is unsure as to how the tenders were finally awarded in these areas and understands that legal action resulted. As part of your inquiry, the Committee would urge your Committee to examine the process around the tendering and awarding of contracts for this programme. Again, the Committee is concerned that local providers may not have had the support they should when bidding for contracts and we are aware of issues around the ability to provide the infrastructure required by the contract on the part of some of the providers. The Committee generally feels that the fact that an organisation can bid for contracts in areas where it has no proven infrastructure or record of provision is worrying. We understand that EU competition rules create this issue; however, it is our hope that your inquiry may find ways of ameliorating this situation. Again, any information that we have can be shared by our respective Clerks.

The Committee is aware that the Scottish Executive has had some success with the use of Social Inclusion Clauses in public procurement exercises and we would recommend that your inquiry investigates these successes with a view to their application to our own process. The inclusion of such clauses in public procurement exercises would allow us to achieve certain social aims outlined in the Programme for Government and may also have the added benefit of giving a boost to some of our local community and voluntary groups.

You are also probably aware that the Committee has made representations on a number of fronts for a quota of apprentices to be included in the award of any contract through the public procurement process. The Committee is concerned that in the current economic downturn considerable numbers of apprentices are being made redundant, with limited hope for finding a foster employer and in some cases being unable to complete NVQ assessments because they do not have a work placement. In the interests of creating a greater skills base for our economy we must be able to guarantee good quality and reliable workplace training. One of the best ways that this can be achieved is by having a well regulated and extensive system of apprenticeships. Public procurement has its part to play in this. The Committee has written to the Finance Minister on this issue and we understand that in the case of publicly procured construction contracts there are aspirational targets for the number of apprentices involved, although these would seem to be voluntary. The Committee would press for more concrete quotas for apprentices involved in public contracts and would see such quotas extending beyond contracts for construction projects.

Contained in PSA 2 (Skills for Prosperity) and PSA 3 (Increasing Employment) of the Programme for Government (PfG) are a number of aspirations involving increasing our skills base and increasing employment levels and reducing economic activity. The Committee believes that targets can be achieved in these areas through the public procurement process. In addition, a good public procurement process can deliver on other PfG aims surrounding social inclusion and the development of the social economy.

The Committee stands ready to assist in any way that it can with your inquiry. As I said previously, our respective Clerks can liaise to ensure that your inquiry is in possession of all the papers that we might hold that might prove useful to you.

Yours sincerely,

Sue Ramsey MLA

Chairperson

Drilling & Pumping Supplies Ltd

29 Jubilee Road, Comber Road Industrial Estate
Newtownards, Co Down, BT23 4YJ
Tel: 028 9181 8347 Fax: 028 9181 3837
E-mail: sales@dps-ni.com
Web site: www.dps-ni.com

Dear Sir / Madam

I am the Managing Director of a pump supply and installation company in Northern Ireland. We are based in Newtownards and employ 22 people and we are involved in public tendering to both the private and public sectors. The public sector tenders would be in the main to N.I. Water Service and District Councils with some private tenders to the main contractors involved in Water Service activities.

I have listed a number of points below which have effective our company for consideration:

(1) Water Service tender C241 – completion date 1st March 2008. This tender

was for the supply of waste water pumps and spares and was a very involved procedure to complete and now some 9 months later we still await the outcome.

(a) Part of the above was to have a design indemnity insurance policy in place to accompany the tender return which we had never required before but decided to fulfil the requirements at a cost of £3329.50 per annum which I feel is totally unjustified given the delay in the procedure, and now with only 3 months to run on the policy.

(2) Water Service tender C311 – completion date 10th March 2008. Framework for the supply of water pumps and associated equipment. We entered into a partnership with our main supplier KSB Pumps to participate in this tender. This was once again a very involved procedure. We received notification in September 2008 (that the procedure had been delayed due to a review of the results and it has been decided not to progress with it). That was all! No further information or explanation has been received.

As an employer trying to keep our work force and premises moving forward, this type of activity by a public body is not very helpful.

(3) Over a number of years we have had the opportunity to tender to main contractors involved in Water Service contracts. While we have been successful in some areas we have been unsuccessful in many others. This seems to be due to a perceived preference of our competition’s equipment, regardless of the fact that our equipment was more economically advantageous to the client Water Service and in fact this became so prevalent that I contacted my MP Mrs Iris Robinson with my concerns and she was good enough to fight my case with Water Service and consequently with the assistance of Senior Water Service personnel we were able to turn a few decisions in our favour, but we still face the same prejudice to our equipment.

(4) In conclusion – While my experience with Water Service has been difficult it seems that when contracts etc. are awarded there is no further information available to the unsuccessful parties i.e. price comparison, reason for failure, etc. There would appear to be no transparency to the tendering system in N. Ireland which leaves a small business like ours with no procedure to seek any post tender information.

Independent Consultant Adviser Group in NI

To committee.finance&personnel@niassembly.gov.uk

February 23rd 2009

Re: Inquiry into Public Procurement Policy and Practice in Northern Ireland

To Whom It May Concern:

Thank you for your recent call for comments regarding the Central Procurement Directorate (CPD) on the end-user experience of Small and Medium Enterprises and Social Economy Enterprises in tendering for and delivering public contracts.

I write to offer the comments and opinions of the recently formed Independent Consultant Adviser Group in Northern Ireland (www.icagni.co.uk). ICAGNI is a group within Institute of Business Consulting focused on serving the needs of members that are independent consultants or work within small consultancy practices. ICAGNI already has almost 60 participants representing a broad experience of SME, not for profit and enterprise work.

The recommendations of ICAG NI are given against the following 3 headings:

1. Terms of reference and responses to invitations to tender

2. Format of outward and inward communications

3. Transparency of process and information

1.1 Terms of reference and responses to invitations to tender:

1.1.1 The terms of reference for projects must define the outcomes required as well as the specific skillset needed for projects. There should be a list of the minimum requirements / qualifications for certain consultancy roles e.g. for Business Mentoring, business experience could be sufficient or a specific qualification might be required e.g. SFEDI or other Business Advice certificates

1.1.2 The terms of reference shall also specify details regarding the timings of payments and the method of payment. End-loading of payments to successful service providers should be replaced with staged payments at agreed milestones in line with delivery and importantly prompt payment of approved invoices.

1.1.3 Responses to invitations to tender must specify the names and personal experience of individuals who are to work on the project and not the overall experience of the practice

1.1.4 Responses to invitations to tender shall map the specific personal experience as stated above to the skillset and outcomes defined in the terms of reference. Tenderers should submit references who can be contacted to comment on previous work by the tenderer. This feedback should play a part in the assessment process. There will also allow authentication of proposers’ capability.

1.1.5 It shall no longer be a requirement to show public sector experience in order to be considered for invitations to tender. Instead relevant and demonstrably applicable transferrable experience will have equal value. Invitations to tender shall state this facility and the assessment process will attribute equal value to such experience. It is likely that a ‘mapping’ template will be needed to quantify this exchange process.

1.1.6 As smaller practices are often quite specialised, they are better able to compete for small tightly focused projects that might otherwise be rolled up with other work in a large project for which they could not expect to compete. Purchasers are therefore asked to identify specialised components of projects and consider tendering them separately where appropriate.

1.1.7 Framework ‘panels’ should have regular reviews (annual) which allow new applicants.

1.1.8 The assessment process shall be described in the terms of reference including the date for a decision, the format and date of communications to all respondents to the invitation to tender.

1.2 Format of outward and inward communications

1.2.1 Standardised invitations to tender will be freely available for download and review from a web-based portal like www.etenders.gov.ie but without the need for subscription or user name. CPD’s existing e-Sourcing NI portal (https://e-sourcingni.bravosolution.com) would serve this need if it included all tenders in the NI Public Sector and if there was an alerts service.

1.2.2 Pre-qualification questionnaires will be limited to projects which are valued at over £50,000.

1.2.3 All respondent organisations or affiliations of individuals will be welcomed and considered, whether the participating individuals have worked together before or not.

1.2.4 All respondent organisations or affiliations of individuals will be welcomed and considered, whether the participating individuals have worked with the CPD before or not.

1.3 Transparency of process and information

1.3.1 The name or names of the successful contractor(s) / organisation(s) shall be published within 30 days of the selection being made using the same open subscription-free web-based portal as mentioned in item 1.2.1 above.

1.3.2 The evaluation and the assessment process of responses to tender shall be open to outside scrutiny and specific reasons will be recorded for each assessment point a respondent earns or loses during the assessment process.

1.3.3 The above confidential feedback on a respondent’s own tender will be provided to that respondent if they ask for it.

1.3.4 General feedback shall be amalgamated and published on the general reasons why contract was awarded and also general reasons why unsuccessful responses failed. This is expected to feed into and inform future CPD’s tendering masterclass / workshop content.

1.3.5 There is merit in publishing a regular (e.g. annual) ‘Lessons Learned’ on what made for successful tenders Vs unsuccessful tenders.

We thank you for the opportunity to present our observations and recommendations and look forward to reading your conclusions

Bill MacNeill MIBC, MCMI, MCIM, DipM
Chair - Independent Consultant Adviser Group NI

ICAG NI is a group within the Institute of Business Consultants focused on serving the needs of members that are independent consultants or work within small consultancy practices.

Committee on the Adminstration of Justice

Paula Sandford
Clerical Supervisor
Committee for Finance and Personnel
Room 419
Parliament Buildings
Stormont
BELFAST
BT4 3XX

16 February 2009

Dear Paula Sandford

RE: Public Procurement Inquiry

CAJ recently read the public notice about this inquiry and considered that it would be useful to provide you with some of our initial thoughts on this matter. Public procurement, and more specifically, the extent to which procurement policies generally can be linked to social objectives such as the promotion of equality is an issue around which CAJ has taken a long-standing interest. CAJ would be of the view for example that the requirement contained in the Equality Impact Assessment process (contained within Section 75 of the Northern Ireland Act) that public bodies consider “alternative measures which better promote equality of opportunity" provides the framework within which specific measures linking public procurement to social objectives should be located. Clearly however, there are a wide range of other issues relevant to ensuring an effective and efficient system of procurement for Northern Ireland such as impact on SMEs, openness, etc.

It would be our view however that these issues were largely and indeed adequately addressed by the fairly comprehensive Procurement Review, established by the DFP in 2001. CAJ, along with a number of other organizations made submissions to this review, and largely welcomed the findings of the review team. CAJ has also met with the Central Procurement Directorate to discuss the implementation of the Procurement Review, and sat on the advisory group that was subsequently established to assist with the production of the guidance on Equality of Opportunity and Sustainable Development in Public Sector Procurement issued in May 2008.

In fact, the CAJ position would be that certainly the key arguments in relation to wider discussions about the value of linkages between procurement and social objectives (particularly in relation to effectiveness, value for money, legality etc) have been adequately addressed and that the focus now should be one of moving towards implementation of the new Guidance. We would also wish for the Committee to exercise caution in order to prevent “reinventing the wheel" and ensure avoidance of ground that has in fact been well covered by others quite recently.

In order to seek to assist the Committee with their deliberations on these matters we have listed below a range of materials which we think shows the extensive workload that has been produced in relation to this area to date, and which you may find useful for your discussions. In particular, we would consider the evaluation of the pilot procurement projects for assisting with recruitment of the unemployed to be useful in that this relates to an assessment of actual projects which have already been carried out. Moreover, it is clear that the success of the pilot projects highlights the potential benefits of such an approach to public procurement being rolled out across the wider public sector more generally.

CAJ would of course be happy to meet with the Committee to provide any assistance possible for this important issue, or indeed to clarify any of the matters that arise here. We hope that you find this useful, and should you have any queries regarding any of these matters or wish to contact us further please do not hesitate to do so.

Yours sincerely,
Tim Cunningham
Equality Project Worker

Suggested Materials for the Public Procurement Inquiry by the Committee for Finance and Personnel

1. CAJ submission to the Procurement Review (May 2001) (Attached)

2. Equality of Opportunity and Sustainable Development in Public Sector Procurement: Guidance issued by the Equality Commission for Northern Ireland and the Central Procurement Directorate (May 2008) (Attached)

3. Evaluation of Pilot Project on Utilising the Unemployed in Public Contracts Case Study (Attached)

4. Pilot Project on Utilising the Unemployed in Public Contracts: Final Evaluation Report (September 2005), Professor Andrew Erridge et al, University of Ulster, (Attached)

5. Guardian news feature on success of procurement as tool for achieving social objectives in Scotland (Attached).

6. Buying Social Justice: Equality, Government Procurement, and Legal Change, Oxford University Press, (2007)

7. Regeneration and the Race Equality Duty: Report of a Formal Investigation in England, Scotland and Wales (September 2007) (Attached)

8. Equality and Diversity Strategy, Olympic Delivery Authority (July 2007), (Attached)

Northern Ireland Council for Voluntary Action

1.0 NICVA

1.1 As the umbrella representative organisation for the voluntary and community sector in Northern Ireland, the Northern Ireland Council for Voluntary Action (NICVA) has over 1,000 members. Full members, of which there are 945, are independent voluntary and community organisations. NICVA also has 78 subscribers to NICVA services. These include all District Councils in Northern Ireland and some statutory bodies which have an interest in or relationship with the voluntary and community sector

1.2 NICVA is an independent body with charitable status and is a company limited by guarantee. The organisation is owned by its members who elect the board of trustees or Executive Committee. NICVA offers comprehensive advice to member organisations on charity law, funding, finance, personnel and policy matters. With a dedicated communications team, NICVA works to ensure the sector is represented at every level, and that the voice of the sector is facilitated through the media and into the corridors of power.

2.0 Summary

2.1 Voluntary and community organisations experience barriers in the pre-qualification process and the resources it requires. The one-size-fits-all approach means they are going through the same processes for a small contract as would be required for a multi-million pound contract.

2.2 The transaction costs of the bidding process are high and meeting them is difficult for organisations which may be penalised by other funders for maintaining suitable reserves. High transaction costs also raise issues of value for money.

2.3 The added value which a voluntary sector provider brings to a contract may not be continued when the service is re-tendered, but no part of the process seems to take account of this.

2.4 The public sector is not good at focusing on outcomes; rather it focuses on financial information and processes. This means that audit and monitoring during the delivery of a contract can be invasive and disproportionate, as if a grant were being accounted for, rather than service being purchased.

2.5 Social clauses appear to be underused in Northern Ireland. There is enormous potential for them to drive social and environmental benefits. We provide examples of this in other places, including the Olympic Delivery Authority, and recommend social outcomes being tightly specified as part of the core deliverables of a contract. These considerations should be treated as seriously as other factors in the procurement process and this importance must be stressed to both purchasers and partners.

2.6 There is a lack of knowledge on the part of those responsible for procurement in public bodies about what the voluntary and community sector is and what it does. The sector is seen as a higher risk, cheaper option. In other parts of the UK major investment has been put into informing public procurement officials about contracting with the voluntary and community sector; the same should happen in Northern Ireland.

2.7 There are capacity issues within the voluntary and community sector. Aside from the issue of undercapitalisation and reserves mentioned above, there has never been any investment in Northern Ireland in preparing voluntary and community organisations to bid for contracts.

2.8 Northern Ireland should learn from the work done in Great Britain, including the Office of Government Commerce documentSocial Issues in Purchasing and theThink Smart – think voluntary sector guidance for contracting authorities

3.0 Voluntary and community sector experiences of procurement

3.1 Many voluntary and community organisations can be viewed as SMEs since they are tendering for business, providing employment and providing services in the local economy. NICVA has consulted its members on their experiences of public procurement from the perspectives of both tendering and of delivery and has found many common themes.

3.2 Tendering

3.3 Pre-qualification can be a problem. Organisations without a sufficiently large turnover or without a suitable history will not be able to pre-qualify – this creates barriers to entering the field. Voluntary organisations often submit joint bids and need to find suitable partners who will also pre-qualify successfully.

3.4 Resources required for pre-qualification are disproportionate for those only bidding for small projects. Requirements such as the need to demonstrate environmental certification are irrelevant for small projects such as short-term community consultation contracts. The requirements for small contracts are the same as for multi-million pound contracts. A one-size-fits-all process places inappropriate burdens on smaller bidders and discourages diversity in bidders.

3.5 The introduction of the new Frameworks appears to be driving towards centralisation.

3.6 The status of CPD guidance is an issue – on one hand it is just guidance, but on the other auditors are likely to check if it has been followed and thus de facto it is mandatory.

3.7 The transaction costs of the contracting process are very high and this is a particular problem for not-for-profit organisations. Substantial resources must be put into even the earliest stages of a bidding process. This raises two issues – value for money and voluntary reserves.

3.8 Many voluntary and community organisations are undercapitalised.

This is because it is difficult to raise additional money to retain as reserves and grant funders will penalise an organisation for holding even minimal reserves. The Charity Commission for England and Wales recommends that each organisation have an appropriate reserves policy – this may be 6-9 months in most cases. It is difficult for a voluntary or community organisation with limited reserves to make the investment required in competitive tendering, putting them at a competitive disadvantage with regard to the private sector.

3.9 The issue of value for money in using competitive tendering for all services is not straightforward. Aside from the recognised high transaction costs of any competitive process, public bodies seem to be using competitive procurement more to ‘cover’ themselves in case of future audit, than to achieve value for money. In one example, a voluntary sector body brought a project proposal to a public body with an offer of 40% contribution to the funding. The public body was in favour of the proposal but insisted on putting it out to tender. Since the proposing organisation was the only one in a position to deliver for 60% of the cost, they were the successful bidder. This unnecessary process was clearly not a good use of public money.

3.10 The clarification process has been found to be helpful and organisations have benefitted from the feedback they have received. This should be continued.

3.11 Where voluntary and community organisations deliver contracts, often to or with specialised user groups, there may be issues of continuity when the contract passes to another organisation. This is not a straightforward matter when, for example, an organisation delivering a contract has been able to provide added value by using the service delivery as training for people with mental health problems.

3.12 Experience of procurement seems to vary widely across public bodies, with some staff very experienced and familiar with procedures and some less so. These latter need to rely heavily on CPD who are experts in the procurement process but not knowledgeable about the specific service or product being procured.

3.13 Voluntary organisations, having submitted a compliant bid, often find they can suggest additional options which the tendering body had not included but which would improve the service. This is important for organisations who are not entering into contracts purely to make profit, but who want to see exactly the right service to meet the needs of users. In this way they can bring expertise and added value to the process.

3.14 Organisations who have received feedback on unsuccessful bids have found this helpful. This should be continued to enable organisations to develop in the process of submitting bids.

3.15 Since little procurement is undertaken jointly by departments, there is no way of recognising the ‘joined up’ benefits that a contract with one department may deliver to another.

4.0 Delivery

4.1 The public sector is not good on the whole at focusing on outcomes. It is easier to concentrate on financial information and process. Some departments insist on a very invasive relationship even after a contract has been signed. Rather than simply vouching that the service being purchased is being delivered, they demand information on many process issues (which would not be the case for a private sector provider) and may audit the same project up to four times per year.

4.2 Monitoring and audit requirements during project delivery may be disproportionate to the value of the contract, causing staff to spend public money designing systems for recording information and maintaining records for monitoring purposes (one NICVA member recently calculated that these used over 30% of the resources of the project). This is not balancing accountability with value for money.

4.3 Audit appears to be focused on issues that departments feel they might later need to defend and not on what is being achieved by the contract.

4.4 Organisations report experiences of goal posts being moved after a contract has been signed, without additional resources being made available.

5.0 Social clauses

5.1 Social clauses do not seem to be a common feature of contracts, despite much discussion, particularly around investment in infrastructure. It might be more helpful to think of this issue in terms of clearly specifying social outcomes as part of the core deliverables of a contract, so that a contract outcome would specify, for example, involvement of users in design, planning and monitoring of a service.

5.2 NICVA would like to see procurement used to help deliver the sort of society we hope to create in Northern Ireland, for example, one that is more fair and equal; one with good relations; one which is free of paramilitary influence; one in which all people enjoy the benefits of economic growth and feel they have a stake; one in which people enjoy excellent public services; one in which public bodies are open and accountable to a local democratic government.

5.3 Government departments and their agencies have the power, as purchasers and contractors, to ensure that social and environmental considerations become an integral part of the procurement and delivery of any investment project.

5.4 Social and environmental considerations should be integrated into every step of the process and especially in the initial drafting of the specification or terms of reference. They should be treated as seriously as other factors in the procurement process and this importance must be stressed to both purchasers and partners. In any case the social and environmental issues that a contract should be impacting on, such as long term unemployment, equality of opportunity and gender issues and creating shared spaces, will be issues that Government already identifies as important priorities and form part of their requirements under Section 75 and New TSN.

5.5 Procurement could be used as a delivery mechanism alongside Northern Ireland’s Anti-Poverty StrategyLifetime Opportunities.

5.6 We note useful examples from other places, such as Raploch Urban Regeneration Company in Stirling, Scotland, which insists that contractors use local people, including young unemployed people and older jobless people, to renew the estate with legally binding “community benefit" clauses in contracts with developers. In a 10-year programme costing £120m, the scheme includes providing 900 new homes and building new roads, public squares and parks. The company decided 10% of jobs must go to local people, creating 225 jobs over 10 years. That means contractors, each year, must provide five apprenticeships, 10 jobs for semi-skilled operatives and 10 training places through legally binding guarantees. This is possible within EU laws outlawing anti-competitive behaviour since a contract can specify that x% of jobs must go to the long-term unemployed, or new entrants to the labour market, or people needing vocational training. The project has been welcomed as tackling skills shortages in the construction sector.

5.7 Likewise, Argent, developer of the £3.5bn regeneration project behind King’s Cross St Pancras in London, which is delivering a new business and residential district embracing a range of facilities, has a binding agreement with Camden Council. This specifies a minimum 15% of jobs on the construction project will go to people from what it calls the “wider impact area" - in other words, locals and those from greater London. But in certain skilled areas this will rise to 30%.

5.8 NICVA also notes the equality and diversity strategy of the Olympic Delivery Authority in London. The ODA requires its contractors to collaborate in actively promoting race equality, disability equality and gender equality and to operate in accordance with all legislation on equality in employment, including preventing discrimination on the grounds of age, faith and sexual orientation. It requires its contractors to demonstrate practical implementation of equalities duties and legislation through: the development of an equality action plan, with suitably qualified and experienced personnel to oversee it; the operation of effective policies and procedures in relation to equal opportunities, recruitment, workplace harassment, reasonable adjustments and flexible working; the operation of effective equality monitoring; and the development and implementation of diversity training plans. The ODA has developed a balanced scorecard for evaluating potential contractors. Equality and diversity forms one element of the evaluation, as it is a necessary part of effective delivery of the programme. This means that all potential and actual bidders for ODA contracts are encouraged to address equality in employment issues. All companies unsuccessful at pre-qualification stage receive feedback on each aspect of the balanced scorecard, including the equality and diversity component. This feedback includes signposting to sources of information and guidance on how to further develop their equal opportunities practices.

5.9 We would also refer the committee to the report funded by the Joseph Rowntree Foundation Achieving community benefits through contracts: Law, policy and practice.

6.0 Recommendations

6.1 There needs to be more clarity around the circumstances in which competitive tendering is being used. Public bodies fund voluntary and community organisations via a range of methods including grants, grant in aid and contracting. However, within contracts there are competitive procurement processes, service level agreements and outcome agreements, all different in process.

6.2 As increased responsibilities pass to local authorities under RPA, voluntary and community organisations would like to encourage councils to continue to use them for service provision rather than move everything in-house.

6.3 There seems to be a lack of knowledge on the part of those responsible for procurement in public bodies about what the voluntary and community sector is and what it does. The sector is seen as a higher risk, cheaper option. In other parts of the UK major investment has been put into informing public procurement officials about contracting with the voluntary and community sector (for example, the work done by the Office of the Third Sector and Cabinet Office in England – see below) but nothing has happened in Northern Ireland. England also has a target for service delivery through voluntary and community organisations, but no such target exists here. This should be remedied.

6.4 The inability to account effectively for outcomes means that the public sector finds it difficult to recognise the added value being brought by voluntary and community organisations as the metrics simply do not exist to measure it. Investment should be made in developing suitable metrics to enable more intelligent procurement.

6.5 We are aware that for contracts below £100k, if two bids are the same on everything but price and one bidder is involving marginalised groups or individuals then that bidder can be given opportunity to reprice. There should be exploration of the scope to expand this within EU regulations, and to make it more widely known.

6.6 There are capacity issues within the voluntary and community sector. Aside from the issue of undercapitalisation and reserves mentioned above, there has never been any investment in Northern Ireland in preparing voluntary and community organisations to bid for contracts. This should now happen to create a level playing field.

6.7 We recommend consideration of the documentThink Smart – think voluntary sector. This is guidance for contracting authorities issued by the Office of Government Commerce in 2004. It states: ‘The myth that the EC Procurement regime is a barrier to effective procurement from the VCS must be dispelled. Firstly, most contracts with the VCS [Voluntary and Community Sector] are likely to be in the field of social services, health, education and other community services. Such contracts, although subject to the EC Treaty principles of transparency and non-discrimination, are not subject to the full application of the EC procurement Directives, but to a lighter regime.’

6.8 The document lists the advantages of contracting with the voluntary and community sector as:

• Established links with the community – VCOs (voluntary and community organisations), especially locally based ones, although not necessarily large national providers, are often deeply embedded in local communities with a thorough understanding of the political and social environment in which they operate. They can be especially skilled at drawing upon resources in the community and gaining local support for new projects.
• Understanding the needs of specific client groups and real passion, focus and commitment to action on a specific issue. Greater capacity to reach and earn the trust of excluded or disadvantaged groups. This is often facilitated by recruiting those with direct experience of the user perspective.
• Independence and freedom from institutional pressures – VCOs are generally not constrained by complex structures and rules. They are independent and driven by their charitable aims rather than the search for improved profit margins. This can make them enthusiastic, committed, and especially flexible and responsive to customers needs.
• Innovation – the VCS is well placed to offer fresh and innovative solutions. They may be less risk averse and have a stronger motivation, through their charitable aims and objectives, to identify better ways of doing things.
• Responsiveness – VCOs may be highly focused on particular services or sectors of the community making them alert and responsive to changes in those markets.
• Economies of scale – because some VCOs are often specialists in a particular field, they can provide services in a way which benefits from economies of scale.
• Niche markets – many VCOs survive by supplying highly specialist services which private sector suppliers find unattractive or outside their competence.

6.9 In terms of the barriers to involving the sector in procurement it lists many of the issues that NICVA members have identified including:

• Lack of early and effective consultation with the VCS in the development of policy, programmes and strategies, leading to poorly packaged or unattractive procurements.
• Failure to properly assess VCOs’ capabilities and to consider them as serious contenders. Insufficient recognition given to their strengths and skills. Public sector procurers too risk averse and worried that VCOs lack the resources, organisation, and business skills to deliver.
• Difficulty in finding out about contract opportunities and who to approach about becoming a supplier. VCOs often lack knowledge and experience of Government procedures and have great difficulty in breaking into the market.
• Trend towards use of large scale contracts, such as national or regional frameworks, and rationalisation of the supplier base, rules out many VCOs. Difficulty in forging alliances with prime contractors prevents them from playing a support role in the supply chain.
• Complex and costly pre-qualification and tendering procedures with unrealistic timescales, prescriptive specifications and excessive contract terms. Means invitations to tender can be consigned to the ‘too difficult’ pile.
• Lack of a level playing field in procurement, particularly relating to the unwillingness of some procurers to accept full cost recovery, including management charges, in VCO tender prices.

6.10 In relation to the issue of pre-qualification theThink Smart document advises that“Pre-qualification criteria should be carefully chosen to avoid unnecessary ruling out at this stage of competent suppliers. Whilst it is important to select suppliers that are financially sound and capable of delivering the solution, this does not necessarily mean the largest suppliers with the most extensive track record."

6.11 Another Office of Government Commerce document Social Issues in Purchasing suggests that staff should be trained in/made aware of social issues“Eg if the user requirement was to build a hospital, a contracting authority’s awareness of regional neighbourhood renewal issues might lead it to consider locations in certain deprived areas in order to facilitate their regeneration". Both guidance documents advocate making procurement opportunities widely known and ensuring they are accessible to small and medium business, social enterprises and the voluntary sector. “Encouraging increased competition through assisting these kinds of bodes should help deliver value for money benefits for contracting authorities and at their best these kinds of organisations can provide innovative, responsive and cost effective solutions to the kinds of outcomes sought by public bodies through procurement. Bodies such as social enterprises and voluntary organisations may often be placed well the deliver certain types of contract eg services to deprived sections of the community".

6.12 Additionally in Great Britain, a National programme for Third Sector Commissioning has been established with funding from the Cabinet Office. It attempts to ensure that government bodies and councils follow the guidance in three main documents: theCompact Code of Good Practice for Funding and Procurement (Commission for the Compact, 2003),Small Business Friendly Concordat (Office of the Deputy Prime Minister, 2005), and the eight principles of good commissioning (Cabinet Office, 2006, paragraph 30). It works partly through training public sector commissioners and procurement professionals on the role of the voluntary and community sector. We recommend that the Committee consider this work and recommend similar training in Northern Ireland.

For further information please contact:
Frances McCandless, Director of Policy
Tel 9087 7777 frances.mccandless@nicva.org

Lestas Consulting

1.1 Introduction- This paper has been produced for the Committee by Lestas Consulting - a local Management Consultancy Company specialising in supporting SMEs and SEEs to procure to the public sector and supporting the public sector to examine good procurement practice. This paper aims to highlight a number of issues that SMEs experience when tendering to the public sector that have been raised in our ongoing work with SMEs and public bodies (Central and Local government and non departmental government bodies) in the area of public procurement.

1.2 The Context for Lestas Consulting Responding - Lestas Consulting is an indigenous Northern Ireland Management Consultancy Company with an international presence having offices in Northern Ireland and Cyprus. The company was established in 2000 and has been successfully operating as a partnership with 4 permanent staff and up to 15 associate consultants who are specialists in a variety of fields. We expanded our operations to Cyprus in 2007 and have successfully delivered on contracts to the private sector and with Central Government on the Island. Lestas Consulting specialises in management and strategic planning and corporate governance. We are currently on the Department of Finance Central Procurement Directorate Framework for the undertaking of contracts across the whole of the NI Civil Service in the following categories:

• Corporate Governance
• Strategic Management
• Performance Measurement
• Projects
• Feasibility Studies
• Organisational Development
• Evaluations
• Economic Appraisals

Our clients include the following types of organisations:

• Local Authorities
• Public/ Private Partnerships
• Central Government Departments
• Non- Government Departmental Bodies
• Private Sector Companies
• Social economy Businesses
• Private Sector Network Organisations
• Cross Border Institutions
• Statutory Bodies/Agencies
• The Voluntary & Community Sector

Lestas Consulting, has extensive experience in the provision of specialist procurement advice, developed and promoted over the past 5 years for both the public and the private sector. In the past number of years, Lestas Consulting has acted in an advisory role on public sector procurement and the implementation of the EU Directives and national law to Local Government, Central Government (both here and in the EU) and over 280 companies from the private sector. In this regard we are well positioned to provide comments on public sector procurement for SMEs in Northern Ireland.

1.3 Definition of an SME for Northern Ireland purposes - In the first instance it is important for the Committee to provide the definition of SME. Public Bodies in Northern Ireland consider that they have 100% submission from the SME sector in Northern Ireland to its tender notices and a 100% success rate of award of contracts to SMEs – given that the definition relates to all businesses employing up to 250. In Northern Ireland over 90% of our SMEs are micro enterprises employing less than 10 people. The current definition used by public bodies makes it difficult to make a case for the real barriers for the majority of our businesses.

1.4 The cost of Public sector tendering to SMEs – This has not been examined in detail yet. However initial indicators are that it is often a very expensive process, involving extensive input from senior staff and owner/managers. Estimates are that it can be up to 35% of annual turnover depending on the size of the company and its dependency on the public sector.

1.5 Public Body Frameworks – The documentation and process involved in the primary stage of frameworks is lengthy, cumbersome and expensive for small businesses. Experiences to date indicate that the primary process for frameworks does not in any way lessen the documentation required for the secondary process. SMEs still need to complete a tender response in the secondary process in the same way as any other open competitive tendering process. Frameworks at present mean double the tendering work for an SME.

1.6 Success Rate for SMEs in Government Frameworks – Central government needs to provide statistics on how successful small companies are on getting onto the framework but more importantly, how successful small companies are at securing contracts from the framework. Initial indicators are that the success rate for companies on the framework (and who have therefore proved their capacity and capability to deliver government contracts) to secure contracts is a very staggering figure and certainly below 20%. This paper calls on the Committee to investigate these figures as part of a detailed research report.

1.7 Contract Management Skills by Managers in the Civil Service - It seems 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 is in direct contrast to the fact that the company has been placed on the frameworks and has therefore proved their capacity and capability.

1.8 The use of the Accelerated process in an economic downturn – In order to assist the current economic crises for the business sector, the EU is calling on government bodies to increase the use of the accelerated process in the restricted process. This means that when procuring public contracts the response time is educed to 10 days from issue of tender notice to tender submission dates. Although this is positive in one sense it also has the potential to create another barrier for a small company, The shorter response time is unlikely to allow small companies enough time to prepare their tender documents.

1.9 Contracts below the EU Thresholds – Most small companies in Northern Ireland procuring to the public sector are working on contracts below the EU thresholds. Most public bodies procuring contracts below the thresholds are not taking the care and direction of good and similar practice as set out in the EU Directives. The processes used for these contracts and the Terms of Reference documentation produced is often of poor quality, that does not adhere to an open, transparent and objective procurement process. For example, decisions are made on contract award without clear understanding of evaluation of award criteria. Award criteria and sub criteria are not published in terms of reference so SMEs are unclear of the emphasis required in their tender response or how the award decision is reached.

1.10 The Debriefing Process –There is a complete lack of consistency across public bodies on the debriefing process from central government through to local authorities. Small companies must be encouraged to use the debriefing process in its entirety as a business development tool and civil servants need to appreciate the importance of this process for SMEs. FSB members highlight the significant barriers to them receiving any useful information in the debriefing process. The OGC provide extensive guidelines to public bodies in the UK of which there is little reference by public bodies in Northern Ireland. Public bodies still do not take the debriefing process seriously even with all the guidelines highlighting the importance of this part of the procurement process. In a number of cases public bodies “hand over" the debriefing process to a junior member of staff who has not been involved in the procurement process. Importantly, this lack of consistency and priority of the debriefing process appears to be increasing the use of the FOI act by SMEs when a more structured debriefing process would have been satisfactory. Given the significant financial commitment that SMEs can invest in public tendering (as outlined in section 1.4) it is important that the breath and depth of debrief information provided by public bodies also acknowledges this commitment.

1.11 Freedom of Information – There is a complete lack of consistency across public bodies on what information can be disclosed from a procurement process under the Act. Small companies highlight many instances where one public body does disclose information and another does not. Public bodies need to agree and have a consistent approach to enable SMEs to effectively use this process.

1.12 Recommendations – This paper concludes with a number of recommendations to ensure the procurement process from public bodies has a greater emphasis on supporting SMEs.

• It is important that the Committee clearly establishes and communicates a definition of SME for the remained of this investigation into public sector procurement to ensure that it recognises that micro enterprises (employing less than 10 people) form almost 90% of our business population.
• There is a need for the Committee to fully investigate the current public body framework approach to ensure that any secondary process is minimal to reflect the current depth of information provided in the primary process.
• There is a need for the Committee to examine the success rate of direct contract award in the secondary process to the micro enterprises currently on the framework that have already proved their capacity and capability in a primary process.
• There is a need for an educational process for contact managers in public bodies on the opportunities provided by SMEs in delivering public contracts. It is important that civil servants are supported to award contracts directly to smaller companies that have proved their capacity and capability and change the current “comfort in a larger company" culture.
• There is a need for the Committee to ensure that public bodies engage in the accelerated procurement process with caution.
• There is a need for the Committee to ensure there is consistency in approach across public bodies when tendering under EU thresholds and to ensure an open, objective and transparent procurement process.
• The Committee needs to ensure that procurement managers across public bodies are properly trained in the tender debrief process and to standardise the information provided during this process when any public funds are involved in the contract either directly or indirectly through a third party such as a partnership.
• The Committee needs to ensure public bodies have a consistent approach to FOI requests from SMEs in relation to a public procurement process in which they are involved and to effectively use this process.

Signed Date 26 February 2009

Michelle Lestas, Partner
Bsc(Hons), MBA, MCIPS, MIIPMM

Royal Institution of Chartered Surveyors

Royal Institution of Chartered Surveyors

27 February 2009

Mr Mitchel McLaughlin MLA
Chairman
Northern Ireland Assembly Committee for Finance and Personnel
Room 419
Parliament Building
BELFAST
BT4 3XX

Dear Mr McLaughlin

Re: Inquiry into Public Procurement Policy and Practice in Northern Ireland

The Royal Institution of Chartered Surveyors (RICS) Northern Ireland is the principal body representing professionals employed in the land, property and construction sectors and represents some 3,000 members. Our members practice in land, property and construction markets and are employed in private practice, in central, regional and local government, in public agencies, in academic institutions, in business organisations and in non-governmental organisations.

As part of its Royal charter, the Institution has a commitment to provide advice to the Government of the day and, in doing so, has an obligation to bear in mind the public interest as well as the development of the profession.

In relation to private consultant and contracting firms, the RICS construction membership represents large multi-national organisations, local SMEs and sole practitioners working in the fields of quantity surveying, building surveying and project management. This broad representation allows RICS to provide a balanced opinion and impartial advice on the current status of the Northern Ireland construction industry.

RICS welcomes this opportunity to provide written evidence to the Committee for Finance and Personnel in relation to the public procurement policy and practice in Northern Ireland. We have responded to four of the key terms of reference under the following headings.

1. Examine the experience of SMEs and SEEs in tendering for and delivering public contracts

RICS members representing the interests of SMEs working within the Northern Ireland construction industry have experienced difficulties in tendering for public sector contracts that use a framework procurement strategy.

RICS recognises the benefits of using a framework procurement strategy, such as, reduced administration costs to clients and the industry, improved long term relations between client and supplier and greater long term efficiency savings. On the downside our members are also very aware that frameworks exclude unsuccessful firms from a particular area of work for up to four years, thus reducing the opportunity to improve wider skills and experience within industry. Frameworks also restrict the overall choice of suppliers and expertise and increase the risk of excluding smaller firms from the bidding process.

In Northern Ireland frameworks have come under scrutiny as they are perceived to unfairly disadvantage the mainly SME market. Many SMEs have delivered on similar schemes in the past and have the potential to deliver on frameworks, but are excluded due to excessively high selection criteria. For example, insurance and company turnover set at levels beyond the capacity of most SMEs and disproportionate to the size and nature of the anticipated workflow.

Two very large frameworks in Northern Ireland failed to get off the ground due to successful legal challenges. In contrast, some frameworks in Northern Ireland such as those managed by DHSSPS, Health Estates have operated successfully for many years. RICS believes it is the ‘one size fits all’ approach to frameworks that has failed in these instances and not frameworks as a potential procurement strategy.

To ensure the success of future frameworks that represent fairness, transparency, BVFM and promote competition, RICS recommends:

• Smaller frameworks (in value) to encourage a higher level of competition and experience within the market;
• Selection criteria such as insurance levels and company turnover should not discriminate against SMEs but be in proportion to the size and nature of the anticipated workflow;
• The number of teams should reflect the total value of work on the framework and the number and size of projects to be let;
• Criteria should accurately define the technical ability and experience required by bidders to distinguish successful bidding potential at an early stage. This will reduce costs to both industry and clients; and
• Where possible frameworks should be geographically based.

Frameworks appear to be the preferred procurement strategy by many government departments. However, it is important that government departments are aware that frameworks are not the only procurement strategy available to them.

Despite the current disorder of public procurement, the downturn of the construction industry, and the urgent need to get work to the market, RICS would under no circumstances wish to see a return to lowest cost tendering.

2. Consider the nature, extent and application of social clauses within public contracts.

The provision of social clauses is currently being incorporated into the procurement processes in some government departments such as the Department of Education. In principle, RICS Northern Ireland welcomes this; however, in the current economic climate with increasing redundancies it may become more difficult to comply.

Unemployment levels vary across Northern Ireland and as such RICS recommends that where permitting, social clauses reflect this regional variation on a project basis taking into consideration the location of a projects and local community need.

3. Identify issues to be addressed and which are within the remit of Department Finance and Personnel;

Workflow

In 2007 the Northern Ireland construction industry readied itself in anticipation of the Investment Strategy for Northern Ireland 2008 -2018. Since its publication the anticipated workflow has not been realised.

Findings from the RICS Construction Market Survey Q3, 2008, indicated that Northern Ireland had experienced the sharpest decline in workloads in the UK across all sectors and the lowest levels since the survey began in 1994. Expectations in workload, employment and profits also recorded the lowest levels since the survey question was first asked in 1998.

This is mainly due to delays in the publication of the second Investment Strategy for Northern Ireland (ISNI2) delivery strategies for education and health estates and the recent legal challenges to the Department of Education and Central Procurement Directorate frameworks. The impact of the economic recession on house building and other private sector construction projects is also having a major affect on the stability of the construction industry.

A steady flow of public sector construction projects has traditionally offset any decline in private sector work and provided certainty within the industry. As it stands the continuing uncertainty of public work makes it difficult for contractors and consultants to plan ahead and maintain staff levels.

Skills

Job losses amongst highly mobile construction professionals will have a significant impact on the availability of skills for future projects as they seek employment elsewhere. RICS has experienced difficulty in placing third year university students with consultants and contracting firms due to increased levels of redundancy within the industry. Construction apprenticeships have also been hit by the downturn in the market with few construction firms taking on new apprentices and many existing apprenticeships being ended early. In summary, the level of skills within the Northern Ireland construction market is reducing which may lead to skills shortages in the years ahead.

The construction industry remains ready and waiting for public sector work; however, projects appear to be tied up in process and bureaucracy. The Northern Ireland construction industry requires clear guidance from the Executive on when work will be released.

Communication with the industry

The Strategic Investment Board (SIB) announced at an RICS procurement workshop in November 2008 that they were committed to launching the Delivery Tracking System (DTS) in early 2009. This tool would provide greater certainty to the industry in understanding where projects are within the government system. However, more recently, RICS have been informed that the DTS is currently undergoing a number of tests and will not be ready for at least another few months.

RICS recommends that the Delivery Tracking System (DTS) goes live as a matter of urgency and has commitment by all Centres of Procurement Expertise (COPEs) to be updated with current and accurate data on a regular basis.

In the absence of the DTS the industry must be kept informed of the progress of new construction opportunities through the development of a clear communication strategy. A starting point would be the regular publication of the CIFNI Procurement Task Group Project List on the DFP website.

Future workloads

RICS welcomed the announcement by the Department of Finance and Personnel in December 2008 to bring forward construction projects worth £115million to proceed to tender on a project by project basis by March 2009. These projects were originally scheduled under the delayed Department of Education and Central Procurement Directorate (CPD) frameworks.

Despite the commitment from the Department the process of delivering these projects to the market is too slow and many will not be ready for tender by the end of the financial year. Once a project is put out to tender it can take 3-4 months before it is awarded and becomes revenue earning; even longer for contractors where design development is applicable.

Our members are concerned that CPD does not have the necessary resources to deliver this work to the market in the timeframe proposed. They are also concerned that there is very little planned work coming out of the system in the twelve months ahead.

RICS recommends that CPD is provided with the necessary resources required to deliver these overdue projects.

The Northern Ireland Executive should re-examine the public works construction programme and bring forward future planned projects into years 2009 -2010 to ensure continued workflow.

The release of this new work must be managed in a timely and consistent manner.

It is essential that Government departments are efficient in their procurement activities. Where there is inaction and budgets are not being spent, funds should be transferred to departments that can use the resources to bring planned work forward to the market place.

Principles of procurement

RICS Northern Ireland supports the twelve guiding principles which govern the administration of public procurement and recommend that they be revisited by all COPEs to ensure they are understood and applied in what are increasingly complex circumstances.

Transparency and objectivity in procurement processes is of particular importance and necessary at this time to rebuild industry confidence.

Standardisation of procurement practice

RICS members have experienced inconsistency across all government departments in tender documentation, the application of evaluation and assessment criteria, and the value and effectiveness of debriefs.

RICS recommends the development of a unified procurement strategy that ensures the consistent application of evaluation and assessment criteria, tender documentation and constructive debriefs across all COPEs.

4. 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 government procurement.

In summary, outlined below are the recommendations highlighted under the previous headings:

1. To ensure the success of future frameworks that represent fairness, transparency, BVFM and promote competition, RICS recommends:

a. Smaller frameworks (in value) to encourage a higher level of competition and experience within the market;

b. Selection criteria such as insurance levels and company turnover should not discriminate against SMEs but be in proportion to the size and nature of the anticipated workflow;

c. The number of teams should reflect the total value of work on the framework and the number and size of projects to be let;

d. Criteria should accurately define the technical ability and experience required by bidders to distinguish successful bidding potential at an early stage. This will reduce costs to both industry and clients; and

e. Where possible frameworks should be geographically based.

2. RICS would under no circumstances wish to see a return to lowest cost tendering.

3. Unemployment levels vary across Northern Ireland and as such RICS recommends that where permitting, social clauses reflect this regional variation on a project basis taking into consideration the location of a project and local community need.

4. The Northern Ireland construction industry requires clear guidance from the Executive on when work will be released.

5. RICS recommends that the Delivery Tracking System (DTS) goes live as a matter of urgency and has commitment by all COPEs to be updated with current and accurate data on a regular basis.

6. In the absence of the DTS the industry must be kept informed of the progress of new construction opportunities through the development of a clear communication strategy. A starting point would be the regular publication of the CIFNI Procurement Task Group Project List on the DFP website.

7. RICS recommends that CPD is provided with the necessary resources required to deliver the £115million worth overdue projects.

8. The Northern Ireland Executive should re-examine the public works construction programme and bring forward future planned projects into years 2009 -2010 to ensure continued workflow.

9. The release of new work must be managed in a timely and consistent manner.

10. It is essential that Government departments are efficient in their procurement activities. Where there is inaction and budgets are not being spent, funds should be transferred to departments that can use the resources to bring planned work forward to the market place.

11. RICS Northern Ireland supports the twelve guiding principles which govern the administration of public procurement and recommend that they be revisited by all Centres of Procurement Expertise (COPEs) to ensure they are understood and applied in practice in what are increasingly complex circumstances.

12. Transparency and objectivity in procurement processes is of particular importance and necessary at this time to rebuild industry confidence.

RICS Northern Ireland looks forward with interest to the outcome of this inquiry and would welcome the opportunity to meet the Committee to discuss the issues raised in our response.

Yours sincerely

Ann Stewart
Public Policy Executive

(t) 02890 322 877
(e) astewart@rics.org

Unison Evidence to Committee for Finance and Personnel

Scrutiny of Public Procurement Practice in Northern Ireland

1. UNISON is responding to this call for evidence as the lead public sector union in the UK, and lead NIC-ICTU representative in recent partnership reviews of procurement practice involving DFP, the Equality Commission, the CBI Central Procurement Directorate and the Strategic Investment Board.

2. We attach a bibliography of relevant material which may be of interest to the Committee. The key text is;

Equality of opportunity and sustainable development in the public sector, Equality Commission for NI and the Central procurement Directorate, May 2008

www.cpdni.gov.uk/equality_of_opportunity_and_sustainable_development_-_full_guidance.pdf

This has the specific endorsement of the Equality Commission, the Department of Finance and Personnel, and the previous Minister in his capacity as Chair of the Procurement Board. It is therefore policy arising from the work of social partners. It prescribes a range of social clauses, and cross-refers to all relevant policy in this area. It sets procurement standards for all public bodies.

3. To meet the objectives of your scrutiny exercise, we recommend that there be focus on the extent to which DFP is taking steps to mainstream this policy into procurement activities of all Departments and public bodies, and actions taken by DFP to communicate and if necessary ensure training in the policy. The Committee may also wish to ask DFP which recent contracts have been let in accordance with the policy.

4. The Committee is seeking to examine the capacity of SMEs and SEEs to compete for public contracts. UNISON considers that the public purpose should be paramount in the letting of contracts, and that there should be no compromise to promote market entry on the protection of the public interest, service users, and workers. In addition, the processes (including pre-contract review and post-contract monitoring) set out in the May 2008 policy are fundamental to preserving the public interest and compliance with the full range of Executive policy.

5. As well as considering the benefits of market entry for SME’s and SEE’s, the Committee should also consider the risks. For example, the Guardian (18/02/08) reported on the risks faced by SEE’s and the voluntary sector when asset bases had been neglected in the search for income from public sector service delivery contracts. UNISON has observed in the context of detailed involvement with PFI processes that this procurement route seems particularly hostile by its nature to the involvement of local SME’s/SEE’s.

6. We note your reference to ‘undue delays in progressing procurement contracts’, and the impact of delays in planned capital expenditure on the construction sector.

Contrary to myths and excuses promoted by the SIB, there are no inherent or practical delays in the May 2008 policy. Put simply, the infrastructure programme does not stand up, never stood up, was totally oversold to promote the PFI model, and led to the spiking of Departmental budgets on the assumption of PFI. In changed circumstances this is blocking the effective release of infrastructure funding.

A probing review by the Committee of these circumstances and the role played by DFP would be welcomed by all concerned for new infrastructure, better services, equality, social inclusion and sustainability, and the urgent need for countercyclical expenditure.

7. UNISON would be content to give verbal evidence to your Committee on the issues highlighted above, and the general remit of your scrutiny exercise. Our contact is Thomas Mahaffy (t.mahaffy@unison.co.uk) if you wish to take this forward.

Bibliography

Refinancing: profiteering from public services UNISON 1 November 2008

Lots of PFI contractors are ‘refinancing’ their loans - changing the terms of their borrowings to increase profits by as much as 80%. Most public bodies making PFI deals have allowed contractors to keep all these windfall profits. The National Audit Office and the Public Accounts Committee have condemned these arrangements and said the benefits of refinancing should be shared between contractor and client. http://www.unison.org.uk/pfi/docs_list.asp

What is wrong with PFI in schools UNISON 2 September 2008

As more PFI schools are built it becomes possible to judge their success. UNISON has members intimately involved in PFI. This report draws on their experience and rounds up the evidence to date. http://www.unison.org.uk/pfi/docs_list.asp

PFI: Against the Public Interest UNISON 29 July 2008

The report analyses the failings of the government’s private finance initiative and public private partnerships, highlighting high profile contracts which have failed and PFI companies, such as Ballast which went into receivership. http://www.unison.org.uk/pfi/docs_list.asp

Public risk for private gain? The public audit implications of risk transfer and private finance UNISON 7 July 2008

A new UNISON report shows that the government has failed to evaluate its own claim that extra costs of PFI are justified, because risks are transferred to the private sector. There are now more than 500 PFI deals worth £36bn, but the the true cost of these deals to the taxpayer is still unknown and private companies are reaping the benefits of this oversight, at the expense of the public purse. (NB: This is a 1.2MB download) http://www.unison.org.uk/pfi/docs_list.asp

Equality of opportunity and sustainable development in the public sector Equality Commission for NI and the Central procurement Directorate May 2008

www.cpdni.gov.uk/equality_of_opportunity_and_sustainable_development_-_full_guidance.pdf

UNISON comments on new Treasury guidance for PFI April 2004 UNISON 23 April 2008

UNISON welcomes the Treasury’s review of PFI, in particular, the recognition that value for money should not be at the expense of the workforce and that soft services do not have to be included in PFI projects. We would like to see these policies incorporated into the methodology and translated into clear obligations on departments and contracting authorities. http://www.unison.org.uk/pfi/docs_list.asp

A Policy Built on Sand UNISON 24 January 2008

Report released by UNISON proves that private finance initiative schemes do not out-perform public sector projects. http://www.unison.org.uk/pfi/docs_list.asp

At What Cost? UNISON 8 October 2007

This UNISON report shows how using private firms to build and run schools and hospitals in Scotland is wasting billions of pounds http://www.unison.org.uk/pfi/docs_list.asp

Not So Great: Voices from the frontline at the Great Western PFI Hospital in Swindon UNISON 1 January 2003

Staff working in nine PFI-funded hospitals speak directly of their experiences of the new system and revealed many of the problems and blunders concealed behind the glitzy exterior of the new buildings. This report, also researched for UNISON by John Lister, asks similar questions of staff at one of the most recently opened PFI hospitals, Swindon’s £132 million Great Western Hospital. http://www.unison.org.uk/pfi/docs_list.asp

Review of opportunities for public private partnerships in Northern Ireland A submission by UNISON September 2002

Contact Thomas Mahaffy – t.mahaffy@unison.co.uk

Response of the OFMDFM Committee to the Finance and Personnel Committee’s Inquiry into Public Procurement Practice

Introduction

1. The Committee for the Office of the First Minister and deputy First Minister welcomes the inquiry into Public Procurement Practice initiated by the Committee for Finance and Personnel.

2. Having regard to the terms of reference of this inquiry, the OFMDFM Committee commissioned initial advice from Assembly Research and Library Service on the application of social clauses within public contracts.

3. A social clause is a requirement within a procurement contract or process which stipulates that the contract should provide added social value.

4. The Executive has committed to using Government procurement to further its social objectives in the Programme for Government.

The Role of OFMDFM

5. The Committee is aware that social clauses in public procurement could have a particularly positive impact at this time of global economic downturn.

6. The Committee noted that as the Department with responsibility for monitoring the Programme for Government and for the Strategic Investment Board, OFMDFM is in a position to influence procurement policy.

7. The Committee urges OFMDFM in the strongest of terms to build on existing best practice and develop expertise in employing social clauses in procurement.

8. The research commissioned by the Committee highlights cultural and technical difficulties experienced by procurement professionals in analysing and evaluating the wider social policy aspects of procurement exercises.

9. The Committee considers that the Department has a key role in overcoming such barriers.

10. The Committee further commissioned research to identify approaches in overcoming technical challenges and to highlight examples of successful use of social clauses.

11. The Committee is in no doubt that these best practice approaches and examples can be built on to achieve crucial social outcomes on agreed Government projects.

12. For instance, training, apprenticeship and employment imperatives in capital procurement exercises could maintain capacity in the construction industry and address fundamental problems such as growing unemployment in recession.

13. The Committee wishes to flag up in particular the Northern Ireland Unemployment Pilot Scheme, which promoted the employment of the “unemployed" in large construction contracts.

14. The benefits of this pilot were found to outweigh the costs on evaluation by CPD and the University of Ulster.

Conclusion

15. The Committee was emphatically in favour of raising the social value of every pound spent from the public purse, ie the ratio of investment to the value of the social outcome (social return on investment).

16. The Committee agreed that OFMDFM and the Strategic Investment Board were responsible for driving cultural change in procurement and prioritising social return on investment in Programme for Government targets.

17. For completeness, the Committee refers CFP and OFMDFM to this research.

Chartered Institute of Purchasing and Supply

Committee for Finance and Personnel
Northern Ireland Assembly
Committee Office, Room 419
Parliament Buildings
BELFAST
BT4 3XX

26 February 2009

To whom it may concern

Re: The Chartered Institute of Purchasing & Supply Northern Ireland Assembly consultation response on the use of SMEs

The Chartered Institute of Purchasing & Supply (CIPS) is an international professional membership organisation with 50,000 members in 150 countries. Dedicated to promoting good practice, CIPS provides a wide range of services for the benefit of members and the wider business community.

CIPS consulted its membership in order to form a response to the Northern Ireland Assembly report on Public Procurement and SMEs. A range of responses were received from members with EU Public Procurement experience of contracting with SMEs.

CIPS position on contracting with SMEs

Small and medium size (SME) businesses are a significant part of most economies, and an important factor in ensuring varied, competitive and innovative supply markets. Whilst SME suppliers offer many opportunities to larger organisations and vice versa, there are often barriers – both real and perceived – to doing business. There has never been a shortage of supportive words for SMEs, but there has often been a shortage of supportive action.

Whilst there is an increasing awareness in many sectors that SMEs have much to offer as suppliers, there is often a disconnect between SMEs and larger organisations, including the public sector, in their attempts to do business. Both parties need to understand what these barriers are, and to commit to overcoming them.

Understanding why SME’s have been under utilised in the past

• A drive for organisations to consolidate spend and reduce their supply base
• Product and service standardisation projects
• Security of supply – in particular with an over-reliance on standards, certifications, complex quality standard systems and, in some cases, lengthy historical financial data.
• Complex processes with little guidance

However, it is worth noting that some of these barriers are often perception rather than reality. For example, buyers have a perception that SMEs can pose more of a risk than larger organisations, and SMEs often do not ask for help when completing their invitation to tender (ITT) because they do not think that they can, or that it will reflect badly on them. Some SMEs also anecdotally hear that it is difficult to win public sector contracts so they often eliminate them from their business plans automatically.

CIPS is supportive of initiatives that provide a level playing field for SMEs to contract with the public sector. We believe that areas for immediate action include:

Ease of access – Supplier portals are a successful way of making information more available and accessible to SMEs. The Olympic Delivery team has created a portal for buyers and suppliers to review bidding opportunities. The CompeteFor website is intended to match companies to opportunities in the London 2012 supply chain providing a level playing field for organisations of any size to compete for the £6bn of Olympic work. This model is being reviewed and could possibly become a model of excellence to be rolled out throughout the public sector. CIPS believes that the use of technology should be deployed where appropriate in order to simplify and speed up the process.

Collaboration – The CompeteFor website also allows suppliers to seek partners in order for them to compete for larger pieces of work. CIPS believes that this is a mechanism that will increase the opportunities for SMEs to contract with the public sector. Sellafield Ltd, set up a supplier ombudsman to, amongst other things, act as a facilitator to put similar small suppliers in touch with each other in order to collaborate and jointly tender for Sellafield contracts. This was set up after a large scale review to consolidate and reduce their supply base and acted as a way to keep some of those suppliers on board. CIPS suggests making awarded contracts more publicly available could allow SMEs access at the second tier supplier level.

Under the threshold notices – CIPS would encourage a wider publication of those notices that fall under the EU thresholds in order to attract SMEs at a lower level entry.

Guidance – Information on how the public sector procurement processes work is available from many sources. BERR have recently launched a “Solutions for Business" which is a streamlined portfolio of publicly-funded business support products that organisations can access through Business Link. The idea is to provide a single source of information to avoid confusion. CIPS is supportive of clear guidance written from the supplier’s viewpoint in plain English. The use of jargon and acronyms should be avoided as much as possible and examples used wherever relevant. As well as a central, independent, source of information, contracting departments should signpost their suppliers to this available resource and provide an internal contact to answer any supplier queries.

Training – Guidance material is often laborious and difficult to understand. On some occasions training will be required. CIPS is in favour of buyers providing training to their suppliers on how to best compete for the work. This may be through ‘Meet the buyer’ events, workshops, on-line tutorials or by putting successful suppliers in touch with prospective ones (where there isn’t a conflict of interest) to coach and share experiences.

Realistic requirements – Often SMEs are excluded, or feel excluded from public procurement contracts due to requirements being set too high. Careful consideration should be used when using standards, certification, length of financial history, company turnover etc so as not to exclude potential suppliers. Consideration should also be made to a supplier’s business experience outside of the pubic sector, and alternative standards and accreditations at the evaluation stage. Requirements should reflect the contract value and be assessed on a case-by-case basis and specifications should be more outcome-based to encourage innovation.

Communication – Clear and transparent processes and requirements are essential, as is a point of contact for the suppliers to use, and encouraged to use. Often suppliers think they may be put at a disadvantage or even unaware that they can make contact with the buying organisation during this pre-contracting phase. Keep your suppliers regularly updated and provide a clear timetable of events.

Feedback – Assist both successful and unsuccessful suppliers with open and honest feedback; and also request feedback from your suppliers on the process in order to make adjustments for next time. Consider completing a frequently asked questions document off the back of any feedback given and received in order to assist future ITT processes.

Trained Professionals – CIPS believes that professionally trained procurement people should be at the forefront of delivering these initiatives. Research shows that the majority of large organisations now have a Chief Procurement Officer (CPO) on the executive management team, and that there is a correlation between professional procurement and profitability. In the case of the public sector this translates into increased value for money.

The SME market has considerable value to bring to the public sector, through innovation, agility, speed to market to mention but a few examples. As mentioned before, much research has been carried out and recommendations made; the implementation of these initiatives is the biggest challenge. CIPS would recommend implementing regular reporting and monitoring of the progress of any initiative set, as well as regular contact with SMEs to constantly review and improve the process.

Please do not hesitate to get in touch with us if you wish to discuss these issues in more detail.

Regards

Roy Ayliffe
Director of Knowledge and Representation
The Chartered Institute of Purchasing & Supply

Committee for Enterprise,Trade & Investment

Committee for Enterprise, Trade & Investment
Room 424
Parliament Buildings
Tel: +44 (0) 28 9052 21230
Fax: +44 (0) 28 90521355
Northern Ireland Assembly

To: Shane McAteer, Clerk to the Committee for Finance & Personnel
From: Jim McManus, Committee Clerk
Date: 26 February 2009
Subject: Scrutiny of Public Procurement Practice in Northern Ireland

1. On 13th November 2008, the Committee for Enterprise, Trade & Investment received oral briefing from DETI officials in relation to progress on the Department’s Draft Social Economy Enterprise Strategy (2008-2011). Issues in the strategy relating to SEEs include:

• CPD formed a Social Economy Enterprise Working Group which brought together procurement practitioners and SEEs with direct experience of competitive tendering.
• Procurement Guide for SEEs launched by CPD in February 2005.
• CPD, in conjunction with DETI held a ‘meet the buyer’ event for SEEs in September 2007.

2. In order to provide support for business growth (Action 2.1):

• CPD will have appropriate systems in place to allow access by SMEs and SEEs to opportunities for doing business with CPD. CPD will also encourage other Central Government bodies to use this common platform.
• DETI and CPD will facilitate the Social Economy Enterprise Procurement Group

3. In order to build the business skills of SMEs (Action 2.2):

• CPD will deliver basic training in sustainable procurement to procurement practitioners, including the integration of equality and sustainable development into public sector procurement

4. In order to foster a social economy enterprise culture (Action 3.2):

• DETI and CPD will facilitate and support ‘meet the buyer’ events across NI to bring public sector procurement practitioners into contact with SMEs and SEEs.
• CPD will monitor and report on the success of SEEs competing for the delivery of public service contracts.
• CPD will provide information on their website about best practice examples of public sector contracts that have integrated sustainability, including social goals.
• CPD will promote awareness across Procurement Practitioners about equality and sustainability within public procurement.
• Departments will facilitate workshops/development of case studies of effective delivery of public services by SEEs e.g. in partnership with DHSSPS/Centeral Procurement /DETI.

5. On the same date, the Committee also received oral briefing from the Social Economy Network (SEN). Specific recommendations on the Social Economy Enterprise Strategy from the SEN, which relate to public procurement are:

• As the new super councils will have a key role in promoting and supporting enterprise it is imperative that local Councils are brought on board at the outset and are involved/represented on the Social Economy Enterprise Procurement Group throughout the implementation of this strategy. In this way, when responsibility for economic development and enterprise is transferred to Councils, the gains and successes achieved can be consolidated, continued and built on.
• The Network recommends that a social economy enterprise champion be identified within each government department to promote social economy enterprise as a viable business model and that it is taken account of in planning the delivery of services.
• SEN proposes adoption of a consistent approach to the measurement of social value which can be embedded in the practice and processes of public procurement.
• SEN recommends the inclusion of social clauses into public procurement specifications to ensure a more equal playing field.
• The strategy should explore innovative ways of increasing business opportunities for SEEs through public/social partnerships and private/social partnerships

6. The Committee has agreed that I write to the DETI and to the Social Economy Network to seek their permission to forward their briefing papers to the Committee for Finance & Personnel, to assist in its scrutiny. SEN paper is attached and I will forward the DETI papers when this has been agreed.

Regards,

Jim McManus
Clerk, Enterprise, Trade & Investment Committee

CETI - Social Economy Network Briefing - Summary of Recommendations

Recommendations in the Social Economy Network Briefing Paper for the Draft Social Economy Enterprise Strategy

Members may wish to question SEN officials further on the recommendations they are making for changes to the Social Economy Enterprise Strategy

General comments on the draft Social Economy Enterprise Strategy (Page 3)

Recommendation (Page 4)

As the new super councils will have a key role in promoting and supporting enterprise it is imperative that local Councils are brought on board at the outset and are involved/represented on the S.E.P.G. throughout the implementation of this strategy. In this way, when responsibility for economic development and enterprise is transferred to Councils, the gains and successes achieved can be consolidated, continued and built on.

Objective one - Increasing awareness of the sector and establishing its value to the local economy (Page 5)

Recommendation (Page 6)

The Network recommends that a social economy enterprise champion be identified within each government department to promote social economy enterprise as a viable business model and that it is taken account of in planning the delivery of services.

Objective two - Developing the Sector and increasing its business strength; and

Objective three- Creating a supportive, enabling and environment. (Page 6)

Recommendation (Page 6)

The Network recommends a two pronged approach to develop the sector; this will involve encouraging the establishment of new SEEs while at the same time building the capacity of existing SEEs.

Training (Page 6)

Recommendations (Page 7)

SEN recommend that the Social Entrepreneurship Programme is available from the beginning of 2009 and that funding is secure for its continuance for the duration of this strategy.

SEN recommend that INVEST NORTHERN IRELAND sponsored business workshops are specifically promoted and targeted at the social economy sector to encourage uptake.

Management and Leadership development (Page 7)

Recommendations (Page 7)

All information on business support, training and management & leadership development programmes should be held centrally to facilitate access and promote uptake. As SEN provides a dedicated website for the social economy sector this issue could be addressed by ensuring that Departments and Agencies channel all relevant information to the Network.

All training and management & leadership development programmes should be evaluated to assess their relevance and impact and to inform decision making about future delivery.

Finance (Page 8)

Recommendations (Page 9)

The social economy sector in other parts of the U.K. has benefitted from and developed as a result of access to a fund such as Futurebuilders which helps build the capacity of companies. SEN recommends that DFP when developing a policy on the use of the unclaimed assets in dormant bank and building society accounts should consider:-

• Establishing a Future Builders fund for SSEs; and
• Channelling some of the funding into CDFIs for a social investment loan fund.

SEN proposes that consideration be given to the adoption of legislation in respect of credit unions which permits the inclusion of incorporated associations and corporate bodies as full members in credit unions so that small enterprises, community organisations and SEEs can access these services.

Procurement (Page 9)

Recommendations (Page 11)

SEN proposes adoption of a consistent approach to the measurement of social value which can be embedded in the practice and processes of public procurement.

SEN recommends the inclusion of social clauses into public procurement specifications to ensure a more equal playing field.

The strategy should explore innovative ways of increasing business opportunities for SEEs through public/social partnerships and private/social partnerships

The Social Economy Network (Northern Ireland) Ltd Briefing Paper for Enterprise, Trade and Investment Committee

Thursday 13th November 2008

1.0 Social Economy Network

The Social Economy Network is a membership based organisation comprising social enterprises throughout Northern Ireland. It was established in 2006 as a Company Ltd by guarantee, to represent the needs and interests of the social economy sector with key stakeholders. It is grant funded by the Department of Enterprise, Trade and Investment with £600,000 over four years up to 2011. The grant allocation is reduced year on year requiring the Network to generate its own income to achieve a level of sustainability.

The aims of the Network are:

• To provide a strong, united and representative voice for the Social Economy Sector of Northern Ireland;
• To promote the role of the Social Economy Sector and its contribution to socio-economic development;
• To represent the views of the Sector in engagement with Government and all key stakeholders;
• To provide a channel for Social Economy Sector input into policy development; and
• Increase the business strength of the Sector and create a supportive and enabling environment for Sector growth.

2.0 Introduction to the Sector

There is a long and rich history of social economy enterprises (SEEs) in Northern Ireland with agricultural co-operatives, credit unions and housing associations having been in existence for many decades. The social economy sector comprises SEEs operating in many sectors of the economy- agriculture; transport; property services; retail; hospitality; tourism; education and training; childcare and health and social care services.

SEEs operate as businesses with a focus on profit. They differ from conventional private businesses in that they have an equal focus on social goals and reinvest profits in the business and for the benefit of the communities they serve. They have a strong “local multiplier" effect stimulating local economic activity.

The social economy sector is big business in the U.K. with at least 15,000 social enterprises contributing some £18 billion to the economy. While Northern Ireland has good baseline data for nearly 400 SEEs with a turnover of just over £355 million (DETI Survey 2007), information on the actual size of the sector is limited. While there are specific mature sub sectors of the social economy sector in particular Credit Unions, Housing Associations and Co-operatives and a number of sizeable successful SEEs in N. Ireland, the sector as a whole is not as well developed as in England and Scotland.

According to the U.K. Global Entrepreneurship Monitor Project (GEM) the Northern Ireland Total Entrepreneurial Activity (TEA) rate for 2006 was 3.7% - the lowest rate in the UK while the Social Entrepreneurial Activity (SEA) rate was 3.3% -the fifth highest out of 12 regions in the U.K. In terms of wealth generation, job creation and social impact social entrepreneurial activity is a phenomenon that policy makers need to take account of. Social entrepreneurship is a key driver of regeneration, neighbourhood renewal and employment in deprived areas and social reform. The network believes that with relevant and targeted support the social economy sector can build on this social entrepreneurial activity and make a significant impact on the Northern Ireland Economy.

In order to grow and develop the social economy sector needs focused support in the following areas –

• Promotion of social economy enterprise as a viable business model;
• Access to a broad range of business support training;
• Access to finance and funding; and
• Inclusion of social clauses into public procurement specifications to ensure a more equal playing field.

3.0 General comments on the draft Social Economy Enterprise Strategy

3.1 Location and Fit

The Network believes that it is useful to identify the location and fit of this draft strategy within the overall policy context. The Network welcomes the fact that the five strategic and interdependent priorities of the Programme for Government are outlined in this draft strategy as this is recognition that the economic and social agendas are interconnected. SEEs by their very nature do not operate in silos, rather they present models of good practice in relation to “joined up" thinking and activity. SEEs have an economic focus in terms of wealth generation and job creation while at the same time having an equal focus on social issues. SEEs are very well placed to assist government to deliver on all 5 priorities.

Some Local Examples

Orchardville bottling company at Knockbracken has secured a contract with Coca Cola. They are creating jobs, generating income and promoting inclusion and health and well being. 25% of the workforce has a learning disability.

Extern Recycle Ltd– A social enterprise based in Mallusk that provides cost effective and high quality recycling and refurbishment of IT equipment to organisations in the public, private and voluntary sectors, whilst supporting homeless and long-term unemployed people through providing work experience and training opportunities that enables independent living and employment creation.

Ardmonagh Family Centre/Colin Care – delivering high quality efficient health and social care services for the public sector. Providing training and employment for local people in disadvantaged communities. Promoting inclusion and health and well being. Taking people off benefits. Local businesses benefit from staff spending in the local community.

The Network believes that it is appropriate to cite having a growing dynamic innovative economy as the top priority. A thriving economy has the potential to benefit everyone in Northern Ireland but will only do so if policies and strategies are in place to support the economically inactive and disadvantaged. The social economy sector has a successful track record in creating innovative pathways into employment for those excluded or distant from the labour market.

3.2 Vision

The Network endorses the vision of the Social Economy Enterprise Strategy –

An enterprise environment which encourages greater social entrepreneurial activity and is supportive of those social economy enterprises that want to grow.

3.3 Stakeholders Buy In

With D.E.T.I. as the lead department, the Network agrees that achievement of the vision requires the co-operation and partnership of a wide range of stakeholders from local and central government, private, social economy and the voluntary and community sectors.

Recommendation

As the new super councils will have a key role in promoting and supporting enterprise it is imperative that local Councils are brought on board at the outset and are involved/represented on the S.E.P.G. throughout the implementation of this strategy. In this way, when responsibility for economic development and enterprise is transferred to Councils, the gains and successes achieved can be consolidated, continued and built on.

4.0 Objectives

The three original objectives of the first social economy strategy are still relevant and appropriate:

• Increasing awareness of the sector and establishing its value to the local economy;
• Developing the sector and increasing its business strength; and
• Creating a supportive and enabling and environment.

An independent evaluation of the first social economy strategy found that most progress had been made on the third objective followed closely by the first objective. The Network would agree with this finding and acknowledge that although most of the objectives/targets outlined in the last strategy were met, and there has been progress made on the first two objectives, there is there is still much work to do.

4.1 Objective one - Increasing awareness of the sector and establishing its value to the local economy

There is evidence of an increased awareness and understanding of the social economy sector within the public sector, especially among some individual civil servants. However, our experience has been that this knowledge is not widespread throughout departments, and therefore, is either not taken into account into departmental policy and planning or remains a periphery consideration.

The actions identified in the draft strategy will go some way to increasing awareness of the sector, however they could be augmented by joint delivery of awareness raising sessions to departments by SEN and the SEB. This programme could include a number of “seeing is believing" tours of successful social enterprises operating in diverse areas across Northern Ireland. The Public Sector and other representative bodies also need to be made aware of developments in the sector in Scotland, Wales and England so that the future potential of social economy enterprises in Northern Ireland can be realised. Reference is made in the document (point 2.12) about maintaining an awareness of good practice in other parts of the U.K. We need to go further and ensure that relevant departmental officials and social enterprises have the opportunity to explore the feasibility of adopting similar practice in Northern Ireland.

The Department of Health in England has a specific social enterprise unit attached to it, as the social enterprise model is recognised as a key vehicle for the design and delivery of core services and user engagement. We are not suggesting that this is necessary here but believe that by identifying a champion for social enterprise in each government department that significant progress could be made on this objective.

Recommendation

The Network recommends that a social economy enterprise champion be identified within each government department to promote social economy enterprise as a viable business model and that it is taken account of in planning the delivery of services.

4.2 Objective two - Developing the Sector and increasing its business strength; and Objective three - Creating a supportive, enabling and environment.

This focus of Objectives 2 and 3 is on developing the business strength of existing SEEs to reach a scale and capability in which they can contribute to the overall viability and sustainability of the sector. The strategy states that a general policy supporting the volume growth of S.E.E.s is not needed. The Network would challenge this. The social economy enterprise movement across the globe is growing and there is widespread support for an increase in the number of businesses that trade with a social purpose. We have a relatively high S.E.A. rate (3.3%) in Northern Ireland which should be nurtured and encouraged. Many voluntary and community organisations are being encouraged by Government to explore ways of generating income to increase their sustainability. In addition there is evidence that existing social enterprises are involved in establishing and developing new social enterprises.

Recommendation

The Network recommends a two pronged approach to develop the sector; this will involve encouraging the establishment of new SEEs while at the same time building the capacity of existing SEEs.

The actions outlined under objective 2 concentrate on five broad areas of support for business growth –

• Training
• Management and Leadership development
• Procurement opportunities
• Finance
• Opportunities for the development and growth of SEE’s in rural areas and tourism.

4.3 Training

It is necessary for organisations to qualify as an Invest NI client before they can access the full range of mainstream business support available from Invest NI. While a number of SEEs have qualified as Invest NI clients the vast majority will not be able to, as one of the qualifying criteria is ability or capacity to export.

One of the strengths of the Social Entrepreneurship Programme is that it is available across Northern Ireland and its open to both new and existing social enterprises and has four entry points. One weakness of the programme was problems of continuity of delivery due to funding uncertainty.

SEN welcomes and is encouraged by Invest NI’s commitment to continue the programme. In view of the interest in and demand for the programme it is imperative that the tendering process is started in order to ensure that the programme will be available from the beginning of 2009 and that funding is in place to ensure that it will continue for the duration of this strategy.

Invest NI could further assist SEEs by ensuring that other services, such as one off workshops are promoted and targeted at the social economy sector. It has been the Network’s experience that, on further investigation, workshops targeted at SME’s have been open to SEEs. This is possibly because of a lack of awareness of the social economy sector and perhaps the failure to recognise social economy enterprise as being a viable business model. As well as the benefits of the learning and skills gained from the actual training workshops, there are additional benefits to be gained from bringing SMEs and SEEs together, for example from the cross fertilisation of ideas and increased awareness of the sector.

Recommendations

SEN recommend that the Social Entrepreneurship Programme is available from the beginning of 2009 and that funding is secure for its continuance for the duration of this strategy.

SEN recommend that INVEST NORTHERN IRELAND sponsored business workshops are specifically promoted and targeted at the social economy sector to encourage uptake.

4.4 Management and Leadership development

SEN welcomes the action by D.E.L aimed at providing financial assistance for skills development and organisational development in Investors in People. Some of the actions proposed by DEL lack detail. Further information on the proposals would ensure maximum impact can be made.

Recommendations

All information on business support, training and management & leadership development programmes should be held centrally to facilitate access and promote uptake. As SEN provides a dedicated website for the social economy sector this issue could be addressed by ensuring that Departments and Agencies channel all relevant information to the Network.

All training and management & leadership development programmes should be evaluated to assess their relevance and impact and to inform decision making about future delivery.

4.5 Finance

In the current economic climate SEEs are suffering as banks have become more cautious of lending to what could be perceived as being high risk enterprises. The need to support those who are most excluded from financial services and those SSEs and SMEs that support their communities has never been greater. Many SEEs are involved in the rental or leasing of business units to encourage business set up and job creation. They rely heavily on SMEs as tenants. In rural areas on the periphery of Northern Ireland, the impact of the economic downturn can be particularly devastating as it is here that there is a heavy reliance on SSEs and SMEs for jobs and wealth generation. Irvinestown, for example, has already witnessed the closure of two local firms, one of whom was an Irvinestown Trustee Enterprise Company (ITEC) tenant, another is a past tenant that had grown, expanded and purchased its own premises. Urgent government action is needed to support local economies and it is imperative that the role and needs of SSEs and SMEs should not be forgotten or sidelined in any actions/plans.

Like all businesses SEEs need to have access to suitable financial instruments to support their growth and development. Social enterprise lenders provide liquidity more effectively to where it is most needed than is the case with high street lenders. CDFI’s and Credit Unions in particular are amongst the few who have increased their lending to those most in need.

UCIT has been identified as a source of loan funding for the sector and reference is also made to a new flexible Enterprise Fund (being designed by DETI, INVEST NORTHERN IRELAND and UCIT) for higher risk projects offering loan funding as an option alongside the Social Entrepreneurship Programme. UCIT has, at this stage, committed all of its available funds and yet continues to receive a growing number of applications for loan finance between £15,000 and £1,000,000 from social enterprises.

SEN is aware that current Credit Union legislation for Northern Ireland does not permit credit union engagement (in any meaningful way) in the social economy sector, despite such provision in Great Britain. SEN intends to work with representative bodies of the credit union movement in Northern Ireland to identify mutually agreed priority areas (e.g. in community enterprise, housing and/or investment ) where financial or technical support from credit unions would have significant impact; to develop a few key pilot projects which would develop same; and to support the lobby from credit unions to have appropriate permissive legislation approved by the Northern Ireland Assembly so that such agreed pilot projects might be implemented promptly and effectively.

Recommendations

The social economy sector in other parts of the U.K. has benefitted from and developed as a result of access to a fund such as Futurebuilders which helps build the capacity of companies. SEN recommends that DFP when developing a policy on the use of the unclaimed assets in dormant bank and building society accounts should consider:-

• Establishing a Future Builders fund for SSEs; and
• Channelling some of the funding into CDFIs for a social investment loan fund.

SEN proposes that consideration be given to the adoption of legislation in respect of credit unions which permits the inclusion of incorporated associations and corporate bodies as full members in credit unions so that small enterprises, community organisations and SEEs can access these services.

4.6 Procurement

Opportunities exist for social economy enterprises to do business with the public sector. Many have successfully secured contracts for service delivery- Bryson Recycling with local councils; Ardmonagh Family Centre and Irvinestown Trustee Enterprise Company for the delivery of health & social care services through contracts with health trusts and a range of other social enterprises for the delivery of training services through contracts with DEL .There is evidence however that social enterprises – particularly small ones- are at a disadvantage compared with private sector businesses in this arena. There is a limited knowledge of the social economy sector and its potential as a provider of goods and services among public sector procurement personnel. A programme of awareness raising and training is required to ensure that social economy enterprises are equally considered with the private sector in procurement considerations.

Social enterprises with little or no experience of doing business with the public sector also need practical advice and training on procurement procedures and writing tenders so that they can acquire the necessary skills to enable them to take advantage of the opportunities presented.

SEN welcomes the actions proposed by CPD to provide information and advice sessions on the tendering process and to organise “Meet the Buyer" events to increase opportunities for SEEs to do business with the public sector.

However, one of the most significant problems facing the development of SEEs in Northern Ireland is the lack of progress on the inclusion of social clauses into the procurement process. SEEs operate their businesses in a market place which does not recognise or take account of the added value they create and this puts them at a disadvantage when competing for public sector business. This problem is not addressed by any of the C.P.D. actions listed under Objective 2 or Objective 3.

It is of concern that in a previous draft of the Strategy (Sept 08) one of the most positive actions relating to the SEEPG has been diluted from “to provide a more informed view on how to build and increase capacity and capability to tender within the sector and to identify how social aspects of the sector’s work can be used to create more opportunities for the sector to compete successfully" to- “C.P.D. will help inform the group to increase awareness of the tendering process and break down barriers to procurement"

SEN recommends that this action be strengthened.

The measurement of social value is one of the difficulties cited in respect of including social clauses in procurement specifications. There are a number of management tools used by SEEs to measure social value and impact, for example, Social Return On Investment (SROI), and social accounting. Social accounts are becoming an accepted reporting format for SEEs in England and Scotland. Understanding of social value and a consistent approach to the measurement of social value must be embedded in the practice and processes of public procurement.

According to a Social Economy Scotland Briefing – the Scottish Government has produced guidance on including social issues in public procurement, including the ability to purchase wider social benefit as part of procurement. The guidance concludes that it is entirely possible to recognise wider social issues within a procurement process, as long as these are part of the primary purpose of the contract and they are included in the specification.

The social economy sector is further disadvantaged by the emphasis in consideration of tenders, on financial capacity demonstrated by a build up of reserves in assessing the financial health of companies. This particularly affects those companies in the early stages of development who were prohibited from building up reserves while in receipt of grants. SEN argues that if there is to be equality of opportunity in accessing tenders then it must be acknowledged that existing means and criteria are exclusionary to SEEs and that amendments to criteria must be introduced to create a level playing field.

Some additional problems faced by SEEs who have successfully secured tenders for the delivery of services include the length of time the process takes; and the fact that the level of finance available for service delivery this year - in the health & social care field- is set at 3% less than the cost of delivering the same service last year. Departmental efficiency savings were not intended to affect front line services but clearly in such instances they will.

Pressure on public bodies to secure efficiencies by aggregating contracts will discriminate against small businesses, which includes many social enterprises. Little cognisance is given to the expertise and ability of social enterprises (with local knowledge and understanding of needs and how best to address them) to deliver services effectively. Social enterprises experienced in this field require support from the public sector to enable them to develop their capacity to grow and expand; to explore the feasibility of sub contracts and or public/social enterprise partnerships.

SEN argue that there should be scope within the strategy to explore innovative ways of increasing business opportunities for SEEs through public/social partnerships which represent a new mechanism for bringing together public bodies and SEEs to create well designed services that deliver additional community benefits. This should be extended also to private/social partnerships where private sector companies are encouraged as part of tender specifications to provide sub contracting opportunities for SEEs.

Recommendations

SEN proposes adoption of a consistent approach to the measurement of social value which can be embedded in the practice and processes of public procurement.

SEN recommends the inclusion of social clauses into public procurement specifications to ensure a more equal playing field.

The strategy should explore innovative ways of increasing business opportunities for SEEs through public/social partnerships and private/social partnerships

5.0 Conclusion

In conclusion, the Network welcomes a future Strategy to drive and shape the growth of the SE sector. The key supports needed for SEEs to develop and grow include:-

• Recognition and promotion of social enterprise as a viable business model;
• Access to a broad range of business support;
• Access to loan finance and funding;
• Social clauses embedded in the practice and processes of public procurement.

In order to facilitate the evaluation and measurement of the success of the strategy SEN recommends that explicit timescales, targets and outcomes be outlined for all actions. Buy in and ownership of actions through departmental Champions will also be key to a successful delivery.

Construction Industry Group Northern Ireland

Equality Commission for Northern Ireland

Introduction

1. The Equality Commission for Northern Ireland (“the Commission") is an independent public body established under the Northern Ireland Act 1998. The Commission is responsible for implementing the legislation on fair employment and treatment, sex discrimination and equal pay, race relations, sexual orientation and disability. The Commission’s remit also includes overseeing the statutory duties on public authorities to promote equality of opportunity and good relations under Section 75 of the Northern Ireland Act 1998 (s 75).

2. The Commission’s general duties include:

• working towards the elimination of discrimination;
• promoting equality of opportunity and encouraging good practice;
• promoting positive / affirmative action;
• promoting good relations between people of different racial groups;
• overseeing the implementation and effectiveness of the statutory duty on relevant public authorities; and
• keeping the legislation under review.

Context

3 The Commission welcomes the opportunity to respond to the Committee for Finance and Personnel’s scrutiny of public procurement in Northern Ireland. Public procurement is an important key in delivering the Programme for Government and in particular we note the Committee’s commitment to maximising the economic and social benefits for the community within the agreed principles of public procurement.

4 The Commission has long had an interest in and concern for public procurement. We contributed to the review of public procurement which reported in 2002 and established the twelve principles of public procurement in Northern Ireland. Subsequently we were members of the PPP/PFI working group and of the Advisory Council on Infrastructure Investment which followed it. In this context we prepared, with the Central Procurement Directorate, guidance on Equality of Opportunity and Sustainable Development in Public Sector Procurement (attached). The guidance was published in 2008 and the Commission is working on a continuous programme of promulgation.

General Comments

5 We believe that the public procurement process is key to a healthy and equal society as it affords the openings to address equality of opportunity and good relations in the delivery of all our public services. Especially at a time of significant investment designed to create a prosperous shared and fair Northern Ireland proper practice of procurement has the potential for significant change in our society.

6 The Programme for Government and the associated Public Service Agreements (PSAs) set the bar for this, in the directly related economic goals, through the ambition for education, health and social care and housing provision and in those overarching plans such as PSA 7, to make people’s lives better. In the context of procurement we believe that Government has the opportunity to promote Northern Ireland as an exemplar through delivering demonstrable best value for money.

7 This can be achieved through government departments and other public authorities fully implementing the requirements of s 75. In addressing the s 75 obligations throughout public procurement, public authorities have the means to use s 75 disciplines for more effective policy making. So the vision of s 75 may also be achieved through sound practice as government, which retains the responsibility for s 75, works in partnership with the private sector.

8 A mentioned above the Equality Commission and the Central Procurement Directorate have developed and published guidance, Equality of Opportunity and Sustainable Development in Public Sector Procurement. This guidance shows how political will and top level commitment, with the expertise of people working in public services and demonstrating the principles on which our public procurement is based, come together in a practical approach. This shows s 75 disciplines to be facilitative in supporting early planning and focusing decision making at all stages in order to promote equality of opportunity in procurement. It also offers practice examples and shows how its lessons are applicable to all procurement.

Specific points

9 The Commission notes the Committee’s will to improve clarity around the procurement process and welcomes this focus. Public authorities and contractors alike have uncertainties about how to maximise the desired impact of projects. Greater clarity and knowledge and understanding will remove many of the concerns which cause caution beyond due care to develop on each side.

10 This clarity, we note, will extend to Government’s position on social clauses. The Commission welcomes this and again would refer the Committee to the advice in the guidance which outlines how equality of opportunity and sustainable development can be considered at each stage and how important this consideration is at planning, specification and contract agreement and monitoring stages.

11 Greater comprehension of these issues can assist in seeking ways in which the capacity of small and medium enterprises and social economy enterprises to compete is enhanced. In this way their particular skills can be harnessed. This presents greater challenges at a time of economic recession but at such times the principles of equality for all are no less of vital importance to the health of our society.

12 Finally we note and share the Committee’s concerns about undue delay in progressing contracts. Significant investment delivered well has the potential of transforming our society. We would urge government departments and other public authorities to use the mechanisms of s 75 in their commitment to develop Northern Ireland as a more equal place.

Process

13 We understand that this written stage is part of a substantial review by the Committee which plans to hear extensive oral evidence. We would welcome the opportunity to expand the points in this note and engage with the Committee in respect of them at an oral hearing.

14 In addition, we will be pleased further to advise the Committee or and member of your staff on the issues in the paper.

Equality Commission
26 February 2009

Martin and Hamilton Ltd

46 Doury Road
Ballymena
Co Antrim
BT43 6JB

Tel: 028 25 653672
Fax: 028 25 645880

Inquiry into Public Procurement Policy & Practice in Northern Ireland

Dear Sir,

I write as M.D. of Martin and Hamilton Ltd, a commercial builder to both private and public clients (e.g. schools; churches; health; heritage renovation) but not involved in commercial development of private housing, office or industrial buildings. The company is a second generation family firm based in Ballymena and working mainly within a 50 mile radius of our base. We have established a reputation for quality and integrity and retain a skilled and knowledge-based workforce in all aspects of construction. We employ 70 people, many of whom have long service. We train apprentices and have a policy of ongoing professional development for all out staff. Our turn-over last year was £13million. Traditionally, we secured work by winning on tender and providing quality work, to programme. However we are now unable to compete due to barriers in place which favour larger companies.

Firstly, the framework system is beyond our reach due to minimum turnover figures e.g. Education framework requiring an annual turnover of 35million. Taking a major area of public sector expenditure away from SME’s and giving it to a small number of large corporations. Could this requirement be adjusted and the turnover figure required for admission to a list set in proportion to the cost of the contract?

In addition, the repeated preparation of quality submissions is an onerous expense for small and medium sized companies. The quality submissions requires extensive, detailed input of knowledge and expertise in a wide range of disciplines and is in essence more sales pitch than factual report. To complete the submission, a smaller firm which does not have all of this expertise in house, must engage consultants. This expense is additional to the submission and is unavoidable, regardless of the success or failure of the attempt. A polished, professional presentation is heavily weighted and crucial to a successful submission. Highly sophisticated software supplied by yet another specialist is undoubtedly impressive, but it may be argued that it is a limited relevance to the discipline of quality construction. Newer forms of contract where quality and cost submissions are marked on a weighting which favours ‘quality’ over ‘cost’ and thus gives the larger companies advantage and decreases the SME cost competitive advantage. All of the workload involved in newer tendering process has slowed the progress of projects. In this slowdown SME businesses are more vulnerable to the unpredictability of such delays and it makes business programming difficult.

Large firms have advantages in this system:

• They inevitably have a broader selection of types of past contracts on their books and so fulfil one of the core criteria for inclusion on most select lists.
• They can more readily support additional departments such as Marketing and build increasing expertise in the submission process.
• The longer the current system exists, the more advantage large firms accumulate and the gap between their capability and that of smaller firms widens. It also seems that once a firm achieves a winning formula for quality submission they can win consecutive bids. This is not beneficial for CPD or the economy.

I would argue that the present system is not providing value for money because it excludes most competitive medium sized local companies and favours a limited number of large companies. Furthermore, it ignores the social, economic and environmental advantages of local contractors working in the community, employing a local workforce, supporting the local economy and building pride in the local environmental.

Our recommendations are as follows:-

• A continuity of contracts scheduled throughout the year.
• A review of procurement marking schemes to ensure fairness regardless of company size.
• Establishment of a time schedule from inception to tender to completion.

Yours faithfully,

For Martin & Hamilton Ltd

David Hamilton
Managing Director

Royal Society of Ulster Architects

27th February 2009

Introduction

The Royal Society of Ulster Architects (RSUA) is the professional body for architects in Northern Ireland and the regional representative of the Royal Institute of British Architects (RIBA). There are approx 870 chartered members and over 300 student members. The public sector employs a considerable number of architects but the majority are in private practices and companies, spread right round the country but with a concentration in the greater Belfast area.

There are 272 practices of which two thirds are of less than 10 employees with only 21 have more than 20. The pattern of practice size and location has evolved locally in this way to reflect traditional procurement practices.

The effect of the recession has been serious. In a recent survey, with returns from 120 practices right round Northern Ireland, 136 architects and 250 other staff have been made redundant, representing over 25% of those practices workforce.

Architecture is a regulated profession, with the independent Architects Registration Board (ARB) established by government to protect the public interest, in addition to the normal professional codes of conduct. This recognizes the fact that architects have unique and considerable responsibilities in the construction industry, certifying both the quality of work and payment for it.

Whilst the common perception of architects is that they simply design buildings, the reality is that the architect’s role is central to the public’s trust in the whole construction industry. The traditional role of the architect includes duties to arbitrate between client and contractor and to act in the broader public interest.

Experience of tendering for and delivering public contracts

Traditionally, private practices, of all sizes, have carried out works for a broad mix of public and private sector clients. With public sector works, architects were appointed by a client on an individual project basis taking into account their expertise, experience and price. This resulted in a significant spread of work across the profession.

In recent years, however, more and more public works have been packaged up into framework agreements and the nature of these has restricted appointments to a small number of practices. Whilst there was a private sector boom this did not seem to be that serious an issue – there was plenty of work for everyone – but with the rapid slowing of private , especially, residential development, many practices, in particular in rural areas, have found themselves in serious trouble, with no access to public sector work.

We recognize that the Construction Procurement Directorate (CPD) in their recent discussions with the professional bodies and the Construction Industry Group (CIG) have acknowledged this issue and have sought to broaden the scope of practices eligible to tender for their next consultant framework, but the RSUA remains unconvinced that large scale framework agreements are necessarily the most efficient and effective method for the public sector to procure all of their construction and design services

The move both towards framework agreements and the move away from so called ‘traditional’ contracts (where design team and constructing team are appointed separately, each reporting to the client) to Design and Build contracts came about under the Direct Rule administration following similar practices in England. This was based on research done, as far as we are aware, entirely in Great Britain and does not necessarily reflect the Northern Ireland experience. The UK government’s belief is that these moves will result in a greater proportion of projects being delivered on time and within budget. This remains to be proven in the Northern Ireland context.

The RSUA recognizes there may be potential advantages of framework type arrangements to public sector clients in the cost effectiveness of group tendering and design teams being available at relatively short notice.

However, a number of significant concerns have been raised about some of the unintended consequences of what has been become public procurement practice.

The recent legal challenges to the Design and Build frameworks (in particular the Dept of Education framework challenged by Henry Bros., determined by Lord Justice Coghlin) demonstrate the risks in scoring tenders on criteria which may not be actually relevant to the particular projects being undertaken through the framework. Whereas single project tenders will typically draw up very specific selection criteria ( e.g. experience of listed buildings, courts or prisons etc.) it is not possible to do this for a framework where a very broad range of projects will come out. If too diverse a range of criteria are used then smaller, perhaps specialized, practices will be disadvantaged compared with large, perhaps multi-national, practices, despite the fact that the smaller practice could carry out at least some of the jobs procured through the framework.

For this reason, the RSUA believes that framework agreements should only be used where there is considerable synergy and similarity to all the projects that will be procured through it. Other, more individual, projects should be delivered by single project procurement tendering.

Issues

A particular issue has arisen for projects being developed by community groups, local enterprise bodies and NGO’s. These projects are characterized by the client having little or no resources to develop the project through feasibility stages. A considerable amount of work is carried out, at minimal cost, usually by a local architect who shares the community’s vision. It now seems to be the case that if these projects subsequently receive more than 50% government grants they come under the remit of CPD. In many cases the architect who has done all the preliminary work, often at a loss, may not even be eligible to tender for the work because they are not on a particular framework. This is highly unsatisfactory and the hard earned knowledge gained during the project development is lost. If this practice continues then it will not be viable for architects to do preliminary work at very little cost and good projects will not get off the ground.

The RSUA has also had recent discussions with DSD regarding the proposed consultants framework for Housing Associations and we have expressed the same concerns. If anything the issues around housing are even more serious. There can be distinct advantages in community understanding for Housing Associations to be able to use a diverse range of practices, picking the most suitable because of their local knowledge and community contacts. A very large proportion of practices, spread right around Northern Ireland, currently work on social housing projects and this local connection is threatened by a move to the Housing Associations having to procure all their services through a small number of practices on large scale frameworks. The undesirable practice of architects being required to carry out a substantial amount of work ‘at risk’ has crept in to Housing Associations and, in the long term, this is not conducive to the provision of proper professional services.

Frameworks are designed to cope with substantial packages of work over a 3-5 year period with high values of construction costs and consequent fees. This leads to an assumption that eligible practices need to have significant resources and financial backing to have the capacity to do the work, and therefore minimum criteria for staff numbers, turnover, etc. This may be reasonable for larger and complex projects but in many cases projects put out through frameworks are of a small and medium size, lumped together in a procurement package to minimize tender costs. In many cases, the selection criteria are set to a much higher level than is necessary or required for a particular job. In a similar vein, a turnover figure is not a reliable indicator of financial strength, nor numbers of staff employed a measure of available resources.

The longer term effect of frameworks will be to concentrate public sector projects into a small pool of consultancies. Even though each framework will be limited to 3 or 4 years duration, the selection criteria for subsequent frameworks will be based on experience of the building type and exclusion from that type of work for a 3 or 4 year period will lead to a vicious circle leading to long term exclusion, the demise of many indigenous practices and the social and economic consequences of that.

We are obviously concerned that the effect of the legal challenges has been to significantly delay public projects coming out to the market but this has not been the only factor. The considerable time taken to put together the tender documents for large scale frameworks does in itself have a significant impact on the programme for delivering public projects.

The consequences of these delays include:

• A reduced amount of work from what was planned by Government and anticipated by contractors
• Projects stalled at tender stage with no programme for construction
• Construction industry shedding jobs
• Programme for Government targets not met

There are of course other factors that have an effect on delivering public projects such as the continued delays in the Planning process, or the introduction of the new NEC suite of contracts, but these are perhaps outside the scope of this Inquiry

Recommendations

The RSUA recommends a detailed Review is carried out on the financial, programme and quality measures of public projects that have been commissioned through both single project appointments and through frameworks, and built through both traditional and D&B contracts. This is to ensure that decisions to move towards frameworks, D&B contracts etc., currently justified by GB experience, are based instead on verifiable, Northern Ireland, conditions.

If the case for frameworks is justified, then the RSUA believes that each COPE ( Centre of Procurement Expertise) has a number of frameworks with bands of project size and consequent eligibility criteria, with a minimum threshold below which a much simpler procurement strategy is in place, and allowance also made for projects of special public interest. Our suggestion for this suite of arrangements is as follows

Minor Projects

Projects up to a construction value of less than £1m (or OJEU level) or a professional fee value of less than £150k (or OJEU level) should be procured by a simplified procedure. If this is a ‘one off’ by a COPE then it would be advertised in local press etc. If there is likely to be sufficient similar projects by a COPE than a Minor Works framework should be put in place. We would suggest that eligibility criteria are set to ensure smaller firms are not disadvantaged over larger firms in terms of turnover, staff numbers, etc, once the minimum level required is reached. This is particularly important for the Housing Association frameworks

Normal Projects

Projects which even on their own would require an OJEU notice should be procured through a OJEU notified framework which groups together projects of similar size and type, but not small projects that could be procured in a simpler manner. Eligibility criteria should be set at appropriate levels, with no disadvantage for partnership arrangements between two firms in the same discipline to pool resources and expertise. For the larger COPEs, with a wide range of size of projects, there should be banded frameworks with the aim of matching project size to practice size and projects of a similar type grouped together

Community projects

An increasing number of community initiated projects are now being delivered through CPD resulting in their original community appointed design teams ( typically for feasibility studies) not being eligible to tender. We believe that community projects should be delivered by single project tenders to ensure locally relevant criteria for selection are included.

Special Projects

The RSUA believes that projects with a high level of public interest and architectural potential should be procured through open design competitions, run by the RSUA or at the minimum, single project tenders, outside of the frameworks, with specific and relevant criteria used for team selection

Achieving Quality in Public Sector Construction Projects

The challenge of ensuring design quality in public buildings is not new and affects both traditional and D&B procurement. However, we believe it is more likely that design quality will be watered down when there is pressure on budgets if the architect responsible for detailed design under a D&B contract does not have the same ‘ownership’ of a scheme and the original architects have a very limited role in advising the client. In these circumstances, external Design Reviews should be used

In D&B projects where the client sets a high architectural design standard as a key criteria, we would recommend the practice used in Scotland where the original design team takes the project through to detail design drawings (RIBA Stage D or E) before responsibility is handed over to the Contractor and his team. We also recognize there can be ‘buildability’ benefits from Early Contractor Involvement (ECI) and this can be accommodated through two stage tender processes in both traditional and D&B contracts

We welcome the use of Quality/Price ratios for scoring of tender submissions but there remains a challenge in measuring a practice’s ability to provide design quality and in defining the architectural essence of any proposals as invariably this does not lend itself to a simple measurement which can be scored as part of a tender process. Unlike other elements of criteria, an assessment of design quality can be open to selective scoring. We do believe that serious, peer judged awards such as RIBA, RSUA and Civic Trust Awards represent an objective measure of design quality and should be used where the quality of the design of the building is seen as an important criteria, in particular the ‘special projects’ as defined above.

Quality scoring is increasingly based on written responses to specific questions. This has led to perceptions that the quality of ‘essay writing’ becomes more important than the real quality of the service being offered, with reports of companies securing the tender writing by external consultants. As expertise in these responses rises, quality differential becomes marginal and price becomes once again the deciding factor.

Although we are told that the use of the Quality/Price criteria has resulted in a number of tenders being awarded to other than the lowest price submission, we are nevertheless worried that, especially in times of recession, practices may feel under pressure to submit a tender for a price below which it is feasible to deliver a professional service. We would thus suggest that a minimum level of fees is set, or as with most Health Estates procurement, the fees are set at the level that long experience has shown to be required to fulfill the tasks properly, and the tender is based on quality alone. This approach would work best with frameworks where there is a high degree of similarity in projects. For general projects we suggest that a 80% quality, 20% price ratio is appropriate.

It should be recognized that design team fees represent only a small part of the overall capital cost and a tiny part of the life cycle costs of the building. Failure to meet properly set Design Quality Indicators can have a dramatic effect on whole life costs. As we move towards low carbon design and the primacy of whole life costs as a decision making tool for the public estate, there needs to be an accompanying recognition to invest the proper level of resources into the design process.

Finally, we are aware of the recent report by the Equality Commission and CPD on Equality of Opportunity and Sustainable Development in Public Sector Procurement and support the general aspiration of its contents. We are, however, concerned, that this level of radical reform is having an effect on the rate that public projects are coming out to the market.

Given the urgent need across the whole of the construction industry for public projects we would urge government to ensure that over bureaucratic procurement practices do not get in the way of delivery.

In summary we would suggest that the simplest form of single project procurement is used by all COPEs in the short term in order to release the maximum number of projects to the market and to relieve the current crisis in the construction industry.

In parallel to this, Government should commission a Review of the experience of design and construction procurement in Northern Ireland to establish, based on real projects and figures, the most efficient and effective procurement methodologies for local conditions, taking into account all economic, programming, sustainability and social equality factors.

Executive Summary

Experience of tendering for and delivering public contracts

The use of frameworks has restricted appointments to a small number of practices and many practices, in particular those outside the Greater Belfast area, have found themselves in serious trouble, with no access to public sector work.

The RSUA remains unconvinced that large scale framework agreements are necessarily the most efficient and effective method for the public sector to procure all construction and design services. There may be potential advantages of framework arrangements to public sector clients in the cost effectiveness in group tendering and design teams being available at relatively short notice. However, a number of significant concerns have been raised about some of the unintended consequences of what has been become public procurement practice.

For this reason, the RSUA believes that framework agreements should only be used where there is considerable synergy and similarity to all the projects that will be procured through it. Other, more individual, projects should be delivered by single project procurement tendering.

Issues

The undesirable practice of architects being required to carry out a substantial amount of work ‘at risk’ has crept in to Housing Associations and some Community organisations and, in the long term, this is not conducive to the provision of proper professional services.

Frameworks are for substantial packages of work over a 3-5 year period with high values of construction costs and consequent fees. Projects put out through frameworks are often of a small and medium size, lumped together in a procurement package to minimize tender costs. In many cases, the selection criteria are set to a much higher level than is necessary or required for a particular job.

The longer term effect of frameworks will be to concentrate public sector projects into a small pool of consultancies. Even though each framework will be limited to 3 or 4 years duration, the selection criteria for subsequent frameworks will be based on experience of the building type and exclusion from that type of work for a 3 or 4 year period will create a vicious circle leading to long term exclusion.

The length of time it takes to bring large scale procurement framework projects to the market is of considerable interest and there is a greater chance that selection decisions in a large scale framework will be more liable to challenge, as the stakes will be so high.

Recommendations

The RSUA recommends a detailed Review is carried out on the financial, programme and quality measures of public projects designed through both single project appointments and through frameworks, and built through both traditional and D&B contracts. This is to ensure that decisions to move towards frameworks, D&B contracts etc., currently based on GB experience, are based instead on verifiable, Northern Ireland, conditions.

If the case for frameworks is justified, then the RSUA believes that each COPE (Centre of Procurement Expertise) has a number of frameworks with bands of project size and consequent eligibility criteria, with a minimum threshold below which a much simpler procurement strategy is in place, and allowance also made for open design or other competitions for projects of special public interest.

Achieving Quality in Public Sector Construction Projects

The challenge of ensuring design quality in public buildings is not new and affects both traditional and D&B procurement. External Design Reviews should be used. In D&B projects where the client sets a high architectural design standard as a key criteria, we would recommend that the original design team takes the project through to detail design stage drawings before responsibility is handed over to the Contractor and his team.

We welcome the use of Quality/Price ratios for scoring of tenders. We believe that serious, peer judged awards such as RIBA, RSUA and Civic Trust Awards represent an objective measure of design quality and should be used where the quality of the design of the building is seen as an important criteria, in particular the ‘special projects’ as defined above. Quality scoring is increasingly based on written responses to specific questions. This has led to perceptions that the quality of ‘essay writing’ becomes more important than the real quality of the service being offered, with reports of companies securing the tender writing by external consultants. For general projects we suggest that a 80% quality, 20% price ratio is appropriate.

Given the urgent need across the whole of the construction industry for public projects we would urge government to ensure that over bureaucratic procurement practices do not get in the way of delivery.

Confederation of British Industry

Northern Ireland Policy Unit
Federation of Small Businesses

Cathedral Chambers
143 Royal Avenue
Belfast
BT1 1FH
www.fsb.org.uk

Committee for Finance and Personnel
Room 419
Parliament Buildings
Stormont
BT4 3XX

27 February 2009

The Federation of Small Businesses is Northern Ireland’s largest business organisation with 8000 members, drawn from across all sectors of industry, and over 210,000 members throughout the UK.

The Federation lobbies decision makers to create a better business environment and welcomes this opportunity to input into the Committee for Finance and Personnel’s Inquiry into Public Procurement Policy and Practice in Northern Ireland

This submission includes feedback from FSB members in Northern Ireland who have engaged or attempted to engage with public procurement processes, as well as information from FSB’s national research. Those members who spoke to us did so on the condition that they would remain anonymous. We are also grateful for expert input by FSB NI member Lestas Consulting, a local Management Consultancy company specialising in supporting SMEs and SEEs to procure to the public sector and supporting the public sector to examine good procurement practice.

Our work on gathering our members’ experience of the public procurement process with a view to identifying good practice as well as barriers, in order to make practical and realistic recommendations, is ongoing and we would welcome a further opportunity to comment if the timescale of this inquiry permits.

We trust that you will find our comments helpful and that they will be taken into consideration. The FSB is willing for this submission to be placed in the public domain. We would appreciate being kept apprised of further developments.

Regards

Wilfred Mitchell OBE
Northern Ireland Policy Chairman

Executive Summary

The FSB was pleased to meet with the Committee in November 2008, and welcomes the Committee’s decision to conduct an Inquiry with a view to increasing access to public procurement opportunities by small and medium-sized businesses and social economy enterprises.

The FSB welcomed the Programme for Government’s emphasis on “growing a dynamic innovative economy". However, we noted that only one of the PSA objectives specifically mentions Small and Medium sized Enterprises, despite the recognition in the Programme for Government of the essential contribution of this sector in the economy. PSA 11, Objective 4 includes the proposed action to “increase access to public sector procurement opportunities for SMEs and Social Economy Enterprises", with the target of having “appropriate systems in place by 30 September 2008 to allow SMEs and SEEs to opportunities for doing business with public sector organisations."

In these difficult economic conditions, it is clearer than ever that SMEs are the backbone of the economy in Northern Ireland, and if supported, will form the basis of the recovery in the future. It is essential to maintain the dynamism and innovation of our small businesses at this time.

Feedback from FSB members in Northern Ireland

This submission includes feedback from FSB members in Northern Ireland who have engaged or attempted to engage with public procurement processes, as well as information from FSB’s national research. Those members who spoke to us did so on the condition that they would remain anonymous. We are also grateful for expert input by FSB NI member Lestas Consulting, a local Management Consultancy company specialising in supporting SMEs and SEEs to procure to the public sector and supporting the public sector to examine good procurement practice (Annex 1).

FSB Member Guidelines

The FSB provides guidance to its members on best practice for those seeking to explore business opportunities in the public procurement sector[1] (Annex 2).

The FSB believes there are significant barriers to the procurement process for SMEs, and is conducting further and ongoing work to identify the specifics of these barriers and the measures that could best address them, building on the work that the FSB is carrying out in Great Britain.

Definition of SMEs

In Northern Ireland, 95% of businesses employ fewer than 10 people, while those with fewer than 50 employees constitute 98% of all business, and employ nearly 50% of those in employment (March 2005)[2]. Less than 1% of the private sector consists of large companies (250+ employees).

It is therefore important that the Committee clarifies its definition of an SME. Public Bodies in Northern Ireland may consider that they have 100% submission from the SME sector to its 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. This definition makes it difficult to make a case for the identification of real barriers for the majority of our typical businesses. This paper calls on the committee to define SME as a company employing up to 25 people. For the purposes of this paper this is the definition of SME that will be used.

Interdependence with other strategies and policies

It will, of course, be important to consider public procurement in conjunction with the current Independent Review of Economic Policy, the draft Enterprise Strategy and the long anticipated review of the Regional Economic Strategy.

In addition to reacting to the current economic climate, this is an opportunity to put measures in place to be introduced under the RPA.

Independent Review

Not wishing to delay any measures that the Committee might wish to recommend as a result of this Inquiry, we would welcome an independent review of the public procurement process in Northern Ireland, such as that conducted by Anne Glover in GB (and following the precedent of DEL’s decision to review Employment Dispute Resolution procedures following the Gibbons Review in GB, taking a specifically Northern Ireland focus and taking account of our uniqueness as a small business economy.

Recommendations

• The FSB has recommended that the UK government should set a target of awarding 30% of low value public procurement contracts to micro businesses. The Department of Finance and Personnel should consider this as a target in Northern Ireland in order to stimulate the indigenous small business base and increase productivity.
• The FSB NI calls on the Committee to initiate a review into SME access to information on public procurement opportunities, including those provided by public bodies outside central government, such as local councils, and address weaknesses where they are found. Tender opportunities are advertised in a plethora of media, including the three main daily newspapers, trade journals, and websites. Small and micro-businesses do not have the human resources to identify and monitor all of these sources on a weekly basis.
• Small businesses should be actively encouraged to enter tendering process. In relation to lower value contracts for which it is not a requirement to advertise, every effort should be made to identify as wide as possible a pool of potential tenderers, and to ensure that all have the opportunity to tender.
• On a national basis, the FSB calls for the introduction of an universal pre-qualification questionnaire that could be used for low value contracts and would only have to be filled in once and then logged for future bids. The time it takes to resubmit a full pre-qualification questionnaire for each new bid uses time the small business does not have. Pre-qualification paperwork should be simplified and in Plain English. Requirements should be clear and relevant.
• The FSB recommends an examination of the feasibility, as part of wider package to boost small businesses during current difficulties, of breaking large contracts into smaller ones to enable smaller businesses to tender.
• If large contractors are used, they should in turn be required to advertise for their subcontractors, and to select from them on a Value-for-Money basis.
• The concept of Value for Money as a principle which requires consideration of much wider criteria than cost – embracing quality, project completion times, ease of communication and project flexibility – must be promoted and public service contract managers thoroughly trained. Such training should include the benefits of using smaller companies.
• Debriefing should be automatically offered to all unsuccessful bidders and should be delivered by someone who was actively involved with the award process. Feedback should be provided in the format requested by the bidders, whether face to face meetings, telephone or written advice and explanations.
• The number and value of contracts awarded to small businesses, by size of business, should be monitored and regularly reviewed. This information should be included in the DFP’s Annual Report to the Procurement Board.

Introduction

Public procurement is an underused tool when it comes to supporting the indigenous small business sector. By using local suppliers, contractors can expect better value for money, better quality of service and a more innovative and punctual completion of the contract.

The public sector in Northern Ireland spends over £2bn a year on public procurement, nearly 25% of the Executive’s budget, yet BERR estimates that only 16% of the total value of public contracts is awarded to SMEs, and only 33% of SMEs who bid every time they find an appropriate opportunity are successful in winning the contract. This is set against EU data which states that SMEs secured 42% of the value of contracts above the thresholds fixed by the EU directives on public procurement which is £140,000[3].

Survey Results[4]

Evidence from a recent survey of FSB members suggests that SMEs experience significant barriers in tendering for government contracts.[5] Small businesses are not always given a fair chance to compete against larger businesses, and also are not always aware of ways in which they can maximise their chance of winning public sector contracts.

On average, SMEs find the private sector easier to sell to than the public sector – their rate of success in winning private sector contracts is double their rate of success in winning public sector contracts.

Over 50% of SMEs find it significantly more difficult to deliver to government agencies than the private sector, predominantly because of the additional requirements of public sector clients. This is largely due to a greater amount of formality, a lack of responsiveness and unrealistic timescales.

Three quarters of SMEs lack awareness of where to find information about public procurement opportunities.

Two thirds also lack the time required to look for opportunities.

Just under two thirds of SMEs are not sure of which information sources to use when looking for opportunities.

Over three quarters of SMEs feel they lack awareness of the government procurement opportunities available to them. The majority of these do not know where to look for opportunities, and believe it is too time consuming to try and find out about them.

Over half of SMEs find the tendering process too costly/time consuming and half of SMEs feel their lack of awareness of appropriate contracts prevents them from bidding.

Many SMEs do not bid because they feel they are unable to compete with larger suppliers. One in five SMEs believes they are unsuccessful in a bid because they are unable to offer better value for money than other suppliers.

SMEs believe that in general, public sector organisations require a greater number of formalities, can be indecisive and unresponsive.

Over half of SMEs feel the process of tendering for government contracts requires more time and resources than their business can allow.

There is a suggestion that further breakdown shows medium sized businesses tend to perform better than small and micro businesses.

Survey Comments

As part of this submission, the FSB contacted members to ascertain their views and experiences relating to public sector procurement in Northern Ireland.

A common thread amongst respondents was whilst they recognise and welcome the pro-active approach taken by the Northern Ireland Executive towards approving capital projects to help stimulate the economy; much of this positivity is endangered by a concern that due to current procurement procedures in place, how long will it take for these to get off the ground?

Snapshot comments are expressed below to illustrate the wider responses received;

Micro-businesses

I have no experience regarding public sector contracts. As a micro business I have shied away from the laborious and time consuming procedures involved in the application process.

Office of Government Commerce

Multi-national companies represented in Northern Ireland are getting contracts through the OGC (government buying solutions) whereas Northern Ireland based companies are placed at a disadvantage that unless they have cover the whole of the UK and have a certain turnover value they cannot get on the OGC...the OGC allows Northern Ireland government departments to issue contracts to those companies with OGC without tendering...the system seems to make ConstructionLine registration useless...most government departments use OGC as an easy way out so that they do not have to tender (thus saving cost of tender). If the Assembly had a similar system then the argument would be negated and more local companies would be getting work.

Public Liability Insurance

Many public sector contracts specify a minimum of £10million Public Liability Insurance, whereas in the private sector, my experience suggests that £2million is normally sufficient.

Tendering Notifications & Qualification

There is no efficient tendering notification system, even commercial fee based services do not seem to cover all tender opportunities, particularly those smaller ones often issued by local councils.

I understand that every project with a construction cost of over £30,000 is advertised. Then a detailed pre-qualification questionnaire is completed by each member of the team, including evidence of health and safety policies, accredited management systems and references for assessment to get on the shortlist. This is before a more detailed questionnaire is then to be completed.

Contractor/Sub-Contractor Payments

“My business is experiencing increasing difficulties due to the trend towards Measured Term Contracts (MTCs). Whilst the main contractors are receiving prompt payment from the public sector contractor, the main contractor is not prompt in passing the payments down to its sub-contractors. The Government recently said it would ‘stamp’ on this practice but we see no evidence of this in reality, in fact the opposite is becoming the case"

Relationship Management

“In the past we would work directly to those who understood the issues but this is being replaced by centrally driven civil servants with no industry specialisms, we do our best to highlight the weaknesses in advance but this clearly not always taken on board. In fact we feel the current process often hinders procurement, rather than facilitate it"

“Administration has grown considerably in delivering public sector contracts as we have many more masters to serve...end user, auditors, various internal departments, purchasing team, etc etc. This has negative effect on cost and project delivery timescales"

Framework Agreements

There have been repeated concerns expressed in relation to the issue of Framework Agreements. Since these were introduced in Northern Ireland, there is a very strong perception amongst many business owners that the outcome has been to exclude the indigenous SME sector in favour of larger [inter]national competitors, the irony being that once the latter have been successful in winning the contract, much of the work is often then sub-contracted to indigenous SMEs.

The announcement by the Finance Minister, Nigel Dodds, in December 2008 that approximately £115 million of construction-related projects previously earmarked for delivery through the Framework process would now be released for tender instead, is a welcome move, albeit forced by other circumstances. This demonstrates that when required there can be flexibility in the system and the FSB would like to see this built upon to benefit indigenous small businesses, particularly during these difficult economic times. However, we urge caution in relation to the Accelerated procurement process, as this is likely to significantly disadvantage small businesses without the resources to devote to preparing complex bids very quickly.

Member Comment – Framework Agreements

“My organisation has, up until now, been appointed to a number of governmental projects. We are a highly experienced company and it is these projects that allow us [to get] on to shortlists for future project opportunities. If frameworks are designed to last for 4-5 years, we will be excluded from the next round of frameworks as we will not have experience of similar projects of a similar size (usually criteria is to look for the last 5 years experience of similar projects). This framework has created sufficient interest for the large UK/Irish consultancies to establish offices in Northern Ireland. Rather than create new job opportunities this has displaced jobs from local SMEs and concentrated the potential income generation to a few larger organisations".

Recommendations

• The FSB has recommended that the UK government should set a target of awarding 30% of low value public procurement contracts to micro businesses. The Department of Finance and Personnel should consider this as a target in Northern Ireland in order to stimulate the indigenous small business base and increase productivity.
• The FSB NI calls on the Committee to initiate a review into SME access to information on public procurement opportunities, including those provided by public bodies outside central government, such as local councils, and address weaknesses where they are found. Tender opportunities are advertised in a plethora of media, including the three main daily newspapers, trade journals, and websites. Small and micro-businesses do not have the human resources to identify and monitor all of these sources on a weekly basis.
• Small businesses should be actively encouraged to enter tendering process. In relation to lower value contracts for which it is not a requirement to advertise, every effort should be made to identify as wide as possible a pool of potential tenderers, and to ensure that all have the opportunity to tender.
• On a national basis, the FSB calls for the introduction of an universal pre-qualification questionnaire that could be used for low value contracts and would only have to be filled in once and then logged for future bids. The time it takes to resubmit a full pre-qualification questionnaire for each new bid uses time the small business does not have. Pre-qualification paperwork should be simplified and in Plain English. Requirements should be clear and relevant.[6]

All councils in Sussex have now agreed to adopt a standard self-assessment PQQ based on the OGC model, but reduced down to only 9 pages. This means that businesses in Sussex now only have to complete the same standard form for any non-EU tender. Questions will always be the same and in the same order, and they don’t need to provide supporting documents.

• The FSB recommends an examination of the feasibility, as part of wider package to boost small businesses during current difficulties, of breaking large contracts into smaller ones to enable smaller businesses to tender.
• If large contractors are used, they should in turn be required to advertise for their subcontractors, and to select from them on a Value-for-Money basis.
• The concept of Value for Money as a principle which requires consideration of much wider criteria than cost – embracing quality, project completion times, ease of communication and project flexibility – must be promoted and public service contract managers thoroughly trained. Such training should include the benefits of using smaller companies.
• Debriefing should be automatically offered to all unsuccessful bidders and should be delivered by someone who was actively involved with the award process. Feedback should be provided in the format requested by the bidders, whether face to face meetings, telephone or written advice and explanations.
• The number and value of contracts awarded to small businesses, by size of business, should be monitored and regularly reviewed. This information should be included in the DFP’s Annual Report to the Procurement Board.

Conclusions

Many small businesses have benefitted from public sector procurement in Northern Ireland over many years, but many believe it is becoming a more and more inaccessible marketplace.

There is recognition that value-for-money is a critical criteria, however this is also a feeling the process has become unnecessarily bureaucratic and unwieldy, which in itself deters many small businesses, who do not have the in-house expertise or manpower to make it commercially viable.

Nationally, the FSB has welcomed confirmation that the Government intends to adopt all eighteen recommendations made by the Glover Review. As part of this process, the FSB has been invited by BERR/OGC to sit on the Glover Implementation Stakeholder Committee to feed into the implementation process.

It would be beneficial for those charged with delivering effective public procurement to closely monitor this Committee’s work and adapt relevant good practice to Northern Ireland.

The FSB report – ‘Evaluating SME Experiences of Government Procurement’ is a comprehensive document which would be useful for reading as part of this inquiry. A copy has been attached as part of this submission.

Annex 1

The following points have been brought to our attention by an FSB NI member specialising in supporting SMEs and SEEs to procure to the public sector and in supporting the public sector to examine good procurement practice:

1.1 The cost of Public sector tendering to SMEs – This has not been examined in detail yet. However initial indicators are that it is often a very expensive process, involving extensive input from senior staff and owner/managers. Estimates are that it can be up to 35% of annual turnover depending on the size of the company and its dependency on the public sector.

1.2 Public Body Frameworks – The documentation and process involved in the primary stage of frameworks is lengthy, cumbersome and expensive for small businesses. Experiences to date indicate that the primary process for frameworks does not in any way lessen the documentation required for the secondary process. SMEs still need to complete a tender response in the secondary process in the same way as any other open competitive tendering process. Frameworks at present mean double the tendering work for an SME. This paper calls on the Committee to examine Frameworks.

1.3 Success Rate for SMEs in Government Frameworks – Central government needs to provide statistics on how successful small companies are on getting onto the framework but more importantly, how successful small companies are at securing contracts from the framework. Initial indicators are that the success rate for companies on the framework (and who have therefore proved their capacity and capability to deliver government contracts) to secure contracts is a very staggeringly low figure and certainly below 20%.

1.4 Contract Management Skills by Managers in the Civil Service - It seems 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 is in direct contrast to the fact that the company has been placed on the frameworks and has therefore proved their capacity and capability. This paper calls on the Committee to examine an educational process for contact mangers into the potential advantages of using an SME for contract delivery.

1.5 The use of the Accelerated process in an economic downturn – In order to assist the current economic crises for the business sector, the EU is calling on government bodies to increase the use of the accelerated process in the restricted process. This means that when procuring public contracts, the response time is reduced to 10 days from issue of tender notice to tender submission dates. Although this is positive in one sense it also has the potential to create another barrier for a small company - the shorter response time is unlikely to allow small companies enough time to prepare their tender documents.

1.6 Contracts below the EU Thresholds – Most small companies in Northern Ireland procuring to the public sector are working on contracts below the EU thresholds. However, most public bodies procuring contracts below the thresholds are not taking the care and direction of good and similar practice as set out in the EU Directives. The processes used for these contracts and the Terms of Reference documentation produced is often of poor quality, that does not adhere to an open, transparent and objective procurement process. For example, decisions are made on contract award without clear understanding of evaluation of award criteria. Award criteria and sub criteria are not published in terms of reference so SMEs are unclear of the emphasis required in their tender response or how the award decision was reached.

1.7 The Debriefing Process –There is a complete lack of consistency across public bodies on the debriefing process from central government through to local authorities. Small companies must be encouraged to use the debriefing process in its entirety as a business development tool and civil servants need to appreciate the importance of this process for SMEs. FSB members highlight the significant barriers to them receiving any useful information in the debriefing process. The OGC provide extensive guidelines to public bodies in the UK of which there is little reference by public bodies in Northern Ireland. Public bodies still do not take the debriefing process seriously even with all the guidelines highlighting the importance of this part of the procurement process. In a number of cases public bodies “hand over" the debriefing process to a junior member of staff who has not been involved in the procurement process. Importantly, this lack of consistency and priority of the debriefing process appears to be increasing the use of the FOI act by SMEs when a more structured debriefing process would have been satisfactory.

1.8 Freedom of Information – There is a complete lack of consistency across public bodies on what information can be disclosed from a procurement process under the Act. Small companies highlight many instances where one public body does disclose information and another does not. Public bodies need to agree and have a consistent approach to enable SMEs to effectively use this process.

Annex 2

SMEs – A role to play

There are practical steps that SMEs themselves can take to increase their chances of winning government contracts. This guidance should form the basis of proposed official guidance;

• The first step to winning a public sector contract is to identify suitable opportunities for your business. Opportunity gateways are one of the more efficient ways of searching but it’s important to make sure the proposed bidder is investing time wisely in identifying the most useful opportunity gateways.
• Once you’re looking in the right place for public sector opportunities, it’s important that you’re selective about those opportunities you’re investing time and resources into bidding for.
• Bidding for smaller contracts initially can help establish a foothold, gain valuable experience in delivering to public sector clients and can reassure procurement professionals of your business capability. It can also be easier to deliver smaller contracts, as they often have no, or much lower, tendering requirements.
• Developing personal relationships with suppliers will strengthen any bids you make, and may help you to become aware of opportunities before they are advertised. You should seek to actively develop relationships with targeted public organisations/offices through the use of mail shots, networking events, phone and email campaigns, etc. And ensure that old clients are contacted on a regular basis to encourage re-purchasing and/or referral.
• An effective marketing campaign can help to raise the profile of the SME with both procurement teams and potential end-users.
• Consider working together with other SMEs to create an offer that it is competitive to attractive to public agencies. As well as considering consortiums, you may want to examine working as a subcontractor for a larger company.

[1] As part of the wider FSB Keep Trade Local campaign, the FSB has produced a ‘Public Procurement – Helping Small Businesses Succeed’ guide. This was published in October 2008, and focuses on member experiences throughout the United Kingdom.

[2] Small And Medium Enterprises In Northern Ireland, DETI, 4/12/06

[3] BERR

[4] The FSB in Northern Ireland conducted additional research to that used in the FSB/CBI/BVCA report in order to ensure sufficient qualitative local responses. On the basis of past survey work and consultation, the quantitative research can be satisfactorily related to a Northern Ireland perspective.

[5] The study was carried out by Fresh Minds Research for the Scorecard Working Party in the autumn of 2008. The Scorecard working party is made up of the BVCA, FSB and CBI.

[6] ‘Evaluating SME Experiences of Government Procurement’ was published in October 2008 jointly by the FSB, CBI and BVCA. It is a 66 page report, which details extensively the public procurement throughout the United Kingdom, including valid case studies.

Bryson Charitable Group

Background

Bryson Charitable Group formed in 1906 is one of N Ireland’s oldest local charities. For over 100 years has been a ‘leader in creating a just and sustainable society’ in Northern Ireland. Bryson is the leading N Ireland social enterprise with a turnover last year in excess of £18M and currently employs just under 600 people. Bryson has a service development and delivery focus; it is committed to service excellence, with a Mission that commits it to identifying and developing sustainable responses to existing and emerging social needs. The modern Charity, with its headquarter building at 28 Bedford Street, Belfast, has a regional presence with service centres based across the Province, which include Enniskillen, L’Derry (Foyle and City side), Larne, Newtownards, Downpatrick, Banbridge, Mallusk and several in Belfast. It has developed and provides service in a wide range of social policy areas, which include; care and social services; sustainable energy use; sustainable waste management and training for people living with long term unemployment etc. Bryson now generates circa 90% of its revenue from contract income and has a long history of successfully tendering for services in competition with the Private Sector. This has provided Bryson with significant experience in the pre-qualification and successful tendering for a wide range of public procurement contracts, with durations which vary from 3 to 15 years. Bryson believes that it is uniquely placed based on experience, to comment on the opportunities for improving the public procurement process, to provide better value for tax payers and better and more flexible services for the Commissioner.

Both regional and local governments have a significant expenditure on procurement annually. It is Bryson’s view that the application of what is currently referred to as “intelligent commissioning" principles to public procurement processes, would provide significant additional value to both tax payers and to commissioning organisations. It is not our intention to outline in this document the detail on those principles, but we would recommend to the Committee that it asks its officials to liaise directly with the UK Government’s Cabinet Office, which includes the Office of the Third Sector and provide the Committee with a review of their range of publications on issues such as; intelligent procurement; social clauses; the advantages of working with the social enterprise sector and training procurement professionals how to engage with social enterprise. In addition they should also consult with N Ireland’s Social Enterprise Network (SEN) and the UK based Social Enterprise Coalition as sectoral representative bodies.

Bryson is an organisation with significant experience in tendering, in particular for high value public procurement contracts and would like to record its willingness to provide oral evidence, in respect of its experience in contracting, to the Committee in due course and would also offer the Committee an opportunity to visit to see at first hand a range of social enterprise activities in operation.

Key Issues:

Green Book Assessment

Bryson has been working as part of a public procurement working group, supported by the Central Procurement Directorate at DFP and the Social Enterprise Unit at DETI and have been raising the issue that there does not appear to be a level playing field for social enterprises, particularly for high value, large volume, public procurement Tenders. While it was our initial view that an amendment would be required to the ‘Green Book’ to enable it to take a meaningful account of the particular qualities or added value brought by service delivery through social enterprise, we have come to the view that a change may not be necessary and what would be more appropriate, would be to ensure that the existing provision, within the assessment process, was used to acknowledge and give weight to the added value brought by social enterprise.

The N Ireland practical guide to the ‘Green Book’ (2003 addition), which is produced by DFP, provides an opportunity to score applications on the basis of non-monetary costs and benefits. For example it suggests an appraisal should follow 10 key steps (contained on page 14) which record in the 7th step the following:

“Weight up non-monetary costs and benefits including new TSN and equality;"

Later in the document (page 56) it describes these steps in more detail and in respect of the point above, its states as follows:

“Where possible, costs and benefits should be valued in monetary terms, using techniques such as those presented in Annex 2 of the ‘Green Book’. However, it is not always cost effective or practical to value costs and benefits in monetary terms. In many assessments there are non-monetary impacts such as environmental, social or health effects that cannot be valued cost effectively. These non-monetary costs and benefits must be taken into account and should not be assumed to be any less important than monetary values. They may be crucial to the decisions needed."

It is therefore our view that there may not be a need to amend the “Green Book" as it does not appear to prevent recognition (scoring) being given to non-monetary and non-costed benefits, as both it and the N Ireland Practical Guide recognise that there can be benefits which cannot be valued effectively using only cost. Our concern is that such benefits are not always taken properly into account by those evaluating tenders. We believe that this could be easily rectified if; work was undertaken to reinforce this aspect of the assessment process; if awareness was developed within Commissioners at both regional and local Government levels on the advantages of working with social enterprise; and if training was provided to Commissioners in using these aspects of the process to ensure best or better value for public spending.

To summarise, the facility exists within the process to take account of added values brought by social enterprise, but it is in the gift of the Commissioner to indicate a weighting or priority. Such could mitigate inequity and rebalance the current view by Commissioners that many social enterprises seem a higher risk, given for example; limited experience in the field; or a lack of reserves, which we believe often unfairly outweighs the advantage afforded by a social enterprise engagement. This would help create a level playing field for social enterprise bidding for the delivery of high value public services.

Pre-qualification/Assessment barriers

It is Bryson’s view that frequently pre-qualification and indeed the assessment process, establish essential criteria that is at times, difficult for social enterprises, particularly newer organisations, to satisfy. These include turnover thresholds, weak balance sheets (few tangible assets and low levels of reserves), or lacking independent accreditation i.e. ISO, Charter Mark, or other. We are not suggesting setting these aside but unless there is some flexibility it becomes increasingly difficult for social enterprises to engage in tendering for high value public procurement contracts. Our suggestion is not that these should be ignored, but that lower thresholds be set or greater flexibility deployed to encourage social enterprises to participate.

Social Clauses

The inclusion of social clauses in tender specifications forms part of the concept of “intelligent commissioning" referred to above. A recent publication by the Cabinet Office (Social Clauses Project) contains on page 4 the following definition for a social clause:

“Social clauses describe relevant, legitimate and value for money aspects of a procurement life cycle, which fulfil a particular social aim. This may include social requirements within the technical specification and award criteria of a contract where they are relevant to the subject of the contract and compliant with Public Procurement Legislation, as well as the UK’s Value for Money policy (or equivalent commitment)"

Bryson is of the view that the inclusion of appropriate social clauses will provide added value to public procurement, ensuring the provision of the specification while achieving other social objects e.g. creating employment for those living in disadvantage (unemployed, disability, etc) or locating in an area of high social deprivation, etc. Public Sector spending makes a significant impact on our local economy; one third of our workforce are employed in the Public Sector and a further third employed as a result of its spending; it is therefore all the more important that Public spending should provide for us, in addition to fit for purpose services, the best possible impact on our economy and society. In addition to the inclusion of social clauses Bryson believes that Government must invest in robust academic research to identify metrics, which will enable procurement professionals to identify and quantify the added value brought by social enterprise in achieving social outcomes when delivering Public services.

Growth Opportunities

It is Bryson’s view that public spending, through formal procurement process, have a significant role in securing and growing the N Ireland local economy. The Review of Public Administration (RPA), if successful, will reorganise public services and seek to achieve cost efficiencies in respect of the delivery of those services. Bryson believes that Social Enterprises, as well as small and medium sized Private Sector enterprises, have a significant role to play in the delivery of high quality cost effective public services and would encourage the Committee to take the view on the importance of outsourcing for that service delivery. Such we believe would create a leaner Public Sector; controlling the services it wishes delivered and creating an opportunity for enterprise, social or otherwise. We would encourage the Committee to take this position and a particular interest in the development of the proposed new and enlarged Councils. Bryson believes it would be important for the Assembly to require local authorities, within their new context, to make the presumption that services, in particular new services as a result of their expanded powers, are outsourced rather than provided in-house. This will provide a stimulus to the local enterprise, keeping those new Councils lean and focused on the delivery of the service that they commission and provide much better value to the rate payer.

We would also encourage the Committee to consider and recommend that targets be set by the appropriate Department (DETI) to achieve growth in the social enterprise sector and in particular in the delivery of public services. This would require the Department to put in place development investment, much as they do for Private Sector enterprise, to enable social enterprise to develop tendering skills, important accreditation (ISO, Charter Mark, etc) and as such treat social enterprise as the important and vibrant part of the N Ireland economy that it could and should be.

John McMullan
Chief Executive
Bryson Charitable Group

February 2009

Business in the Community

Background

Business in the Community is a membership organisation for companies committed to responsible business practice. We help our members meet their responsibilities towards society. Established in 1982, Business in the Community operates across the UK and has a sister organisation in the Republic of Ireland. 2009 marks the 20th anniversary of Business in the Community in Northern Ireland.

There are more than 800 members of Business in the Community nationally, including 80% of the FTSE 100. In Northern Ireland, Business in the Community has over 230 member companies of all sizes, committed to making a positive difference to local communities, minimising their environmental impacts, investing in their workforce and putting something back into the future development of the local economy.

Business in the Community’s purpose is:

To inspire, engage, support and challenge companies to continually improve the impact they have on society.

Business in the Community’s engagement with small and medium enterprises (SMEs) and Social Economy Enterprises (SEEs)

Around two-thirds of the 230 members of Business in the Community in Northern Ireland fall into the Small and Medium Enterprise category, as outlined by the EU definition, ie less than 500 employees. Support from our organisation to stimulate growth splits broadly into two areas – Support for SMEs and Supporting Entrepreneurship in the Third Sector:

1. Supporting SMEs

SMEs have been supported through programmes like Think Big, delivered in five local council areas across NI. Predominantly aimed at start up businesses, 265 start-ups received support from more established firms to help find new markets, build capacity through mentoring and embed good practice into operations from an early stage. This support totalled over £100,000 of investment. Over 170 jobs were created in the process and a total increase in sales of 23 percent was recorded at the culmination of the three year programme.

To help SMEs with environmental action, including readiness to meet environmental clauses in tendering applications, the Green Dragon environmental standard was developed and already, around 40 businesses across Northern Ireland have benefitted from completing this process.

Costs have been reduced and tendering has been successful as a result of the Green Dragon Programme, delivered by Arena Network, the environmental arm of Business in the Community.

For the past 16 years, Business in the Community has supported established small firms with growth potential through a Business to Business Bridge Programme. Through this programme, over 2000 small firms have received practical assistance and mentoring support from larger, established companies across Northern Ireland.

2. Supporting Entrepreneurship in the Third Sector

Business in the Community has used various methods to support entrepreneurship in the third sector, including peer mentoring, resource provision, pro-bono assistance and partnered initiatives. One initiative includes the current Community Enterprise Development Programme, taking place in the Coleraine Borough and aimed at stimulating entrepreneurial and social enterprises in the north-coast area.

A special toolkit for social enterprises was published recently, in association with the Social Economy Network and an accompanying event provided a networking opportunity for social enterprises to get direct access to established business figures and experts in particular fields. Professionals in the areas of marketing, communications, governance, procurement and employment and selection provided advice and guidance on best practice for new businesses, particularly those rooted n their communities.

Draft Programme for Government Response 2008

In January 2008, Business in the Community lodged a response to the Draft Programme for Government with the Northern Ireland Executive. Responding to the section on Supporting Ecomomic Growth and Development, we argued that there was little in the Programme around supporting new business start-ups or encouraging entrepreneurship, essential if the NI economy was to continue to grow. This has become an even more pressing concern as the global economy slows and inward investment reduces.

Business in the Community also petitioned the Executive in support of mentoring initiatives and best practice transfer from larger to smaller business. We asked the Executive to consider ways in which this process could be incentivised to support responsible entrepreneurship and keep companies engaged in existing initiatives. Similarly, we pointed out that there has been a dramatic increase in the amount of environmental legislation Northern Ireland businesses must comply with. This is especially challenging for the SME sector and has an impact on tendering and procurement. ARENA Network, the environmental arm of Business in the Community, is still very keen to engage with government on these issues, making it as simple as possible for small firms to reach the highest standards of environmental excellence.

Business in the Community position on social clauses in tenders

Business in the Community’s position on social clauses in public tenders is one of general support for their inclusion. Often, these clauses can be used as a method of encouragement to help firms raise their own standards in terms of environmental protection, social inclusion, community impact or recruitment and retention.

While broadly supportive of the inclusion of social clauses, when it comes to small firms Business in the Community believes government must ensure that these clauses aren’t overly rigid, or unworkable, resulting in the preclusion of small and medium enterprises from tendering at all. These clauses should be viewed as a method of encouragement and not a barrier to engagement. Business in the Community works with companies to improve their ability to withstand scrutiny in related areas.

Our organisation has encouraged this already within and even beyond legal frameworks, promoting best practice in every available aspect.

The Green Dragon Environmental Standard is designed specifically to help small and medium enterprises and with a graded approach to environmental action (through Levels 1-5). This allows a continuous level of development for small firms and has already proved to be a great help in private sector tendering for some companies across Northern Ireland. With the up-coming Review of Public Administration, Business in the Community has attempted, without much success, to engage with the council-wide group on procurement, operated by the Department of the Environment.

We feel an opportunity exists for best practice in procurement to be embedded in the planning stages of the amalgamation process. Unfortunately, the ad-hoc nature of this committee seems to have worked against us impacting at council wide level, which is a lost opportunity to discuss future engagement and benchmark best practice during the planning stages.

Key areas of concern for SMEs and SEEs

Many SME’s and SEE’s may feel the tendering process is unavailable or out of reach for them, for a variety of reasons. It is crucial that government ensures this dissonance is reduced or eliminated and that indigenous small and medium enterprises and social economy enterprises are actively encouraged and supported in engagement with government departments. It is often felt that language used by government can be off-putting, overly technical or obscure and for small organisations, with limited resources, simply reading related documentation is time consuming and cumbersome. Another real concern for small firms is speed of payment from government departments for work that is carried out. It is absolutely vital that small firms are paid promptly by departments, ensuring liquidity and safeguarding against cash flow problems that could lead to downsizing, particularly if a supplier chain is in existence.

Business in the Community recommendations

Business in the Community has workable recommendations on how to maximise end-user experience for SME’s:

• Workshops for small businesses hoping to tender for local government contracts, or form part of procurement processes, should be held at least once, if not twice a year. This would give representatives an opportunity to learn more about the operations of SMEs and SEEs, as well as guaranteeing transparency. Firms hoping to tender would get direct advice and guidance from departmental staff and could acquaint themselves with procedural norms for procurement and tendering. This would help reduce dissonance between government and small firms. These should also be regional and not always hosted in Belfast.
• A dedicated website should be developed to provide direct access to year round support for small firms. This website would include round-ups of latest news, up-coming opportunities, staff movement within the Central Procurement Directorate or related offices, Frequently Asked Questions, guidelines and general information and feedback avenues on working with government.
• Language used in tendering notices, applications or instructions should be in plain

English and where possible and should be devoid of unnecessary jargon, unexplained abbreviations or business-speak.

• An examination into the billing and payment arrangement for the tendering process should be conducted to ensure that the most cost-effective and timely methods are being used to get payments to small and medium enterprises quickly and efficiently. Liquidity for companies is a huge issue in the present downturn and this should be conducted immediately as part of the wider effort aimed at stabilising Northern Ireland’s economic framework.

Further contacts:

For further information, please contact Martin Flynn at Business in the Community on 028 90 46 0606. Business in the Community is entirely happy to provide oral submission on these or related topics to relevant Northern Ireland Assembly committees at any time.

Appendix 1

Business in the Community NI Board members

Eileen Sowney	AIB Group (UK) Plc
Roy Adair	Belfast Harbour Commissioners
Michael J Ryan CBE	Bombardier Aerospace
Stephen Magorrian	Botanic Inns
Chris Clark	BT Ireland
Alan Lennon	Civil Service Commissioner
Ciaran Sheehan	Clarendon Executive
Aideen McGinley	Department for Employment and Learning
Terry McDaid	First Trust Bank
Mark Sweeny	FG Wilson
Nigel McIlwaine	Foyle Food Group
Brian Ambrose	George Best Belfast International Airport
Nigel Gray	Marks & Spencer plc
Ruth Laird	NI Transport Holding Company
Bro McFerran	Northbrook Technology of NI
Peter Dixon	Phoenix Natural Gas Ltd
Paul Rooney	PricewaterhouseCoopers
Gerry McCormac	Queen’s University Belfast
John McCann	UTV plc

Appendix 2

Current Business in the Community membership list

A&L Goodbody	Gallaher Ltd	Northern Bank Ltd
Acheson & Glover	GEDA Construction	Northern Ireland Blood
Action Renewables	Genesis Breads	Transfusion Service
AES Kilroot	George Best Belfast City Airport	Northern Ireland Chamber
Airporter	Gilbert Ash	of Commerce & Industry
Airtricity	Goldblatt McGuigan	Northern Ireland Court Service
Alburn Investments	Grafton Recruitment	Northern Ireland Office
Alliance Boots	Grant Thornton UK LLP	Northern Ireland Water
Allianz Northern Ireland	GSL Ireland Ltd	Novsoco Limited
Allied Bakeries	Habinteg Housing Association	Odyssey Trust Company
Allstate Northern Ireland	Haldane Fisher	Old Bushmills Distillery
Almac Group Ltd	Hamiliton Shipping	Parker Green
Amey Business Services	HBOS plc	Patton Group
Andor Technology	HCL BPO Services (NI) Ltd	Phoenix Natural Gas
Anglo Irish Bank Corporation Ltd	HEAT Ltd	Police Service of Northern
Arthur Cox Solicitors	Henry Denny & Sons Ltd	Ireland
Arts & Business	Hewlett Packard	Premier Power Ltd
Asidua	Hivolt Capacitators	PricewaterhouseCoopers
B9 Energy Services	Holiday Inn Hotel	Pritchitt
Bank of England	Hughes Christensen Co	Probation Board for NI
Bank of Ireland	Huhtamaki NI	Progressive Building Society
BBC	Hutchinson Homes	Queen’s University of Belfast
BDO Stoy Hayward	IBM UK Ltd	resource™
Bedeck	ICS Computing	Richmond Centre
Belfast Harbour Commissioners	Identity & Passport Service	Royal & SunAlliance
Belfast Health & Social Care	IEB Software	Royal Mail Group plc
Trust	IKEA	RPS Consulting Engineers
Belfast Metropolitan College	INVISTA Textiles (UK) Ltd	Rural Development Council
Belfast Telegraph	Ipsos MORI	Sangers
BIH Housing Association	Irish News Ltd	Sainsbury’s
BluePrint	ITS Ltd	SCA Packaging Ireland
Bombardier Aerospace	J P Corry Ltd	SDC Trailers Ltd
Botanic Inns	Jackson Graham Associates	Seagate Technology (Ireland)
B.P. McKeefry Ltd	John Graham	Ltd
BP Oil UK Ltd	John Henderson Ltd	Serco Ireland
BT Ireland	John McKee & Son Solicitors	Singularity
Canon	John Thompson & Sons	SITA
Carecall	Johnston Press Ltd	Smarts
Care Circle	Kilwaughter Chemical Co. Ltd	Social Security Agency
Carson McDowell Solicitors	KPMG	SODEXO LTD
Castlecourt Shopping Centre	Lafarge Cement	Southern Health and Social
Cavanagh Kelly Accountants	Lagan Holdings Ltd	Care Trust
Circe Ltd	Land Securities Trillium	South Eastern Health and Social
Citigroup	Larne Harbour Ltd	Care Trust
Clanmill Housing Association	Leckpatrick Foods	South Eastern Regional College
Clarehill Plastics	Linden Foods	SP McCaffrey & Co Accountants
Clarendon Executive	Lindsay Ford	Spengler Fox
Cleaver Fulton Rankin	Londonderry Port & Harbour	Steria
CMWorks	Commissioners	Stevenson Munn
Coca-Cola Bottlers (Ulster) Ltd	Lyle Bailie International	Stratagem
Compass Group	Lynergy	Strategic Investment Board
Connswater Shopping Centre	Marks & Spencer	Stream Ltd
Consarc Design Group Ltd	Marsh Ltd	Teletech UK Ltd
Consilium Technologies	McAvoy Group	Tesco Stores Ltd
Copelands	McCormick Property	TextHelp Systems Ltd
Council for the Curriculum,	Developments	The Carvill Group
Examinations &	McGrigors Belfast	The Grant Group
Assessment (CCEA)	McMullen Architectural Systems	Tim Lewis Consultancy
Crane Stockman Valve	Ltd	Titanic Quarter
Davy	Medicare	TR Shipping Services Ltd
DCC Energy (NI) Ltd	Michelin Tyre plc	Translink
Deloitte	Microsoft NI	Triangle Housing Association
Delta Packaging	Mills Selig	Tughans Solicitors
Diageo Northern Ireland	Ministry of Defence	Ulster Bank Limited
Dillon Bass Ltd	Mivan	Ulster Carpets
Driver & Vehicle Licensing	Montupet (UK) Ltd	Ulster Stores
Dunbia	Mott MacDonald Group	USEL
DuPont UK Ltd	Moy Park Ltd	United Dairy Farmers
Energia	Multi Development	University of Ulster
Enterprise Rent-A-Car	Munster Simms	UTV plc
ESB Independent Energy	Musgrave Retail Partners NI	Viridian Group plc
Evron Foods Ltd	NACCO Materials Handling Ltd	Vodafone NI Ltd
FG Wilson (Engineering) Ltd	Nationwide Building Society	W5
FGS McClure Waters	NHBC	Western Health and Social Care
Field Boxmore Ltd	NI Ambulance Service	Trust
Firmus Energy	NI Co-ownership Housing	WH Stephens & Sons
First Trust Bank	Association	White Young Green
Firstsource	NI Housing Executive	Wrightbus Ltd
Fold Housing Association	NIjobs.com	Yell
Foyle Food Group	Nitec Solutions
FPM Accountants LLP	Norfolkline
Fujitsu Services	NORTEL Networks
Funeral Services NI Ltd	Northgate Information Solutions

Bold text denotes companies joined in the last year.

Data correct as if February 5 2009

Law Society of Northern Ireland

40 Linenhall Street
Belfast BT2 8BA
Tel: 02890 231614
Fax: 02890 232606

Email: info@lawsoc-ni.org
Website:www.lawsoc-ni.org

1.1 The Law Society is the professional body established by Royal Charter and invested with statutory functions in relation to solicitors (primarily under the Solicitors (NI) Order 1976, as amended). The functions of the Law Society are to regulate responsibly and in the public interest the solicitors’ profession in Northern Ireland and to represent solicitors’ interests.

1.2 The Law Society represents over 2,200 solicitors working in some 550 firms based in over 74 geographical locations throughout Northern Ireland. Members of the Society represent private clients in legal matters. This makes the Society uniquely placed to comment on policy and law reform proposals.

1.3 The Society welcomes the opportunity to make a submission to the Assembly Committee for the Department of Finance and Personnel’s inquiry into Public Procurement Practice in Northern Ireland. The Society has previously and continues to raise it’s concerns in relation to current Government practice in the procurement of legal skills with the Department and welcomes the opportunity to raise it’s concerns with the Committee.

Current Practice of Public Procurement in Relation to Legal Services

2.1 A solicitor’s firm may be classified as a small or medium sized enterprise as defined by the European Union.[1] The role of solicitors’ firms in the economy is often underestimated, however the existence of a well skilled legal sector is a prerequisite to a vibrant economy. Solicitors’ firms advise clients including businesses on legal matters ensuring legal certainty for business ventures and facilitating commerce.

2.2 A number of solicitors’ firms have raised concerns with the Society in relation to their experience of the tendering process for the provision of legal services to Government in Northern Ireland. The Society fully understands the legal framework which governs the procurement process and EU provisions governing the free movement of goods and has had regard to these in drafting its submission.

Relevant Expertise and Personnel Expertise

2.3.1 The experience of solicitors’ firms based in Northern Ireland suggests that in assessing relevant expertise and personnel expertise, including knowledge and skills an overemphasis is placed on experience of having provided legal services relating to large scale Government projects in other jurisdictions. Expertise gathered providing legal services on smaller scale Government projects and even large scale private client projects in this jurisdiction often is underestimated. This is particularly true of contracts for the procurement of legal services relating to Private Finance Initiative (PFI) and Public Private Partnership (PPP) projects.

2.3.2 This emphasis places Northern Irish firms at a competitive disadvantage to larger firms based in England and Wales who often have particular experience of providing services relating to large scale Government contracts of high value. This is despite the fact much of the expertise required to provide such services can be developed by providing services relating to smaller scale projects and to large scale private client projects. The Society’s view is that the consideration of relevant expertise should place a greater emphasis on the legal issues advised on rather than simply the quantum of the relevant project. Whilst this factor may be of significant relevance in the assessment of other service providers, for legal services it is the legal issues advised upon which are of greater importance than the quantum of the specific project.

2.3.3 Current criteria further appear to fail to acknowledge expertise of local law and practice. Northern Irish based firms have an integral knowledge of local law and practice, having such expertise greatly enhances their ability to advise Government and ensures costs are kept to a minimum. Solicitor firms based in England and Wales when awarded a contract to provide a Government Department in Northern Ireland with legal services often rely on Northern Irish based firms to provide knowledge and expertise in the local law. Whilst collaborative initiatives such as these can bring benefits to all parties it is considered that local firms are well qualified to provide the full range of services required of Government, including those relating to PFI and PPP projects.

Cost

2.4.1 The current criteria, despite the emphasis placed on value for money, weigh costs at only 20% of the tender. The Society considers this weighting not to be in the public or taxpayer’s interest. It places Northern Irish based firms who are able to offer better value for money than larger firms in England and Wales at an unfair disadvantage. The Society queries why current practice so greatly undervalues the costs savings offered by Northern Irish firms given their broad base of relevant skills and experiences.

Insurance

2.5.1 Legal firms providing legal services to Government are required to have a sufficient level of professional indemnity insurance cover to protect Government against any risk emerging in the provision of their services. This ensures protection of public funds and interests should any difficulties arise.

Final Comments

3.1 The Society considers the current criteria are set in such a way as to under value the benefits which local firms can bring to Government. Local firms have a well developed broad base of legal skills and have developed expertise through advising both private and public clients in complex legal matters. The Society considers the current criteria undervalue the expertise which local firms hold and fail to take account of the costs savings they may offer.

3.2 The current criteria prevent the growth of the legal sector in this jurisdiction in contradiction to the Northern Ireland Executive objective as outlined in its Programme for Government 2008 –2011 of growing the private sector and the local economy.

[1] Companies classified as small and medium sized enterprises as defined officially by the EU as those with fewer than 250 employees and which are independent from larger companies.

Anderson Spratt Group

ASG and Anderson Spratt Group Holdings
Anderson House
Holywood Road
Belfast BT4 2GU

T: 028 9080 2000
F: 028 9080 2001

Dear Committee Members

We are responding to your recently published notice inviting comment on Public Procurement Practice in Northern Ireland, which we welcome.

Background

We, ASG, have contributed energetically and, we trust, constructively to consultation processes and studies attaching to Public Procurement in the very recent past. Our inputs have most obviously attached to:

NICS Campaign Advertising and Related Services Framework Agreement/Tender Ref; FI565007

This Framework is obviously sector specific and of particular consequence to ASG as a provider of Strategic Marketing & Communications services. We contributed thinking during the consultation window both unilaterally and via our industry representative body, The Institute of Practitioners in Advertising. Our principal point of reference during this consultation was the Executive Information Service.

Confederation of British Industry (NI)

Our corporate membership of CBI and inclusion within its Procurement Policy Working Group has further resulted in substantial dialogue with Central Procurement Directorate and associated COPEs in recent months, a dialogue which is ongoing and which will have very public expression at the NI Procurement Conference to be held on 5th March 2009. ASG is therefore an active contributor to the debate on the particularly important issue of Public Procurement.

Notwithstanding the weight of submission previously forwarded in response to both the Framework and CBI lobby referenced above, we would wish to forward the following comments, which we trust are appropriately timely and commensurate with the Terms of Reference attaching to this consultation. We also offer these comments in a context which is not restricted to our own area of professional practice but which should additionally reflect the experience of and challenges facing all SMEs.

Bidding Costs

An obvious challenge for potential respondents to Public Procurement invitations. These are largely dictated by the specific requirements of the tender in question and the timeframe being made available for completion of response. Experience suggests (notwithstanding Frameworks) that requirements tend to be unduly exhaustive and timeframes unduly punitive. Such considerations are of particular sensitivity in relation to SMEs.

The relationship between bid cost and potential commercial return (if successful) is often unattractive to the bidder and rarely, if ever, is a timeframe more generous than those formalised within Frameworks-and these are already hugely restrictive.

Language and Clarity of Tender Documentation

Much progress has been made in this area in recent times as a consequence of consultation and improving, regular dialogue. Having said, tender documentation often prompts a requirement for further questions and clarification from bidding parties; timeframes should adequately allow for such process and speed of response to clarification queries should be the subject of an agreed protocol. We would greatly encourage a continuing commitment to clarity of language and intention in the drafting of invitations to tender.

Previous Experience-Still an Ambiguous Position?

At time of writing, there appears to be an uncertainty (perhaps legal) as to the requirement for evidence of previous experience in secondary competitions if same has been demonstrated in a successful Framework bid. Such ambiguity is wholly unsatisfactory and is requiring of definitive clarification.

Experience of Assessment Panels

Professional Procurement requires resource-and said resource requires to be both experienced and intellectually imaginative. We would encourage a rigorous and ongoing assessment of the assessor in this context. We would further encourage an examination of appropriate third party expertise-perhaps a panel of qualified assessors in different disciplines-which might be drawn upon as necessary.

A Focus on Fitness for Purpose and ‘World Class’ Outcomes

The ‘process’ of Public Procurement is a demanding one for the procurer and there is a very substantial volume of work to be awarded in any one year. The sheer scale of this process might-and we stress might-result in a slipping of focus upon the primary intention of the procurement in the first place-and that is ultimately the provision of services to the citizen. And not just services, but services which are best in class.

A previous Northern Ireland Secretary of State, Peter Hain MP, said shortly before leaving office that if Northern Ireland is truly to become a ‘world class society’ then it must genuinely deliver ‘world class public services’. This is a noble ambition and one which goes beyond the purely quantitative. We believe, as an SME endeavouring to reflect such sentiment and live up to such expectation in our work, that such a culture can only positively impact upon outcomes and delivery.

Thank you for your consideration of this commentary.

Peter Spratt
Group Managing Director

Northern Ireland Federation of Housing Associations

27 February 2009

Introduction

The Northern Ireland Federation of Housing Associations (NIFHA) represents 40 housing associations. This includes 33 of the associations registered and regulated by the Department for Social Development (DSD).

Collectively, these associations provide 30,000 good quality, affordable homes for renting or equity sharing. They also develop 1,000 – 1,500 new homes each year and, often working in partnership with more specialised voluntary organisations, provide housing support services to thousands of tenants.

Further information is available at www.nifha.org

Background

At one and the same time, housing associations are voluntary organisations, social enterprises and part of the small business sector.

Housing associations are perhaps unique in the voluntary sector because they have experience of public procurement from two contrasting perspectives:

• like many other voluntary organisations, housing associations may submit tenders for public contracts
• in addition, they invite tenders for multi-million pound contracts for the construction of social housing, aided by grants of approximately 65% from the public purse.

Our evidence considers each of these aspects in turn.

A. Experience Gained from Submitting Tenders for Public Contracts

A1. Public procurement policy is complex and more training is required to enable all the relevant stakeholders, including housing associations, to understand the relevant principles, rules, procedures and terminology.

A2. Housing associations have been awarded public contracts through a variety of methods. In the case of the Health and Social Care sector, for example, sometimes a housing association has been directly appointed on the strength of its track record while in other cases the appointment is made after expressions of interest, pre-qualification and the evaluation of tenders involving quality as well as price. The procurement rules for the local authorities seem to be different from those of central government and its agencies.

A3. We are unaware of any public procurement exercises in N Ireland that have included social or environmental clauses. This may be due to a lack of self-confidence on the part of the procuring authority.

A4. We understand that authorities procuring goods or services below £100,000 may legitimately allow social enterprises to re-tender if price is the only factor that differentiates their tender from another. Such a rule should be better publicized and used.

A5. We endorse the comments made by NICVA and the Social Economy Network that the pre-qualification criteria are often set in ways that effectively preclude smaller organisations.

B. Experience Gained from Inviting Tenders for Grant-Aided Contracts

B1. Housing associations registered by the Department for social Development (DSD) are eligible to receive capital grants of about 65% towards the construction of social rented housing. For many years housing associations have procured individual housing contracts by inviting competitive tenders from competent builders.

B2. In 2006 the DSD informed us that, because the grant is more than 50%, housing associations would be required to comply with public procurement policy when they undertake this activity. This was set out in the DSD’s Strategy for Procurement of the Social Housing Development Programme, published in October 2008. It states that housing associations will only be allowed to develop grant-aided homes if they are members of one of four procurement consortia that establish frameworks and let building contracts after “mini competitions" between the contractors admitted to the relevant framework. The contractors in the frameworks can therefore expect much more continuity of work than would otherwise be the case. Each framework is expected to last 3-5 years and the Strategy implicitly assumes that sufficient grant and private finance will be available throughout the life of the framework. The Strategy also envisages that, within a few years, commodities and services purchased by housing associations will also have to be procured through the procurement consortia and frameworks.

B3. The Federation’s members have formed four consortia and are working constructively to make a success of the Strategy but feel that the implementation plan should be re-considered in the light of the following important factors:

(a) the assured grant budget for the next two financial years cannot support the scale of development programme envisaged when the Strategy was devised

(b) the building industry is severely depressed and contractors not admitted to frameworks may consider they have little to loose by mounting legal challenges to the selection process. This could cause serious delays and high costs

(c) in normal market conditions, it is difficult for half a dozen housing associations in a consortium to assemble enough housing projects at roughly the same time and in the same general area to confidently set up a framework.

B4. The Federation therefore believes it would be wise for the DSD to consider starting its procurement strategy with maintenance and improvement work, which obviously involves known property and is funded by associations themselves. In addition, other existing procurement initiatives involving housing associations and certain public bodies could be furter developed in an organic manner.

B5. The DSD should also recognise the VAT, TUPE and other implications of its preference that procurement consortia should establish legally-constituted entities to undertake the procurement function.

B6. Associations should be permitted to set a fair price and appoint firms (e.g. for maintenance) on the basis of quality of service.

B7. For certain specialized work, only small firms may be able and willing to do it. The procurement system should make allowance for this factor.

Submitted on behalf of NIFHA by:

Christopher Williamson
Chief Executive

Fold Housing Association

27 February 2009
Committee for Finance and Personnel
Room 419
Parliament Buildings
BELFAST
BT4 3XX

Dear Sirs,

We welcome the Committee for Finance and Personnel’s Consultation Paper on public procurement policy. In our response we aim to brief the Committee from the perspective of a developing housing association.

Fold Housing Association is a not-for-profit association with charitable status, set up in 1976. We are registered with and regulated by the Department for Social Development and governed under the Housing (NI) Order 2005 and the Industrial and Provident Societies Act (NI) 1969. Whilst the views below are those of Fold, we believe they are broadly representative of the housing association movement.

Our response has been developed in the context of the Government’s Achieving Excellence policy and its application to social housing.

1.0 Social Housing Procurement Strategy

Most recently the Department for Social Development (DSD) embarked on a Procurement Strategy for Housing Associations with the main objectives:

• To meet the programme target of 10,000 units;

• To achieve a noticeable increase in efficiency, with a minimum target of 10% cost efficiency over the period;

• To achieve targets for environmental performance in line with the Code for Sustainable Homes;

• To embrace construction procurement best practice.

Housing Associations in conjunction with their representative body NIFHA supported the strategy and its objectives in that they had already benefitted from collaborative working which has produced tangible savings and service improvements. The strategy provided an opportunity to expand collaborative working further.

However we have had concerns about the requirements within the strategy for housing associations to follow the Government’s Achieving Excellence initiative. We enclose an exert from the strategy which explains DSD’s position on this policy.

‘Government policy on construction procurement has also changed during this period and through the Achieving Excellence initiative Government now seeks to introduce changes arising from Sir Michael Latham’s report ‘Constructing the Team’ and the Egan report ‘Rethinking Construction.’

The Achieving Excellence in Construction initiative was developed in England and Wales to improve the performance of Government as a construction client. It was recommended that a Northern Ireland version of the Achieving Excellence in Construction initiative be prepared. The Government Construction Clients Group undertook this task and Achieving Excellence for Northern Ireland was launched in May 2002.

The Achieving Excellence in Construction initiative initially applied to direct construction procurement of Northern Ireland Government Departments. The subsequent decision that the principles should apply to grant aided organisations where grant exceeded 50% of total cost was taken in late 2005. As a result of this decision DSD must now require Housing Associations to comply. Housing Associations will now play an important role in delivering the efficiencies and skills required in undertaking the procurement role with Achieving Excellence’.

Our concerns in relation to this policy are based on its practical implementation and the potential effect it may have on our delivery partners in the construction industry. These are summarised as:

(a) The disparate nature of the NI social housing programme

(b) The constraints of in-year funding

(c) The historical performance of delivery partners

(d) Evidence of efficiencies

(e) Complexity and added bureaucracy

(f) Contesting of framework contracts

(a) The annual social housing development programme in Northern Ireland is made up of a large number of projects with a relatively small number of units. Only a small number of projects each year exceed 100 units. This reflects housing need. Projects have traditionally been delivered via a variety of means including traditional procurement, off-the-shelf and design and build. We understand the Achieving Excellence Policy requires that such projects will in future be delivered via integrated supply teams, appointed to framework agreements. Therefore each housing association will have to call off a framework and appoint an integrated supply team for specific housing developments. We understand this approach has been adopted successfully for large housing projects in GB and for major capital contracts in other sectors. However we are not convinced this model transfers to the social housing model in Northern Ireland and will bring added complexity, slow the delivery process and increase costs.

(b) We believe the ability to achieve efficiencies through partnering will not materialise whilst the social housing programme is funded in its current format. Housing associations are typically having to conclude negotiations with developers and contractors in the final quarter of a business year. At the same time the DSD is not able to make financial commitments outside of the current year. Housing associations need at least a 3-year funding commitment (as is the case in GB) in order for strategic partnerships to deliver any tangible efficiencies or long term benefits. We believe that housing associations deliver excellent value for money under current funding arrangements. However under the current arrangements with no longterm commitment to collaborative working, contractors and design partners will not be inclined to offer efficiencies or become involved in partnering.

(c) The contractors who currently service the development programme are generally in the small to medium category which reflects the structure of the construction industry of Northern Ireland. Fold has had no difficulty in compiling select lists of competent contractors willing to submit tenders (the lists are generally well over subscribed). The tenders returned demonstrate keen competition – all the lowest tenders we received for projects in 2006/07 were within the pre-tender estimates. Furthermore we experience very few problems on site with cost overruns or claims; work is completed within time and within the specified quality. The new policy will direct Fold and other housing associations towards larger contractors, who are probably already committed to other public sector framework contracts. We believe these commitments will lead to larger contractors having to engage the small to medium sized contractors under sub-contract arrangements. In effect we will have added an extra layer of cost and complicated the engagement process. We are not convinced such an arrangement will deliver efficiencies or provide an environment for introducing modern methods of construction.

(d) We believe that housing association construction costs when benchmarked with their GB counterparts confirm the current traditional procurement process is cost effective. We also believe that current tender prices are producing high levels of efficiencies. Efforts should be focussed at this time on maximising methods of procurement with streamlined tendering processes in order that best prices are achieved and jobs in the construction industry are protected.

(e) We believe the move towards strategic partnerships has taken place without adequate programmes of training for locally based delivery partners. Notwithstanding our concerns over the application of integrated supply teams within our sector (see a) above) it is clear that small to medium sized businesses have a limited understanding of the practicalities of such partnering arrangements. The Committee should consider additional provision for assisting contractors, consultants and customers with practical guidance of how such partnerships can be operated and efficiencies achieved. Our experience suggests there is limited appetite for engaging in practices such as ‘open book’ or ‘profit sharing’ arrangements.

(f) We have recently seen a rise in the number of contractors and consultants contesting tendering decisions. This is despite employing expert procurement advice. We have concerns that complex framework agreements will further be subject to mis-understanding and will themselves be contested. Procurement cycles will be extended and ultimately our ability to deliver on time, will be curtailed. Such frameworks should be set aside whilst efficiencies are currently being delivered through market forces until such time as robust processes have been developed for use by all bodies in receipt of public funds. We strongly recommend that a central body take on the responsibility for designing such a procurement process and that they liaise closely with representative bodies of the construction industry.

In summary we support the efforts of the DSD and the Minister for Social Development in their pursuit of the objectives laid out in the Procurement Strategy for Housing Associations. However we call upon the Committee for Finance and Personnel to review the points raised above in relation to the Achieving Excellence Policy. We are concerned the policy requires the application of a method of procurement which is overly complex for our development needs. We feel it excludes small and medium businesses who have helped provide almost 20,000 homes across the province and who much to offer in terms of expertise and local employment. We have concerns that the procurement process by virtue of its complexity and timeframe will prevent housing associations from achieving efficiencies in the current economic climate. We do believe that with a 3-year funding platform and a robust procurement process, Fold and fellow associations would be better able to achieve the objectives of our Procurement Strategy.

Yours sincerely,

JohnMcLean
Chief Executive
Fold Housing Association

Employers for Childcare

Organisational Background

Employers For Childcare is a registered charity set up in 2002. Our aim is to make it easier for parents with dependent children to get into work and to stay in work. We offer a range of support services for employers, employees and childcare providers.

In 2004 we set up a trading company to administer childcare vouchers, which are a government tax exemption on the cost of registered childcare.

100% of the profit made from administering childcare vouchers is gift-aided to the charity to fund its services. The voucher company is a social enterprise as it trades for a social purpose.

We have 16 staff and a voluntary Board of Directors. We are based in Lisburn. We are the only social enterprise in the UK which administers childcare vouchers. There are approximately 15 commercial competitors, all of which are based in England, many of which have hundreds of staff.

Experience of Tendering for and Delivering Public Contracts

Employers For Childcare Vouchers Ltd has applied for and been awarded all four main contracts to deliver childcare voucher schemes advertised by the public sector since 2006.

Health Service

Regional Supplies Service of the Central Services Agency on behalf of the Belfast Hospitals Trust advertised a tender which they stated could be used by other Health Trusts. Employers For Childcare Vouchers Ltd won the contract to deliver a childcare voucher scheme following a UK wide tendering process.

It was very unclear as to which other Health Trusts or associated agencies could or should avail of the contract and/or if they needed to advertise a separate tender. It was left up to individual Trusts which was very unsatisfactory as we were unclear as to the exact scope or limit of what we were entitled to deliver. The UK based competitors have continuously contacted each of the individual Health Trusts and associated organisations and no one was able to tell them clearly that the contract has already been awarded to us for a definitive period of time.

This has caused a great deal of confusion for everyone concerned and has wasted our time and the time of Human Resource Managers and Supplies Departments throughout the Health Service in Northern Ireland.

When we tried to get something in writing we were told that the person who was dealing with that tender has since moved on and no one else knew anything about it.

Northern Ireland Civil Service

We were awarded the contract in February 2007. Due to internal NICS delays the contract did not start until January 2009, 23 months later. This has a serious impact on our business as we had recruited additional staff to manage the expected increase at that time.

Councils

The local councils all work separately and individually and seem very confused about when they need to advertise a tender as opposed to a quote, or if they can just decide to pick a supplier because of their ‘persistence’. Employers For Childcare has been in contact with one council for 3 years, has met with them and tried to encourage them to use our services. We called last week to be told they started a contract with an English commercial company 3 months ago, just because the commercial company had called them on a day when the council was thinking about starting to use childcare vouchers.

Nature, Extent and Application of Social Clauses within Public Contracts

To our knowledge and in our experience there is absolutely no recognition of ‘social clauses’ within any public contract. There are no public tenders which include a section on social benefit or return on social investment.

As a social enterprise which donates 100% profit to charity we have to compete with commercial companies. These commercial companies have huge staff numbers, very aggressive marketing campaigns, and no local knowledge or interest in the local community in Northern Ireland.

Despite this, the public sector in Northern Ireland gives no recognition to small charities or social enterprises which employ local people and contribute to local communities.

An example of how this works against us is that a leading Northern Ireland University which claims to have a strong interest in the development of the Social Economy Sector advertised a UK wide tender. Nine companies responded.

We were asked to deliver a presentation on what makes us different from the competition. We based our presentation on these facts:

• we are the only Social Enterprise in the UK which provides childcare vouchers
• we are the only childcare voucher provider which donates 100% profit to a charity
• we employ local people
• we have expert knowledge of childcare and work related issues in Northern Ireland which none of the competitors have as the legislation is different here to the rest of the UK
• we provide training placements for local women returning to the labour market, local school children on work experience and we provide work placements for students, including their students, as part of their career development
• we have been awarded the contract from the other leading Northern Ireland University
• we have been awarded each of the Northern Ireland public sector contracts advertised since 2006, because of our efficient professional service.

We were not even shortlisted. We have asked for feedback but the preliminary briefing has informed us the competitors offered a lower administration fee and this was a deciding factor for the assessment panel.

Recommendations

The fact that Employers For Childcare has won each of the Northern Ireland Public Sector tenders advertised since 2006, on a level playing field with no recognition of what we give back to the local community by the tenderers, indicates that we provide a quality service.

1. 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.

2. The measurement of the social value must be clear and easy to understand, and it must be applied consistently across all public sector contracts.

3. There must be clear guidance set out by all public procurement departments as to

• the limit and extent of contracts,
• how they will be advertised,
• why and when a quotation is acceptable rather than a tender and - which other department or associated organisation can or should come in under the terms of the contract as opposed to holding a separate contract specification.

4. There should be greater and clearer communication between tenderers and suppliers in relation to becoming a preferred supplier, how to get on the list etc.

Committee for Regional Development

Committee Office
Room 402
Parliament Buildings
Belfast
BT4 3XX

Tel: 02890 521970
Fax: 02890 525927
Email committee.regionaldevelopment@niassembly.gov.uk

Mitchel McLaughlin, MLA
Chairperson of the Committee for Finance and Personnel
Northern Ireland Assembly
Parliament Buildings
Stormont
Belfats
BT4 3XX

27 February 2009

Public Procurement Inquiry

Dear Mitchel,

The Committee for Regional Development noted your Committee’s inquiry into public procurement and, at the meeting of 24 February 2009, made the following brief response.

The public sector in Northern Ireland makes a significant contribution to both GDP and employment in Northern Ireland. It is an important direct employer, and indirectly through public procurement, it contributes to the local economy, job creation and growth in local businesses and service providers.

The Northern Ireland Executive has an impressive programme of infrastructure investment, as set out in the capital budget for 2008-11 and the Investment Strategy for Northern Ireland. The Committee has expressed its continued support for the Department for Regional Development in delivering on the road, rail, and water elements of this programme.

The Committee is of a view that such a significant investment programme may provide opportunities to explore social policy initiatives, such as apprenticeships and local labour clauses, which could contribute to building, maintaining and enhancing the skills of the Northern Ireland labour force; a factor which will be critical in enhancing Northern Ireland’s attractiveness to inward investment, and underpinning the ability of local firms and individuals to take advantage of the economic recovery when it comes.

The recent success by local construction and transport firms in competitive tendering demonstrates that companies in Northern Ireland can and are world leading. In this context, opportunities may also exist to support and develop the competitiveness of local enterprises, through the provision of advice and practical assistance in identifying, building and developing strategic partnerships and knowledge / skills sharing. Information and a clear forward programme of investment projects, as well as a steady deal flow are also essential if local firms are to invest the often considerable sums required to bid for large public investment contracts, and train or recruit the staff necessary to deliver on these bids.

At this challenging time for the global economy, and particularly for businesses in Northern Ireland, the Committee for Regional Development would encourage full, creative and joined-up consideration of ways in which public procurement could, without jeopardising important value for money considerations or compliance with EU procurement provisions, be harnessed to the widest possible benefit of the people of Northern Ireland.

Yours sincerely,

Fred Cobain, MLA
Chairperson of the Committee for Regional Development

Health Care Supplies Association (N.I. Branch)

The Health Care Supplies Association is an interest group established by procurement professionals working within the NHS in the 1970’s. Since its establishment the HSCA has represented the interests of its members nationally through links with the Chartered Institute of Purchasing and Supply and provides training and professional development support to its members and their staff through Summer Schools, annual training initiatives and an annual conference. HCSA (N.I. Branch) sees the training and development support provided to members and other staff working in health care procurement in N.I. as a means to supplement hard-pressed budgets and raise the profile of health care procurement.

The HCSA is responding to the Northern Ireland Assembly Finance and Personnel Committee call for submissions on Public Procurement Policy and Practice in Northern Ireland to represent the interests of its members working in procurement within Health and Social Care N.I.

Background

Outline of Arrangements in Northern Ireland

Currently procurement of goods and services on behalf of Health and Social Care organisations in N.I is carried out by the Central Services Agency Regional Supplies Service (RSS). This body is an accredited Centre of Procurement Expertise under the N.I. Public Procurement Policy and must be re-accredited every 3 years to retain this status. This organisation has responsibility for both strategic and operational procurement of goods and services for all N.I. health and social care organisations and is unique in this position in the NHS. The procurement and logistics services provided by RSS are ISO 9000/2000 accredited and RSS holds a silver European Quality Award (EFQM Business Excellence Model). A Northern Ireland Best Practice Scheme Award 2005 - 2007 from the Office of the First Minister and Deputy First Minister is also held by RSS.

RSS works with procurement organisations in N.I. public sector and across the NHS and participates in and leads on a number of national contracts in the NHS as well as with other Centres of Procurement Expertise in N.I.

In 2004 RSS restructured its procurement services on a “Category Management" basis. Category Management is recognised as a best practice method to manage procurement which categorises products and services based on common features (markets, suppliers, commodities etc) and sees the procurements managed by dedicated teams specialising in those categories. In structuring their procurement directorate in this way RSS has reduced the points of contact for tender arrangements and has enabled those staff engaged in the tender process to develop a greater expertise in the goods or services being procured and develop a greater understanding of both the marketplace and those suppliers operating in that marketplace. These category teams, or Sourcing Teams as RSS describes them, are located at key health locations across Northern Ireland. At each of these key locations other RSS staff perform operational procurement services (ordering, expediting and relationship management) on behalf of the Trust within whose premises they are located this ensures that local requirements are met and enables a flexibility in the letting of contracts to consider geographical markets within N.I.

RSS underpins services to health care organisations with a warehousing and logistics service that delivers stocks of goods to health facilities throughout N.I. In 2008 this service was streamlined to maximise the storage capacity of its two warehouses located in Belfast and Campsie. These two warehouses now service standardised stock lines to Health and Social Care in N.I covering products as diverse as stationery and medical disposables. The warehouse operates strategic partnerships with a number of N.I Small Medium Enterprises who pick, pack and supply products on a daily basis to the RSS warehouse locations for onward distribution to Trust wards and departments by RSS. The RSS logistics service also developed an electronic materials management (EMM) solution for N.I. health and social care that received a Northern Ireland Best Practice Scheme Award from the Office of the First Minister and Deputy First Minister during 2005 to 2007.

Specialist arrangements have been developed by RSS for the procurement of goods for new build capital projects and diagnostic imaging equipment that ensures the needs of health and social are organisations are properly met when undertaking such complex and protracted procurements. The team responsible for this area has provided services and advice to Isle of Man (Nobles Hospital), Malta and Lebanon. These latter two were in support of projects sponsored by the European Union.

Outline of Arrangements for Other U.K. Jurisdictions

Arrangements vary across England, Scotland and Wales for the provision of procurement services and that is reflected in the number of organisations involved in delivering those services and the level at which they are delivered. As a result there are a large number of organisations involved in managing procurements and dealing with suppliers. This is best demonstrated in tabular form:

Level / Home Country	England	Scotland	Wales	Northern Ireland
National	Purchasing and Supply Agency (PASA) (1) NHS Supply Chain (1)	National Procurement Scotland	Welsh Health Supplies (1)	Regional Supplies Service
Regional	Collaborative Procurement Hubs (10)			Regional Supplies Service
Local	NHS Trusts (354 per PASA website)	NHS Health Boards (14)	NHS Trusts (10)	Regional Supplies Service

England

In England strategic and operational procurements are carried out at three levels by a range of organisations. There can be tensions between each of these levels and this can result in multiple layers of contracts for the same products or services

National

Purchasing and Supply Agency (PASA) - an arm of Department of Health, this organisation develops framework agreements for use by health care organisations across UK but most especially England. It also undertakes procurements associated with major NHS policy initiatives.

NHS Supply Chain (NHSSC) – this is the health procurement company set up by DHL Ltd under contract to the NHS to provide procurement and logistics services to the NHS in England. NHSSC operates on a profit making basis and provides procurement and logistics services to NHS Trusts. Contracts are let at a national level.

Regional

Collaborative Procurement Hubs (CPHs) – these are NHS bodies established to co-ordinate procurements on behalf of groups of NHS Trusts. By and large they do not have associated logistics services but focus on management of contracts rather than operational procurement services. Hubs let contracts solely for those Trusts they provide services to.

Local

Trust Procurement Departments – it is the norm in England for individual Trusts to employ their own procurement teams who let contracts in their own right, manage operational procurement services and liaise with Hubs, NHSSC and PASA.

Wales

Procurement and logistics arrangements for health in Wales operate on two levels national and Local.

National

Welsh Health Supplies (WHS) – this organisation manages a range of national contracts for the NHS in Wales and provides logistics services to all of NHS Wales from two warehouses. In the past 12 months WHS has become more involved in delivery of procurement services to individual Trusts in Wales through a migration of a purchasing consortium to the management control of WHS. WHS also has responsibility for collaboration with the wider Welsh public sector on joint contract initiatives.

Local

A number of the NHS Trusts in Wales employ their own procurement staff who let and manage contracts on behalf of and provide operational procurement services to the individual Trust.

Scotland

Similar to Wales arrangements in Scotland are on two levels national and local.

National

The national dimension to NHS Scotland procurement is a relatively recent one with the establishment of National Procurement Scotland (NPS). This organisation lets and manages a range of national contracts for Scotland and is in the process of rolling out logistics services to the NHS in Scotland following substantial investment in suitable facilities and technology.

Local

Individual NHS Trusts in Scotland employ their own procurement staff who let and manage a range of contracts on behalf of and provide operational procurement services to the Trust.

Constraints on Procurement

Public procurement is regulated by legislation founded in the EU Procurement Directives which dictates the procedures that apply to the procurement process, these procedures have been in place since 1995 and were updated in new legislation in 2006. This transparent process affords protection to both the supplier and the taxpayer. In addition controls are placed on health expenditure by DHSSPS that require HCSA members working in RSS to enter into competition for expenditure over £2k and to publicly advertise all tender opportunities above £30k. These latter arrangements have been a feature of health procurement since 1974 with value updates occurring regularly over the years. Such rigid value for money tests do not uniformly apply in other jurisdictions and subsequently SMEs or SEEs may never have the opportunity to bid for business below EU thresholds.

It is a continual challenge to our members to manage the proscribed procurement processes so as to minimise the burden on suppliers and buyers alike and yet maintain probity and value for money in health related procurement.

Improving Access to Contracts for SMEs and SEEs

Developing the SME/SEE to Bid

All procurements above £30k are tendered openly through RSS’ e-tendering portal with competitive quotations being sought for all business in excess of £2k

RSS has supported initiatives across a number of industry sectors and our members have participated regularly in Meet the Buyer events run by development agencies, local councils and N.I. Chamber of Commerce. These events have taken many forms ranging from simple “speed-dating" type events bringing suppliers and buyers together on a one to one basis across a table to more extensive involvement including participating in supplier development workshops and formal presentations to participants. RSS has also participated in research projects bringing together local universities, suppliers and RSS to develop greater understanding of product lifecycles and explore potential development areas that may benefit health.

Through our members we understand that RSS tries to support at least one region-wide Meet the Buyer event annually as resources permit.

One of the most notable engagements that RSS was involved in as a partner was the EC funded RAFAEL Project. RSS’ role in that project was to develop a procurement model that was fully compliant with public procurement regulations and supported sustainable procurement in the local rural economy. This project saw contracts let worth £1.5m over three years to local food suppliers who had not previously bid for public sector food business. Furthermore the project was “Highly Commended" at the Government Opportunities National Awards (Go Awards) in the Sustainable Development category. Subsequent to this project the model developed is being imbedded within the RSS food procurement team and has involved our members working for RSS pro-actively engaging the market to encourage companies to bid including seminars that removed much of the fear around public tendering. RSS has commenced working with DARD to develop further engagement with the market on a broad range of fresh food contracts.

RSS has also engaged with Social Economic Enterprises formally and informally which includes membership of the Public Procurement Social Economy Enterprise Group. This has involved site visits and introduction of a pilot project. RSS has also sought to raise the profile of SEE’s through requiring tenderers in relevant contracts to provide details of their use of SEEs as part of their manufacturing processes.

Reduce information demands

RSS seeks only information that it requires to evaluate bids properly and in line with procurement regulations and public procurement policy. The information requested is relevant to the procurement being undertaken. In 2007 RSS took a decision to cease requesting copies of company accounts as part of tender returns and secured a budget to assess accounts using Dunn & Bradstreet Reports obtained by RSS under a contractual arrangement with Dunn & Bradstreet. Accounts are now only requested where no Dunn & Bradstreet listing is available.

In considering the optimum method to contract for goods and services RSS has sought to partner with CPD in utilising their framework agreements for ICT and Management Consultancy. In partnering in this way RSS believes it has reduced the cost of tendering for both suppliers and health organisations. This partnering removes the need for companies participating in the framework to submit comprehensive tender bids for each and every procurement undertaken in this category and enables them to focus on submitting proposals that are competitive and meet the clients needs. Additionally framework agreements greatly reduce bidding time and costs for all those suppliers on the framework as the terms and conditions of contract, and commercial arrangements are established at the primary stage of the competition in setting up the framework.

In selecting e-commerce solutions and partners in delivery of those solutions RSS has taken a conscious decision to pursue only solutions that are drawn from a “buy-side pay" model rather than a “supply-side pay" model. RSS has also sought to reduce bidding costs by automating the issue and return of tender documents introducing standard documents for completion that may be downloaded and uploaded to remove the need for “hard copy" responses. This has meant that responses are largely paperless. Furthermore RSS does not restrict the documents that suppliers wish to return i.e. if a supplier feels additional information will enhance their bid they are at liberty to upload that as part of their response. In moving to electronic issue of tender documents in 2006 RSS removed charges for documents that had been in place since 1997.

Standardisation of approach

For the procurement of goods and services in Health the processes involved are standardised across all health and social care organisations in Northern Ireland this is not the case in any other UK health economy. The level of standardisation of process in Health Procurement in Northern Ireland is considerably higher than any other GB jurisdiction and as a result the bidding process is considerably less complex. To secure business let by RSS on behalf of Health and Social Care organisations requires dealing with considerably fewer procurement entities than England where procurement of goods and services is carried out at 3 levels by multiple organisations. RSS also works collaboratively with other Centres of Procurement Expertise (CPD and ELBs in particular) to establish a common procurement approach and shared contracts on a number of matters.

Since the introduction of the N.I. Public Procurement Policy RSS has been an active member of the CPD led Procurement Practitioners Group and its sub-groups on collaboration and its special interest groups on Information Disclosure, Value For Money and E-Commerce.

Improve specifications

All tenders let by RSS involve the end user in the development of the tender specification with guidance provided by RSS. The purpose of this is to ensure that the end user is able to communicate their requirements to bidders. Where it is appropriate to do so end users are supported by experts in functional areas, legal experts or financial experts. This is reflective of best practice.

RSS migrated procurement arrangements to a category management basis in 2005 in order to create a level of expertise in the diverse range of products procured by health. The staff engaged in category management are also involved in supporting the preparation of specifications in order to reflect what might offer a best value solution to our end users or to assist them in articulating their needs in commercial terms.

Needs to be a greater focus on value for money rather than lowest cost

Since RSS became responsible for the provision of procurement services to all health organisations in 1997 we have operated to the award criteria defined under the Public Contract Regulations as “most economically advantageous tender". This definition allows for the consideration of qualitative aspects of products and bids as well as financial aspects. Their approach has been reinforced by the decision taken by the Public Procurement Board to have all public procurement contracts let using this criteria. In adopting this approach the weighting of qualitative criteria relative to financial criteria is varied according to the nature of the product or service being procured. This is in line with guidance published by CPD in 2003. All procurements allow a weighting for qualitative aspects of the bid that weighting ranges from 30% of marks were the product or service is simple and quality is less important than price to 70% of available marks were the procurement is complex and the qualitative aspects of the bid are critical to successful delivery.

Professional Skill of HCSA Members

Within RSS staff are actively encouraged to attain the recognised professional qualification of their chosen area of work. In procurement this is membership of Chartered Institute of Purchasing and Supply (CIPS), which gives automatic membership of HCSA and in their logistics arm it is Chartered Institute of Logistics and Transport (CILT). Staff receive partial financial support along with day release arrangements to undertake this study and are expected to maintain their workload during their period of study. It is RSS’ view that the shared approach to funding training between employer and employee recognises the mutual advantages gained by those two stakeholders. Terms and conditions of employment for staff in RSS do not allow successful completion of examinations to be rewarded.

Full membership of CIPS requires the study of a full range of commercial procurement modules and has introduced public procurement modules in the last two years. RSS’ senior management team are all professionally qualified in their respective fields and more specifically of senior managers within their Procurement Directorate all but one are CIPS members and 73% hold Masters level qualifications in procurement, all are members of HCSA. In order to obtain promotion to head of department level within RSS Procurement Directorate candidates must have either full membership of CIPS or extensive experience of procurement over a period of years.

Quality Processes

RSS operates to accredited ISO9000/2000 procedures for all core services provided to its customers and has robust, audited governance arrangements set against Controls Assurance Standards that require engagement with customers as part of the tender process including their involvement pre-tender in developing specifications, their full involvement in the evaluation process and their agreement to the award of contract. All of these are managed and monitored through a series of oversight arrangements.

RSS has a complaints procedure that allows suppliers to complain directly to the Regional Director - Supplies and that complaint is then investigated by two independent senior officers. Where the complainant is not satisfied with the response the complaint may be elevated to the Chief Executive of the Central Services Agency to whom the Regional Director – Supplies reports. All senior staff to whom such complaints may initially be directed are aware of the complaints procedure.

Opportunities to Improve

More budget certainty

There is a considerable drive by the Assembly to introduce more effective and transparent plans for investment in capital developments in Northern Ireland and this reads across to Health and Social Care as funding is made available by the Minister of Health. However there are constraints on the budget availability particularly where capital expenditure is concerned. For example funds must be spent in the year in which they are allocated, there can be no carry forward of monies surplus from one year to the next. This position applies a pressure on Health and Social Care organisations to commit only funds that they are confident will be spent in year and this places a pressure on suppliers to deliver. Additionally the allocation of funds to HSC organisations is not always clear early in the financial year and this typically leads to a compression of spending into the last 6 months of a financial year. These are issues that are outside the control of procurement professionals but which have a direct impact on the procurement of goods and directly effect suppliers. Greater flexibility in such areas would improve opportunities for SMEs in particular to bid effectively as their would be less pressure on them to hold stocks available therefore reducing their costs.

Investment in E-Commerce

The procurement systems in place in Health in Northern Ireland date back to the early eighties and in England, Scotland and Wales these systems have been replaced some considerable time ago.

Therefore Health procurement in Northern Ireland lags behind GB in this respect. Staff in Trusts should be able to enjoy the “online" shopping experience in their working lives as well as their private lives and whilst RSS has taken steps to offer such an experience it has not been supported by the necessary investments.

Current technologies support the integration of supplier systems with procurement systems through real-time exchange of order and acknowledgement, enable electronic invoicing and automated payment improving cash-flow for businesses which is particularly important for SMEs. Modern systems also help manage supplier performance and effectiveness and this is often where SMEs and SEEs offer an advantage over larger companies, a focus on this area should also enable SMEs to improve through feedback on their performance.

HCSA understands that work is underway to deliver modern e-commerce systems to Health and would encourage the Finance and Personnel Committee to lend its support to such investment.

Ownership of the Supply Chain

Ownership of the supply chain is not purely the preserve of the procurement organisation but all parties involved have a part to play. For goods to be properly procured once the deal is done the goods must be delivered in the right quantity to the right place. The person receiving the goods must take the necessary steps to ensure that the goods are properly receipted according to the needs of their organisation, failure to do this will delay payment to the supplier. Once delivery has been effected the supplier must ensure that their invoice matches the price agreed through the purchase order (this forms the basis of the contract and it’s terms must be met) otherwise a delay in payment will ensue. This ownership of the relevant parts of the supply chain can be found wanting. The Finance and Personnel Committee is asked to take account of the various roles played by parties outside the procurement organisation in ensuring that public procurement meets the needs of all stakeholders.

Consideration of a Common Supplier Appraisal System

Most public procurement organisations lack an effective supplier appraisal system. Good systems not only allow the buyer to assess supplier performance but provide a basis for feedback to suppliers, recognise supplier improvements and enable further business to be secured. Application of a common system across public procurement in N.I. would not only result in supplier improvement but will help procurement organisations learn from each other where suppliers score more highly with one organisation than another enabling performance improvement to take place for both suppliers and buying organisations. l

The Finance and Personnel Committee is asked to consider introduction of a common supplier appraisal system across Centres of Procurement Expertise.

Linda-Marie O’Neill
HCSA NI – Branch Secretary

Quarry Products Association Northern Ireland

Introduction

The Quarry Products Association Northern Ireland welcomes the opportunity to comment on the Committee for Finance and Personnel scrutiny of public procurement policy and practice.

Founded in Northern Ireland in 1998 the Quarry Products Association NI now represent over 95% of the quarry products industry. Our membership includes major, medium and smaller sized companies directly employing around 4000 people with an annual turnover of over ¾ billion pounds.

The Quarry Products sector is a key essential industry that contributes significantly to the quality of life of every man woman and child in Northern Ireland.

The quarry products industry has a long and proud history of

1. Providing secure, long term employment in rural areas designated by Government as targeting social need.

2. Being a massive net contributor to the Northern Ireland Economy and a major investor in local communities.

3. Not receiving hand-outs or benefiting from Invest NI assistance similar to that given to overseas companies who stay for a short period then leave.

4. Having the majority of our companies, both large and small, family owned with their roots firmly established in Ireland.

5. Fulfilling our Corporate and Social Responsibility by investing significantly in the Environment and in protecting the health and safety of all who work in and visit our sites.

Our membership is made up of mainly of companies classified by Government as SMEs.

The Quarry Products Association NI is a member organisation of the Construction Industry Group for Northern Ireland ( CIGNI ). We liaise regularly with Government Construction Clients and the Centres of Procurement Expertise through the Construction Industry Forum for Northern Ireland ( CIFNI ). QPANI have found this forum extremely helpful in the past as matters over procurement issues have been discussed and resolved to mutual benefit. However things have sometimes never been ideal and there have been issues in the past that were not resolved and to this day still create problems.

QPANI comments and experience on public procurement policy in Northern Ireland.

1. QPANI believe that public procurement policy should deliver value for money and sustainable development for the Northern Ireland Economy.

2. In terms of the construction procurement policy it should be consistent, transparent, fair and create an environment that will ensure the development of a truly sustainable construction industry in Northern Ireland.

3. There is an excessive use of Consultants in the NI procurement process. This is taking much needed revenue away from front line services and increasing bureaucracy within the process.

QPANI wish to see a procurement policy that will

• Reduce bid costs – therefore improve value for money
• Minimise the risk of legal challenge
• Assess contractors on actual performance not just on sales pitch
• Recognise that not one size fits all
• Provide opportunity for a wider pool of local contractors to bid for work
• Avoid long term exclusion for proportionally large amounts of work
• Contend with ever changing work flow and uncertainty of work volumes
• Adopt common policy and practice across all public sector clients.
• Be flexible to adapt to changing economic circumstances

Over the last few years QPANI have been lobbying a number of Government Departments and local Councils to ensure that we move to common procurement policy, specifications and practices in the procurement of construction materials and services. Many companies have invested significantly in training, health and safety, third party accreditation for quality and environmental management. Unfortunately in some so called “Centres of Procurement Expertise" these quality systems count for nothing. It is our view if companies can demonstrate best practice through a third party accredited management system then the important aspect of assessment should be how they deliver and perform on the contract.

QPANI and CIG believe that the current method of procurement by Framework contracts does not deliver value for money for Northern Ireland and will ultimately not deliver a sustainable Northern Ireland Construction Industry. We are currently in discussions with the Central Procurement Directorate, through the procurement task group, to ensure the speedy delivery of delayed construction projects due to a number of legal challenges. It is our view that “Frameworks" should be developed to suit the needs of Northern Ireland, the local community and the local Construction Industry. The packaging of projects could be dependent on geography, value, type of work or other factors deemed relevant by the client. This flexibility in the method for putting packages together should make the model useable by the vast majority of clients. We firmly believe that the benefits that would flow from such a process would be

• Industry performance is improved by effective performance monitoring and the learning on one job benefits the next
• Improved ability to actually deliver on sustainability requirements
• Bid costs are reduced because there is no secondary competition and because the client appoints the design team
• The risk of legal challenge is minimised because unsuccessful bidders for one bundle know there will be another bundle to bid for in the near future
• Successful contractors can plan with a greater degree of certainty
• There will be opportunity for SMEs to grow through winning packages themselves or through joint ventures
• Widens opportunities for local contractors to bid for work
• Accommodates a changing programme of work

QPANI members have recently reported,

• Increased costs in bidding for contracts.
• Delays in the procurement process
• An unacceptable number of contracts priced then to be suspended or cancelled leaving contractors with significant bidding costs.
• Difficulty in getting information on forthcoming work.
• Government Departments advertising and circulating tenders to sectors whose work as set out in the contract is not there core business or area of expertise
• Government Clients seeking quality accreditations from their suppliers and contractors yet do not require it off their own direct labour force.

QPANI comments on the nature, extent and application of social issues within the public sector.

QPANI understand the objective of the Northern Ireland Executive to meet wider social and environmental goals through the delivery of the Investment Strategy and wider public procurement. Public procurement is the ideal vehicle to improve standards across the supply chain and ensure responsible sourcing becomes the normal practice. We need to have a public procurement process in place that will accurately and fairly confirm that those bidding for and winning contracts are complying with equality, health and safety and environmental legislation. QPANI believe that adoption and monitoring by Government of a recognised responsible sourcing scheme as developed by BRE and BSI may be one way to ensure this. Unfortunately experience in Northern Ireland has taught us that having recognised standards and accreditations in place does not count for much with some public sector organisations. It is vital that if Government are asking for such accreditations and proof of quality and competence it must enforce and implement a monitoring system to ensure that what a contractor says they are going to do, they actually deliver.

The Construction Industry should not be viewed as the easy option way out to address the failures of Government social policy. The work carried out through the Construction Industry Forum on initiatives such as the “Proposals for promoting equality and Sustainable Development by sustainable procurement in Construction" and the “NI Sustainable Procurement Action Plan" if implemented on the ground by all should deliver the worthy social objectives as set out by the Executive. .

In terms of ensuring environmental protection it is the QPANI view that Client bodies, whether Public or Private, should by law have to appoint an individual responsible for environmental issues, similar to the CDM safety advisor on construction projects. The appointment of such a competent individual would ensure that environmental permits, waste licenses and exemptions, water discharges and site waste management plans are sought and approved prior to contractors arriving on site. This in our view would reduce delays, improve delivery of the project and most importantly protect the local environment.

Identify Issues to be addressed and which are within the remit of the DFP

There are a number of areas within the remit of DFP, and in particular the role of CPD, that could improve the procurement process for SMEs. QPANI and CIGNI have worked closely with the Central Procurement Directorate over the past number of years. It is our view that CPDs remit should be strengthened and become more of a “telling" role rather than an “asking" role. If we are to ensure commonality of the procurement process and specifications across the public sector then CPDs remit over the Government Construction Clients must be enhanced and even enlarged to include the local authorities. ( This is an issue for the final agreement on RPA ). Other areas for consideration and improvement are,

• The role and resources of the Performance Efficiency Delivery Unit should be expanded to ensure the delivery of value for money on every pound spent by the public sector.
• Government Departments should report to CPD, on a quarterly basis, their “on the ground" construction expenditure against initial targets.
• The resourcing, updating and general management of online systems is crucial to ensure that SMEs have access to accurate procurement and tender information.
• Regular training, in partnership with industry Trade Organisations such as CEF, ICE, RICS and QPANI, should take place to ensure that public procurement officials are aware of new construction product standards, quality, safety and environmental standards. There should also be opportunities for public sector officials to experience at first hand working in the private sector environment.

Assess progress of DFP in achieving associated objectives an targets, including those contained in the PPG and related PSAs

As an organisation who works closely with the Central Procurement Directorate we are satisfied with the co-operation, communication and relationship that together we have developed. As previously stated we believe that the remit and authority of CPD should be increased to ensure that commonality of procurement policy, effective communication and recognition of responsible sourcing becomes the norm.

Key recommendations for improvements to public procurement policies and processes, aimed at increasing access opportunities for SMEs and SEEs

QPANI view have been stated earlier in this document.

Conclusion

QPANI welcomes this valuable opportunity to comment on the enquiry and commends the Committee for Finance and Personnel for instigating it. We look for forward to playing any other role or providing further information or clarification if required.

Gordon Best
Regional Director QPANI

Irish Congress of Trade Unions

The Committee Clerk
Committee for Finance and Personnel
Parliament Buildings
Belfast
BT4 3XX

6 March 2009

Dear Committee Clerk

Inquiry Into Public Procurement

The Northern Ireland Committee, Irish Congress of Trade Unions, is the central trade union body in Northern Ireland. As such it represents over 30 trades unions and in excess of 220,000 working people. The committee is pleased to have the opportunity to provide some views to the Inquiry.

a. SMEs and SEEs

All of the evidence to hand would point to the fact that the structure of the procurement process, including PPP/PFI, deters local small and medium sized enterprises from bidding for PPPs. The current process is designed to deter local companies from bidding and encourages the multi-national corporation approach. The practice of ‘batching’ individual projects will ensure that local SMEs will never be able to enter the market. The significant legal, financial and other related costs are a further block on encouraging local enterprises. Under the current procedures local firms, even the larger ones, continue to suffer a severe disadvantage. It is unlikely that this will change until such times as the Assembly introduces measures which will make finance available to local companies at favourable rates.

Clearly the continued use of PPP/PFI instead of conventional procurement methods will ensure that local employers will not benefit from public contracts.

b. Application of Social Clauses

The NIC would recommend the updating of public procurement procedures to take advantage of European Directives 17 and 18 of 2004. Among other things these directions allow public authorities in awarding contracts to further policies on social, employment, disability, equality, environmental and ethnic matters. Ensuring that indigenous manufacturing and construction companies are primed to avail of all procurement supply chain opportunities is another important element in ensuring that social clauses work effectively.

If Northern Ireland is to prepare itself for coming out of the current recession then it is important that we protect and enhance our skills base. One significant contribution towards this would be a requirement that in the awarding of any public procurement contract there should be an obligation on contractors to engage and train apprentices. DEL is currently committed to promoting apprenticeships and there is a natural synergy between the awarding of public procurement contracts and the aims of the Assembly as espoused by DEL. Such a measure would have the strong support of trade unions.

c. Department of Finance and Personnel

Central Procurement Directorate is on the record as saying:

‘Maximising the opportunities for SMEs in public contracts is even more important than ever during the present difficulties being experienced by the construction industry and is high on the agenda for the Construction Industry Forum for Northern Ireland (CIFNI). Any actions, however, must be in compliance with procurement policies and regulations and not compromise fair competition.’

Clearly it is time to have a fundamental review of procurement policies, particularly in the current economic climate, if we are to protect and grow local companies. Some specific attention should be given to the significant legal, financial and technical advisory costs being faced by potential local bidders.

d. Progress in achieving objectives and targets regarding Programme for Government and Public Service Agreements

The NIC has in every submission on the Budget and Programme for Government called for transparent feedback on the progress made in achieving objectives and targets. To date no real progress has been made. The Department of Finance and Personnel Committee should consider ensuring that stakeholders are continually updated in this area. Reasons for not meeting objectives and targets should be made clear.

e. Improvements to Public Procurement Policies

The NIC has already commented on these issues in the above paragraphs. There is one final issue which would go further towards meeting the objective of enhancing the social benefits of the procurement process. The introduction of the code of practice being looked at by OFMDFM would be a significant measure to eliminate any two-tier workforce structure in PPP/PFI contracts although it should be added that NIC remains strongly opposed to any future use of PPP/PFI. The Trade Union Movement has been in discussions with OFMDFM for some time and would now wish to see the immediate implementation of the code.

NIC.ICTU would be pleased to give further oral evidence if requested.

Yours sincerely

Peter Bunting
Assistant General Secretary

Department of Finance & Personnel: Central Procurement Directorate

Assembly Section
Craigantlet Buildings
Stormont
BT4 3SX
Tel No: 02890 529147
Fax No: 02890 529148

email: Norman.Irwin@dfpni.gov.uk

Mr Shane McAteer
Clerk
Committee for Finance and Personnel
Room 419
Parliament Buildings
Stormont

11 March 2009

Dear Shane

In response to the Committee for Finance and Personnel’s request for written evidence from organisations involved in public procurement, please see the attached response from Central Procurement Directorate.

Yours sincerely,

NORMAN IRWIN

Introduction

Northern Ireland Public Procurement Policy was established in May 2002 following a major review of public procurement in Northern Ireland. It applies to all Central Government Departments, their Agencies, Non-Departmental Public Bodies and Public Corporations and has as its primary objective the achievement of “Best Value for Money". The policy goes on to identify 12 principles which, when satisfied to an acceptable level, result in the achievement of “Best Value for Money". The principles are set out as Annex A.

The policy defines “Best Value for Money" as the optimum combination of whole life cost and quality (or fitness for purpose) to meet the customer’s requirement. So it doesn’t mean awarding contracts on the basis of the lowest prices. Almost always public contracts are awarded on the basis of a combination of quality and price which identifies the most economically advantageous tender. Best VFM also allows for the integration, individually or collectively as appropriate within the procurement process, of social, economic and environmental objectives, which are the three pillars of sustainable development. The EC Treaty, EU Public Procurement Directives and UK implementing legislation all recognise and allow for the integration of sustainable development considerations within the procurement process.

The development and overall governance of public procurement policy rests with the Procurement Board – a body chaired by the Minister for Finance and Personnel and made up of the Permanent Secretaries of the NI Departments, the Treasury Officer of Accounts, the Director of Central Procurement Directorate, two independent members and is attended by observers from the Northern Ireland Audit Office and the Strategic Investment Board.

The review recognised that procurement is a specialist activity – given the complexity of the European Treaty and Directives – and that it is important to ensure that it is done professionally. So the review recommended that public procurement is carried out through either the Central Procurement Directorate (CPD) or one of the 7 other Centres of Procurement Expertise (CoPEs).

The other CoPEs are responsible for procurement in the following sectors – Health, Education, Roads, Water, Housing and Transport. So, for example, when it comes to building hospitals the DHSSPS has its own procurement experts in its own CoPE concentrating entirely on that specialist activity. CoPEs are required to employ procurement professionals and are subject to independent accreditation to validate their expertise. CPD acts for those Departments which do not have their own CoPE.

While each Department is accountable for its own budget and how that budget is spent CPD and CoPEs work with Departments to assist them to obtain Best Value for Money and deliver on their Programme for Government commitments through the application of public procurement policy and best practice in procurement.

A cross-cutting theme of the Programme for Government is sustainable development. The Executive has approved guidance, prepared jointly by CPD and the Equality Commission on the Integration of Equality of Opportunity and Sustainable Development into Public Procurement.

A key target in taking forward this integration is the Sustainable Procurement Action Plan for Northern Ireland which CPD has produced and under which CoPEs have been tasked with the delivery of individual Action Plans to reflect the specific nature of their areas of responsibility.

Procurement will also play an important role in the delivery of efficiencies over the current Budget period as value for money (vfm) gains obtained through effective procurement will provide additional resource to improve the provision of public services in Northern Ireland. There will also be an important role for procurement in relation to the delivery of the Investment Strategy and the £6bn infrastructure projects with its inherent influence on the Northern Ireland economy in this period of recession.

CPD and the other CoPEs between them establish contracts for a diverse range of goods, services and works on behalf of Departments and other public bodies, from desks and computers for our office staff to new schools, hospitals and other capital infrastructure projects for our citizens. The procurement expenditure is approximately £2 billion per year and thus represents a significant share of the local economy. While the variety of systems used throughout the CoPEs cannot give a definitive position on the value of contracts awarded to SMEs in Northern Ireland anecdotal evidence gleaned from procurement practitioners in CPD and other CoPEs would indicate that the vast majority of their contracts, estimated to be in the high 90’s%, are awarded to SMEs in Northern Ireland.

Programme for Government 2008-2011

The Programme for Government 2008-2011 places a focus on two cross-cutting themes of equality of opportunity and sustainability in the delivery of the Executive’s priorities. PSA11 has an objective “To support the wider Public Sector in taking account of sustainable development principles when procuring works, supplies and services.", and a key target “To improve access by SMEs and SEEs to opportunities for doing business with public sector organisations".

Working under the auspices of the Procurement Board, CPD and the Equality Commission for Northern Ireland (ECNI) have drafted guidance - aimed at policy makers and procurement professionals - on how to more effectively integrate equality and sustainable development (economic, social and environmental) considerations into the procurement process. This guidance, which was approved by the Executive, underpins and reinforces the work already being undertaken to promote access for SMEs and SEEs to public sector contracts and supports delivery of the two cross-cutting themes of equality of opportunity and sustainability.

Training to embed this guidance has been provided to all procurement staff and Sustainable Procurement Action Plans have been developed by CoPEs to deliver sustainable development priorities, including social, economic and environmental targets.

Outreach Programme

The Inter Departmental Business Register (IDBR) - Edition Ten (30 June 2008) shows that of the 72550 SMEs in Northern Ireland 7870 businesses had more than 10 employees and of this figure 1240 employed more than 50 people, the remaining 64680 businesses were classed micro employing less than 10 people and 50% of all businesses in Northern Ireland are registered as “Sole Proprietors".

All procurement falls into one of three categories; construction works, supplies or services. Examples of work carried out in relation to the encouragement of SMEs and SEEs in each category is set out below;

Construction Works and Services

Much of the public sector requirement for construction is procured from integrated teams of contractors, consultants and their supply chains. Construction CoPEs, led by CPD, recognise the importance of SMEs in this field and encourage SMEs to join together to form teams by facilitating bids from consortia.

To assist SMEs to obtain opportunities within supply chains the Government Construction Clients Group has agreed with the construction industry to include a contract requirement that main contractors publish the opportunities available within their supply chain on their website and/or where appropriate in the local press in relation to new contracts with effect from December 2008. Construction contracts also require prompt payment to contractors and sub-contractors alike.

Supplies and Services

CPD has been working with a number of government and cross-border bodies to increase awareness with local SMEs and SEEs of the opportunities to compete for public sector contracts for supplies and services.

Examples are as follows: -

1. The Tender Support Programme

The Tender Support Programme has been divided into ten manageable programmes over the last 18 months and has involved 107 SME’s and Social Economy Businesses. Approximately 20 of these SME’s are from the ROI the rest from Northern Ireland. The programme is part-financed by the European Union through the Interreg IIIA Programme managed for the Special EU Programmes Body by the ICBAN Partnership and further supported by a variety of organisations including Enterprise Ireland and a number of local Councils.

2. The Go-2-Tender Programme

CPD has worked with InterTradeIreland since 2005 on the Go-2-Tender Programme the aim of which is to create cross-border business opportunities for SMEs in the all island Public Procurement market through the provision of carefully targeted regional workshops to enhance the skills, expertise and efficiency of those SME businesses that wish to target the public sector. Specifically, the Programme seeks to provide participating companies with the basic knowledge and practical support required to target and win contracts in the all island public procurement market.

The objectives of the Programme are to: -

• Increase awareness among suppliers, particularly regarding cross-border contracts and to create cross-border opportunities for SMEs in the all island public procurement market.
• Provide knowledge to SMEs regarding the public sector market throughout the island.
• Provide development of the skills required to win public sector work in both jurisdictions.
• Provide experienced one to one support in the process of bidding for work.

Between 2005 and 2008 CPD presented at 30 workshop events, which were attended by over 400 SME suppliers. Many of these suppliers have gone on to successfully compete for public sector contracts both on the island of Ireland and across Europe. Recent research by InterTradeIreland indicates that over the last two years the Go-2-Tender Programme had resulted in 234 companies being awarded public sector contracts to a value approaching £17 million.

CPD is currently assisting InterTradeIreland with its “All Island Public Procurement Competitiveness Study" designed to produce initiatives that will enhance the effectiveness and efficiency of public procurement spend on the Island of Ireland.

The objectives of this ongoing Study are:

1. To gain a fuller understanding of the dynamics of the public procurement market on the island.

2. To make recommendations for mutually beneficial cooperative actions in the following areas:

• The provision of supports to build SME capacity and capability.
• The identification and removal of the barriers that prevent the operation of an open all-island public procurement market.
• The use of public procurement to drive innovation.
• The identification of ways to enhance local sustainable development.

CPD is also supporting the Department of Enterprise, Trade and Investment’s work with the Social Economy Sector and the development of its draft Social Economy Enterprise Strategy. CPD will continue to provide support through interaction with the Social Economy Network, meet the buyer events and working closely with CoPEs and the Sector to contribute to the development of a successful social economy in Northern Ireland.

From a business perspective the Confederation of British Industry (CBI) Northern Ireland conducted a Procurement Survey in July 2008 among its members the findings of which were discussed at a workshop hosted by CPD and attended by Heads of Procurement (CoPEs), SME and CBI representatives. The workshop produced an agreed action plan to address the issues raised and arising from this is a jointly sponsored Procurement Conference to take place in Belfast in March the theme of which is “winning public procurement markets at home and away".

On the wider front the European Commission has recognised that SMEs are generally considered to be the backbone of the EU economy and in order to make the most of their potential for job creation, growth and innovation SMEs’ access to public procurement markets should be facilitated. In pursuit of this the Commission has included in its "Small Business Act" for Europe at Principle V the recommendation that the EU and Member States should adapt public policy tools to SME needs. This has been further enhanced through the publication of a Code of Best Practice providing guidance to Contracting Authorities on how they may apply the EC public procurement framework in a way that facilitates SMEs’ participation in public procurement procedures. The areas addressed in the Code include:

• Overcoming difficulties relating to the size of contracts
• Ensuring access to relevant information
• Improving quality and understanding of the information provided
• Setting proportionate qualification levels and financial requirements
• Alleviating the administrative burden
• Putting emphasis on value for money rather than on price
• Giving sufficient time to draw up tenders
• Ensuring payments on time.

In parallel in preparation for the 2008 Pre-Budget Report the UK Government commissioned and published the Glover Report on action to reduce the barriers SMEs face when competing for public sector contracts. This Report makes twelve key recommendations which aim to build on the existing initiatives by further improving SME participation in public procurement by;

• Making opportunities as open and transparent as possible
• Making the procurement process equitable and as simple as possible
• Managing procurement strategically to encourage –
• innovation;
• procurer capability; and
• ensuring a fair deal for SMEs that participate in a supply chain.

Guidance

In its leadership role within public procurement in Northern Ireland CPD has produced a comprehensive suite of Guidance Notes for both SME suppliers and procurement practitioners that addresses the majority of the recommendations contained in these initiatives. CPD is considering how best to address the remaining recommendations and will take the matter forward together with the outcome of the Committee’s Inquiry.

The guidance for suppliers provides information for SMEs seeking to widen their customer base to include the Northern Ireland public sector. The companion guide for procurement practitioners examines the barriers SMEs might face in participating in public sector tender competitions and suggests measures that purchasers might take to reduce or eliminate these barriers. The guidance also addresses the achievement of best value for money through adherence to the 12 principles of procurement policy (Annex A) which ensures that public confidence is maintained in the procurement process and that mutual trust exists between contracting authorities and suppliers. This approach safeguards the role SMEs play in providing goods and services to government to enable it to provide effective public services.

CPD has also produced specific guidance aimed at Social Economy Enterprise’s to help the sector to understand public procurement, how to prepare bids and address issues on the delivery of the contract.

Recommended actions for CoPEs contained within the guidance include, supporting ‘meet the buyer’ events and supplier workshops, offering debriefs to unsuccessful suppliers to assist them to compete more effectively for future opportunities and ensuring access to opportunities by SMEs and SEEs by advertising all contracts over £30,000.

Social Considerations

CPD and CoPEs have a key role to play in the drive towards the integration of social, economic and environmental considerations in the procurement process by assisting the Northern Ireland Public Sector to embed those sustainable development considerations into its spending and investment decisions.

Public sector procurement spend is expected to rise significantly in the coming years, largely as a result of the Investment Strategy for Northern Ireland which sets out a framework to deliver around £6bn over the period 2008 - 2011 and an overall total approaching £20bn in the period 2008 - 2018.

The leverage provided by this volume of spend provides significant opportunities to help deliver the Executive’s overarching aim, set out in the Programme for Government, of building a peaceful, fair and prosperous society in Northern Ireland, with respect for the rule of law and where everyone can enjoy a better quality of life now and in years to come.

The Programme for Government 2008 - 2011 and Investment Strategy 2008 - 2018 reinforce the importance of achieving sustainable outcomes. They also provide the high-level context in which contracting authorities can identify specific sustainable goals to achieve from public procurement.

CPD and the Equality Commission have produced a joint Guide designed to support public authorities as they integrate equality and sustainable development in their procurement practice.

The early chapters of the Guide are directed at policy makers and decision takers and address how Public Bodies should approach integration through compliance with the Statutory Duties and with obligations and commitments under the Northern Ireland Sustainable Development Strategy.

The remaining chapters are directed at Procurement Practitioners and provide advice and guidance on the integration of equality and sustainability and what steps can be taken at the various stages of the procurement process.

The Guide also has a range of case studies to help illustrate what is possible and has a summary flow chart as an aide memoire for policy makers and practitioners alike to determine what needs to be considered at the various stages of the procurement process.

Throughout the guidance the reader is reminded of the two cardinal rules, set out in the Procurement Directives and implementing UK legislation, which state that where sustainable development considerations are integrated into the procurement process they must be linked to the subject matter of the contract and/or to the performance of the contract. This effectively rules out of the tender evaluation process any consideration of a tenderer’s general benefits to the community when such benefits are not directly connected with the specific contract being evaluated.

The Government Construction Clients Group (GCCG) and the construction industry, as represented by the Construction Industry Group for Northern Ireland (CIGNI), have jointly explored how sustainability issues could be incorporated into construction contracts. A Sustainability Task Group was established to develop proposals that could promote the economic, social and environmental elements of sustainable development through sustainable procurement in construction. The Group produced agreed contract requirements and further development through the CoPEs’ Practitioner Group has extended the contract requirements to supplies and services contracts. A list of the contract requirements, which can be further refined to suit a particular contract, is attached as Annex B.

eSourcing

CPD and the CoPEs are also committed to making it easier for suppliers to access government opportunities and have a variety of websites and systems to accommodate suppliers interested in doing business with the public sector. CPD has however developed e-SourcingNI a platform which is free to SMEs and SEEs to register and gives access to business opportunities within the public sector. The system provides web-based technology allowing buyers and suppliers to manage all their interactions online, creating greater transparency, speed and efficiency throughout the tender process. In addition the system provides details of CPD’s current tender opportunities and links to tender opportunities within the other NI Centres of Procurement Expertise.

The system has the ability to hold a supplier’s corporate information (e.g annual accounts, insurance details, etc) thereby reducing the amount of information required from suppliers at the pre qualification stage in the procurement process. The Procurement Board has recommended that other CoPEs to use the e-SourcingNI platform thereby creating a single portal for all government procurement activity within Northern Ireland. A roll out programme has been established to achieve the single portal for Northern Ireland.

e-SourcingNI is part of a UK wide system commissioned by the Office of Government Commerce and available to public sector organisations throughout the UK. e-SourcingNI went live in May 2008 and at mid February 2009 the SMEs registered on the system total 3707 of which 2118 are SMEs in Northern Ireland. Through this system registered SMEs in Northern Ireland have access to tender opportunities published by all UK public sector organisations using the system.

Annex A

Procurement Principles

The administration of public procurement is governed by the following principles:-

i. Accountability: effective mechanisms must be in place in order to enable Departmental Accounting Officers and their equivalents in other public bodies to discharge their personal responsibility on issues of procurement risk and expenditure.

ii. Competitive Supply: procurement should be carried out by competition unless there are convincing reasons to the contrary.

iii. Consistency: suppliers should, all other things being equal, be able to expect the same general procurement policy across the public sector.

iv. Effectiveness: public bodies should meet the commercial, regulatory and socio-economic goals of government in a balanced manner appropriate to the procurement requirement.

v. Efficiency: procurement processes should be carried out as cost effectively as possible.

vi. Fair-dealing: suppliers should be treated fairly and without unfair discrimination, including protection of commercial confidentiality where required. Public bodies should not impose unnecessary burdens or constraints on suppliers or potential suppliers.

vii. Integration: in line with the 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.

viii. Integrity: there should be no corruption or collusion with suppliers or others.

ix. Informed decision-making: public bodies need to base decisions on accurate information and to monitor requirements to ensure that they are being met.

x. Legality: public bodies must conform to European Community and other legal requirements.

xi. Responsiveness: public bodies should endeavour to meet the aspirations, expectations and needs of the community served by the procurement.

xii. Transparency: public bodies should ensure that there is openness and clarity on procurement policy and its delivery.

Annex B

Promoting Equality and Sustainable Development through Sustainable Procurement

General Requirements

It is anticipated that while the following requirements were developed for construction contracts, with minimal refinement /amendment a number of the requirements could also be incorporated within contracts for the provision of goods and services and can be further refined to suit any particular contract. Where the proposals might be applicable for goods or services contracts as well as construction then this is denoted by the following legend in the right hand column.

(G) – Goods, (W) – Works, (S) – Services, (CS) – Construction related services/consultancy

ECONOMIC
1	Objective:	Mandatory exclusion from procurement competitions due to fraud, corruption & money laundering
	Contract Requirement:	Pre-qualification questionnaire and tender documents to include a declaration from the Main Contractor that none of their directors have any convictions relating to any of the offences listed under Regulation 23(1) of the Public Contract Regulations 2006.	G W S
2	Objective:	To encourage the establishment of local partners
	Contract Requirement:	Government Construction Clients to publish Main Contractor and supply chain details on ISNI project database.	W
		Main contracts to include a requirement that Main Contractors publish the opportunities available within their supply chain on their website and or where appropriate in the local press.	G W S
3	Objective:	To encourage prompt payment to suppliers
	Contract Requirement:	Main contracts to include a requirement that Government Construction Clients have access to contractors’ accounts (as part of the open book process) to allow timeliness of payments to subcontractors to be verified.	G W S
4	Objective:	To promote fair dealing
	Contract Requirement:	Main contracts to include Government Construction Clients’ right to approve subcontract terms and conditions for consistency with main contract terms, particularly in relation to fair dealing and open book accounting.	G W S
		Main contracts to include a requirement that the Main Contractor complies with the Code of Practice for Government Construction Clients and their Supply Chains.	W
5	Objective:	To limit opportunities for criminal organisations to target construction procurement projects
	Contract Requirement:	Main contracts to include a Construction Contractor Monitor (CCM) enabling condition of contract. CCM would then be deployed on contracts where intelligence indicates cause for concern or by way of random audit to ensure contractors are meeting their requirements under the contract.	W

SOCIAL
1	Objective:	To encourage the economically inactive back into the work place
	Contract Requirement:	Main contracts to include a requirement that Main Contractors submit an employment plan setting out:- General policy on recruitment, training and retention of employees; Proposals for recruitment and retention of employees for project and monitoring system to be used to report to Government construction client.	G W
		Main contracts to include a requirement that Main Contractors recruit one long-term unemployed person, either directly or through the supply chain, for each £5m of project value.	G W S
2	Objective:	To encourage training and skills development to build a sustainable industry
	Contract Requirement:	Main contracts to include requirement that the Main Contractors recruit one apprentice, either directly or through the supply chain, for each £2m of project value.	W
		Government Construction Client to work the Construction Industry Group NI and the Department for Employment and Learning (DEL) to monitor apprentice progress and retention.	W
3	Objective:	To promote equality in the workplace
	Contract Requirement:	Main contracts to include a requirement that: Main Contractors comply with the application of fair employment, equality of treatment and anti-discrimination legislation; Main Contractors shall use their best endeavours to ensure that in their employment policies and practices and in the delivery of the services required under the contract they have due regard to the need to promote equality of treatment and opportunity.	G W S
4	Objective:	To promote Respect for People
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chains comply with the requirements of the ‘Respect for People (RfP) – Code of Good Working Health and Safety Practices’ incorporating the ‘Code of Practice for Industrial Relations and Health and Safety’. Compliance with this Code will include payment of operatives in accordance with the Working Rule Agreements.	W
5	Objective:	To promote best practice in Health and safety
	Contract Requirement:	Main contracts to include a requirement that: Main Contractors and their first tier subcontractors have or will obtain within a reasonable time period 3rd party accreditation of their documented health and safety management systems;	W
		all site operatives and supervisors have attained set minimum standards in health and safety training; and	W
		‘BuildHealth’ to be a possible future requirement.	W
		Main contracts to include a requirement to enable Government Construction Clients to discharge their monitoring duties under the CDM Regulations 2007 by assessing main contractors and their supply chains via office audits and site inspections.	W
6	Objective:	To incorporate ‘Fair trade’ products within construction projects
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chain provide and maintain corporate Fair Trade policies.	G W S
		Main contracts to include a requirement that Main Contractors and their supply chains embrace procurement of Fair Trade goods and services within construction projects in accordance with CPD Procurement Guidance note 02/06.	G W S
7	Objective:	To promote development of Essential Skills
		Main contracts to include a requirement that Main Contractors and their supply chain provide opportunities for all employees to develop essential skills through, for example, the promotion of the DEL Essentials Skills Programme.	G W S

 

ENVIRONMENTAL
1	Objective:	To ensure compliance with the Northern Ireland Miscellaneous Provisions Act 2006
	Contract Requirement:	Government Construction Clients to co-operate with other Government departments in discharging their statutory duty to act in a manner which they consider best contributes to sustainable development. This includes:- taking account of any DOE strategy or guidance on sustainable development including Departmental guidance.	G W S
		Compliance with the ‘Policy Framework for Construction Procurement’ incorporating the ‘Achieving Excellence in Construction’ initiative, the Government Constructions Clients Group - Sustainability Action Plan and all guidance produced by the Procurement Practitioners Group - Sustainable Construction Task Group.	W CS
2	Objective:	To promote Design Quality
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chains:- Develop designs that are consistent with Government policy on Architecture and the Built Environment for Northern Ireland; and	W CS
		fully participate with other project stakeholders in design review process and workshops (eg Design Quality Indicator workshops) which seek to establish and enhance design quality.	W CS
3	Objective:	To promote Environmental Management Systems
	Contract Requirement:	Main contracts to include a requirement that Main Contractors have, or will attain within a reasonable time period, 3rd party accreditation of their Environmental Management System with appropriate scope to cover the services to be provided under the contract.	G W S
4	Objective:	To minimise and manage waste
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chain prepare and submit a Site Waste Management Plan for consideration by the Government Construction Client prior to commencement of works.	W
5	Objective:	To promote recycling and reuse of construction materials
	Contract Requirement:	Main contracts to include requirement that: at least 10% of the material value of the project be derived from recycled/reuse content; and	G W CS
		Main Contractors report on the recycled/reuse content achieved using suitable standard industry tools.	G W
6	Objective:	To promote environmental assessment
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chains achieve a CEEQUAL or BREEAM rating of “Excellent" and “Very Good" ,or equivalent, for new build and refurbishment projects, respectively.	W CS
7	Objective:	To promote the reduction in energy and water consumption and carbon emissions.
	Contract Requirement:	Main contracts to include overarching design requirements for energy, water and low carbon design.	G W CS
8	Objective:	To promote the use of legal & sustainable timber
	Contract Requirement:	Main contracts to include a requirement that Main Contractors and their supply chain source timber from legal sources and provide an audit trial for chain of custody.	G W CS
9	Objective:	To promote the Considerate Constructors Scheme
	Contract Requirement:	Main contracts to include a requirement that Main Contractors register projects with the Considerate Constructors Scheme.	W

Carson McDowell

Incorporating Social Considerations in Public Procurement

Introduction and Background

Recognising that sustainability is an important issue to both central and local government, public procurement must play its part and address social issues where possible. Regulation 30 of the Public Contracts Regulations 2006 (the Regulations) specifically mentions “environmental characteristics" as an element which may be relevant to assessing the most economically advantageous tender (MEAT). Environmental considerations can be reconciled with the evaluation of whole life cost and quality issues i.e. the basis upon which an award should be made. However, generally there is less scope to incorporate “social" criteria in the public procurement process as they can be more difficult to link to the subject-matter of the contract. Nonetheless, there is scope to do so, depending on the stage of the procurement process, and we have set out the legal position below following European Commission and OGC Guidance.

Executive Summary

There is scope to include social criteria in compliance with the Regulations depending on the stage of the procurement process. Key points are as follows:

• the social issues must be relevant to the subject of the contract;
• it is best to address social issues at the beginning of the procurement process as there is less scope to introduce social criteria at the selection and award stages;
• social issues must be compliant with the principles derived from the EC Treaty, for example, maintaining a level playing field for suppliers in the UK and other member states i.e. the principles of equal treatment and non-discrimination; and
• social issues to be included in procurement must be consistent with government’s value-for-money policy and take account of whole-life costs.

The Legal Position

Recital 1 of the European Directive (2004/18/EC) (the Directive) states that the Directive is based on European Court of Justice case-law, in particular case-law on award criteria, and that it:

“…clarifies the possibilities for the contracting authorities to meet the needs of the public concerned, including the environmental and/or social area, provided that such criteria are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the contracting authority, are expressly mentioned…" and comply with the fundamental principles derived from the EC Treaty i.e. equal treatment, non-discrimination, transparency etc.

Further, Recital 46 of the Directive provides that:

“In order to guarantee equal treatment, the criteria for the award of the contract should enable tenders to be compared and assessed objectively. If these conditions are fulfilled… a contracting authority may use criteria aiming to meet social requirements, in response in particular to the needs- defined in the specifications of the contract- of particular disadvantaged groups of people to which those receiving/using the works, supplies or services which are the object of the contract belong".

Therefore, under the EC Treaty, it would be discriminatory to require “local" labour in the specifications and/or contract conditions. As issues also need to be relevant to the subject matter of the contract, to exclude, at the selection stage, a candidate for not being willing or able to meet the authority’s own race, gender or disability policies (where those policies go beyond what is required to perform the contract) is unlikely to square with the EU rules. As stated above, the key principles are relevance and non-discrimination.

To a certain extent, social issues can be relevant to all stages. However, they should be addressed at the start i.e. in defining the requirement and drafting the specification, so that they become part of the subject of the contract. In addition, terms and conditions is another means by which social factors can be incorporated in contract performance. However, the selection and award stages provide less scope to introduce social issues. We have outlined below the potential for inclusion of social issues at the different stages of the procurement process.

Please note, social issues should not necessarily be included in every contract - procurers must still meet their value for money and EU obligations in awarding contracts.

Stages of the Procurement Process

1. Pre- Procurement

This is the point at which there is most scope to consider social issues- when the procuring entity is identifying the need and developing the business case. For example, an understanding of government social policy requirements is key to identifying which are relevant to a particular procurement e.g. cultural and equality issues.

When identifying the need, contracting authorities should also consult stakeholders such as customers and interest groups to help them understand what is needed i.e. conduct market sounding. However, this should not be done in a manner which treats certain candidates more favourably than others i.e. the principles of non-discrimination and equal treatment should be borne in mind.

In addition, ensuring that SMEs have equal access to public contracts is another example of how procuring entities can aim to meet the social agenda.

2. Specification Stage

It is possible for social considerations to be included in the specification as long as the requirement is central to the subject of the procurement and consistent with the Regulations and principles derived from the EC Treaty.

For example, in an ethnically diverse area, it is necessary to ensure information about the relevant services is available to all ethnic groups. Therefore it is legally permissible to include requirements for staff working on a helpdesk to be fluent in languages other than English. There is also a provision in the Regulations giving procuring entities the option to reserve contracts for organisations providing supported employment opportunities to disabled people.

Social conditions reflected at this stage should be transparent and non-discriminatory.

3. Selection Stage

This is the point at which candidates are selected, or not, to participate in the next stage of the procurement process i.e. selected to tender.

First, candidates can be excluded on certain grounds set out in the Regulations. These grounds include prior convictions for offences concerning professional misconduct, or a finding of grave professional misconduct and such grounds may relate to social matters e.g. breaches of employment legislation.

Second, in terms of selection, candidates can only be selected on the basis of economic and financial standing and technical capacity. The Regulations contain an exhaustive list of evidence that candidates can be required to provide in order to demonstrate their technical capability- the objective is to choose candidates most able to carry out the contract and therefore requirements must be directly relevant to the subject matter of the contract. Some of these can be of a social nature. For example, health and safety provision may impact on a contractor’s capability to perform a contract.

Provided it is relevant in assessing technical capacity, contracting authorities can also examine candidates’ track records for delivering similar contracts- if candidates have failed to fulfil social requirements of a previous contract, this can be taken into account at this stage.

4. Award Stage

The Regulations permit a contract to be awarded to the tenderer offering either the lowest price or the most economically advantageous tender. A number of examples of permissible award criteria are set out in the Regulations, including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date and delivery period and period of completion. These do not explicitly include social criteria, however could have a social dimension. Such social considerations may be included provided the following are met (as per the Directive):

• criteria must be relevant to the subject matter of the contract;
• criteria should be from the point of view of the contracting authority;
• criteria must comply with the principles derived from the EC Treaty; and
• be distinct from the earlier selection criteria.

5. Performance of the Contract

In accordance with Article 26 of the Directive:

“contracting authorities may lay down special conditions relation to the performance of a contract, provided that these are compatible with Community law and are indicated in the contract notice or specifications. The conditions governing the performance of a contract may, in particular, concern social and environmental considerations".

Recital 33 of the Directive also provides further guidance:

“Contract performance conditions are compatible with this Directive provided that they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents. They may, in particular, be intended to favour on-site vocational training, the employment of people ex experiencing particular difficulty in achieving integration, the fight against unemployment or the protection of the environment. For instance, mention may be made, amongst other things, of the requirements- applicable during performance of the contract- to recruit long-term job-seekers or to implement training measures for the unemployed or young persons, to comply in substance with the provisions of the International Labour Organisation (ILO) Conventions, assuming that such provisions have not been implemented in national law, and to recruit more handicapped persons than are required under national legislation."

For example, in a construction procurement, a contracting authority may consider including a targeted recruitment and training programme in the conditions of contract e.g. apprenticeships.

However, when including such conditions care must be taken to ensure that they do not discriminate either directly or indirectly against national or non-national tenderers and that they maintain value for money.

Advice NI

Advice NI is a membership organisation that exists to provide leadership, representation and support for independent advice organisations to facilitate the delivery of high quality, sustainable advice services. Advice NI exists to provide its members with the capacity and tools to ensure effective advice services delivery. This includes: advice and information management systems, funding and planning, quality assurance support, NVQs in advice and guidance, social policy co-ordination and ICT development.

Membership of Advice NI is normally for organisations that provide significant advice and information services to the public. Advice NI has over 70 member organisations operating throughout Northern Ireland and providing information and advocacy services to over 110,000 people each year dealing with over 213,000 enquiries on an extensive range of matters including: social security, housing, debt, consumer and employment issues. For further information, please visit www.adviceni.net.

Advice NI welcomes the opportunity to respond to this consultation, and our comments are focused on procurement and tendering insofar as it impacts on the advice sector. This response is informed by Advice NI’s direct experience in procurement: Advice NI has responded to a number of tender opportunities and has seen the impact of both successful (SSA benefit uptake) and unsuccessful (DETI money advice) tenders.

Advice NI understands that there is undoubtedly a top-down drive to maximise the effectiveness of advice provision and use resources efficiently. ‘Opening Doors’ the DSD’s Advice & Information strategy launched in September 2007 explicitly states:

“The consultation invoked considerable debate about the method of allocating future funding under the Area Hubs model. A number of proposals were submitted involving the use of competitive tendering, consortia approach and service level agreements. Recent Treasury guidance is clear that, where the third sector is involved in delivery of public services, a procurement process open to competition and leading to a conventional trading relationship under contract is the best option. It is envisaged that contracts will be awarded jointly by councils and the Department. This process will not preclude a collaborative approach between providers leading to joint bids."

Advice NI’s position on tendering and procurement is clear: in our experience a competitive tendering approach to securing resources does not foster the collaborative approach advocated in the strategy. Our recent experience regarding the Department of Enterprise, Trade & Investment tender for money advice services highlighted that the tendering approach creates a ‘winner-take-all’ scenario; is exclusive rather than inclusive; and increases the likelihood of a two tier advice service developing in Northern Ireland.

Undoubtedly there is merit in promoting joined up working between advice providers in order to maximise the effectiveness of advice provision and use resources efficiently. Real partnership and joined up working would help to bring about a situation where service provision is tailored more closely to client need – for example staggered opening hours, referral mechanisms in place to balance workloads, sharing resources for example money advice specialisms. Partnership on this kind of agreed basis can have the buy-in of all involved, takes an inclusive approach and ultimately places service users at the centre of developments. We remain to be convinced that current procurement practices will have these outcomes.

In addition we would be concerned that sources of funding which are premised on tendering would see a continuation of short-term-ism and would amount to continuing uncertainty for the staff involved. This may not be the case where there was an agreed tender covering all providers (in essence a true partnership approach) but history shows us that this is unlikely to happen. And of course tendering also brings a risk of ‘providing services on the cheap’ and a risk of undermining the quality of the service (with the focus being on price). In actual fact we would argue that tendering does not encourage best practice – because it creates a monopoly in terms of funded service provision and thereby stifles diversity, innovation and creativity which are the essential components of driving change and improvement.

Advice NI would also point to three informative GB-based publications which shed light on this issue:

‘Unintended consequences: How the efficiency agenda erodes local public services and a new public benefit model to restore them’ (nef: the new economics foundation)

• Wider benefits to the community, be they social or environmental, are not considered in the current model, which only recognises cost and the achievement of narrowly defined targets. A radical rethink is needed, based on a new public benefit model.
• A Public Benefit model: In this framework the effectiveness of outcomes is assessed in terms of their benefit to users and the community; and service providers are encouraged to cooperate and innovate to maximise these benefits, rather than simply minimise costs. The result would be a model which:
• Creates a ‘race to the top’ by encouraging innovation and the maximisation of the social and environmental benefits that result from public service provision, both to those directly affected and to the wider public.
• Places people at centre stage with public services co-produced by commissioners, providers and service users, and with the latter seen as ‘assets’ in producing positive outcomes.
• Provides public sector actors with a more appropriate measure of efficiency when making purchasing decisions, which takes account of the vital role played by small voluntary and community organisations in local areas.
• Takes a ‘social return on investment’ (SROI) line, which builds the ‘triple bottom line’ approach into public service contracts, incentivising providers to maximise their wider impacts wherever possible, rather than focusing on solely cutting costs in the short term.

As the Treasury sets out its plans for public services for the next four years in the Comprehensive Spending Review, it is time to rebalance the role of efficiency in public service provision, moving to measure success in terms of outcomes for people rather than the ‘false economy’ of short-term cost savings to the Exchequer.

‘It’s the System, Stupid! Radically Rethinking Advice’ (Advice UK)

• Advice organisations could make a huge contribution to improving public service delivery (and cutting costs) but the increasing practice of funding them solely for advice transactions means that opportunities for learning, for joint work to tackle waste and for service improvement are being missed.
• Funders’ requirements and new contract conditions are actually introducing waste into advice agency systems.
• The project that has led to this report arose out of our concern that current government plans for improving legal and advice services will achieve nothing of the sort. We share the desire for improved services but, in our view, plans for advice to be provided by fewer larger contractors selected through competition, using funds that currently support many smaller outlets, will actually lead to worse services more focused on serving the ‘top-down’ interests of government than the ‘bottom-up’ interests of people seeking advice.

‘A better return: setting the foundations for intelligent commissioning to achieve value for money’ (nef: the new economics foundation)

• This report is for public service leaders, commissioners and all concerned with spending public money and delivering effective public services.
• Commissioning to deliver ‘full’ or ‘best’ value for communities and the public is a difficult and complex task, particularly in a time of financial constraint and when the institutional context presents barriers.
• A key objective of this report is to encourage public service leaders to develop an enabling institutional framework for intelligent commissioning. The report sets out to do this by:
• firstly, showing that better outcomes can be achieved for people, communities, the environment and public purse when the Government’s own definition of value for money is put at the heart of intelligent commissioning frameworks.
• secondly, showing how the institutional and regulatory context can encourage intelligent commissioning that achieves value for money.
• thirdly, using case studies to explore new ways of measuring value that can help public service leaders and commissioners arrive at better approximations of value for money.

Advice NI would welcome the opportunity to further discuss the issues raised in this response.

Contact information on this consultation response:

Bob Stronge (Director)
Kevin Higgins (Deputy Director)
Advice NI
1 Rushfield Avenue
Belfast
BT7 3FP

Tel: 028 9064 5919

Email: bob@adviceni.net
Email: kevin@adviceni.net
Website: www.adviceni.net

Social Economy Network

Inquiry into Public Procurement Policy and Practice in Northern Ireland. February 2009

Social Economy Network’s submission to the Committee for Finance and Personnel

Inquiry into Public Procurement Policy and Practice in Northern Ireland. Feb 2009

The Social Economy Network (Northern Ireland) Ltd welcomes the opportunity to comment on public procurement practice in Northern Irelend.

The Social Economy Network is a membership organisation (current membership 103) drawing its members from social enterprise initiatives throughout Northern Ireland. The aims of the network are to

• Develop and strengthen the membership
• Foster, support and encourage exchange of experience, information and knowledge within the sector
• Provide a channel for social economy sector input into policy development
• Represent the views of the sector in engagement with government
• Promote the role of the social economy and its contribution to socio – economic growth and development

This submission was informed by input from members through a consultation session facilitated by SEN on 20th February 2009 and previous SEN consultation sessions which dealt with the issue of public procurement.

How public goods and services are procured.

1. How public goods and services are procured

Opportunities exist for social economy enterprises (SEEs) to do business with the public sector. Many have successfully secured contracts for service delivery- Bryson Recycling with local councils; Ardmonagh Family Centre and Irvinestown Trustee Enterprise Company for the delivery of health & social care services through contracts with health trusts and a range of other social economy enterprises for the delivery of training services through contracts with DEL.

Public bodies in Northern Ireland procure goods and services from the social economy and voluntary sectors in the following ways:-

• Grants for the delivery of services;
• Contracts/Service Level Agreements (SLAs); and
• Open Competitive Tendering.

Grants and contracts/SLAs have historically been used by Government Departments, their second step agencies and Local Councils for the delivery of local services including health & social care; health promotion; education and training; employment and supported housing services. In the past 20 years there has been a definite move away from grants to commissioning services through contracts/SLAs. More recently we have experienced the introduction of competitive tendering. There is a distinct difference between commissioning of services and public procurement through competitive tendering. Some Government Departments and second step agencies favour the commissioning model. One of the key problems identified with the commissioning model of services is duration of contracts. In some instances contracts must be bid for on an annual or bi-annual cycle which places undue pressure on staff time and costs to the organisation. Longer term contracts of 3-5 years would be more beneficial for organisational planning and sustainability.The fact that the level of finance available for service delivery this year - in the health & social care field- is set at 3% less than the cost of delivering the same service last year is also an issue. Departmental efficiency savings were not intended to affect front line services but clearly in such instances they will.

Many Social Economy Enterprises (SEEs) are very familiar with and experienced in the process of commissioning for the delivery of local public services through contracts and SLAs. Public procurement through open competitive tendering however is a process more familiar to the longer established and larger SEEs.

This experience is very similar to that of the private sector. The Small Business Service-Annual Survey of Small Businesses: UK-2005 found that:-

• 15% of SMEs had done some work for the public sector.
• The larger the firm the more likely they were to have done some work for the public sector. 34% of medium- sized businesses had done some work for the public sector, compared to 28% of small businesses and 20% of micro businesses.
• Businesses of four years and older were more likely than their younger counterparts to have done public sector work.
• Small businesses were more likely to have done work for local authorities as opposed to Central Government Departments.

Capacity and experience of organisations are clearly factors in terms of entering into public procurement and winning tenders.

There are currently no statistics on the numbers of SEEs who compete for public contracts nor for the numbers who successfully secure contracts. It would therefore be beneficial to collect such data to establish a baseline of information against which to compare the situation on an annual basis and assess progress.

The provision of feedback on tenders – successful and unsuccessful- was cited by SEEs as a positive aspect of the procurement process and a valuable learning experience

2. Barriers faced by SEEs in the public procurement process

• Lack of knowledge and understanding among the Social Economy Sector about the public procurement process. Many of the small and newly established SEEs expressed an interest in becoming a supplier of goods and services to the public sector but were unaware of how to go about it and had limited knowledge of the policies and procedures governing public procurement. SEEs with little or no experience of doing business with the public sector need practical advice and training on procurement policy & procedures; information on how and where to access information on tendering opportunities and writing tenders so that they can acquire the necessary skills to enable them to take advantage of the opportunities presented.
• Lack of knowledge and understanding among Public Procurement Practitioners about the Social Economy Sector- The experience of SEN members is that the level of awareness and understanding of the Social Economy Sector is low and that Public Procurement Practitioners are unaware of SEEs as potential suppliers of goods and services. While SEEs and the Social Economy Network accept responsibility for the need to promote and market themselves more effectively there is a requirement for Government Departments and DETI, as the lead Department for the Social Economy Enterprise Strategy, to do more to raise awareness of the sector within Central and Local Government. It is particularly important, post RPA, to ensure that Local Councils have a good understanding of the role of SEEs, accept the social economy as a viable business model and recognise SEEs as potential suppliers of goods and services.

The Social Economy Network (SEN) is willing to work with relevant Government Departments and Local Councils to raise awareness and increase understanding. SEN has developed a Social Economy Trade Directory which is currently being promoted as a resource to CPD and Local Councils. The Directory provides information on the goods and services provided by the SEN membership. If used as a resource by Public Procurement Practitioners it should go some way to addressing this problem but it needs to be positively promoted. Public Procurement practitioners also need to get to know and understand the broader environmental, social and economic benefits and efficiencies that can be derived from the varied approaches to how goods/services might be delivered

• Emphasis on financial capacity

The social economy sector is disadvantaged by the emphasis in consideration of tenders, on financial capacity demonstrated by a build up of reserves in assessing the financial health of companies. This particularly affects those in the early stages of development who were prohibited from building up reserves while in receipt of grants. SEN argues that if there is to be equality of opportunity in accessing tenders then it must be acknowledged that existing means and criteria are exclusionary to SEEs and that amendments to criteria must be introduced to create a level playing field.

• Special contract Arrangements

In the experience of the social economy sector there has been little or no use made of Special Contract Arrangements (SCA) also known as the “offer back" system in public procurement tenders. Under SCA where a bid by a supported business falls only on price the contracting body can give a tendering supported business a chance to adjust its price. (The price tendered by the leading bidder must not be disclosed unless there is consent to do so)

• Aggregating contracts

Pressure on public bodies to secure efficiencies by aggregating contracts discriminates against small businesses, which includes many social enterprises. It should not be assumed that large suppliers offer better value for money. There are many advantages of using smaller enterprises which include:-lower overheads and management costs; and greater responsiveness to changing needs and ability to “tailor" goods and services. Little cognisance is given to the expertise and ability of SEEs (with local knowledge and understanding of needs and how best to address them) to deliver services effectively. Social enterprises experienced in this field require support from the public sector to enable them to develop their capacity to grow to take on the prime contractor role; and to explore the feasibility of sub contracts and or public/social enterprise partnerships.

• Public/Social Partnerships

Consideration should be given to exploration of innovative ways of increasing business opportunities for SEEs through public/social partnerships which represent a new mechanism for bringing together public bodies and SEEs to create well designed services that deliver additional community benefits. This should be extended also to private/social partnerships where private sector companies are encouraged as part of tender specifications to provide sub contracting opportunities for SEEs.

3. The nature, extent and application of social clauses within public contracts.

Despite the Programme for Government recognising the valuable role procurement can have in reducing inequalities and promoting social exclusion social clauses still do not feature in public procurement contracts. The subjects of social clauses, community benefits and sustainable procurement suffer from the lack of a shared vocabulary and understanding between the social economy sector and public procurement practitioners. The lack of progress on the inclusion of social clauses into the procurement process is one of the most significant problems facing the development of SEEs in Northern Ireland. SEEs operate their businesses in a market place which does not recognise or take account of the added value they create and this puts them at a disadvantage when competing for public sector business.

The measurement of social value is one of the difficulties cited in respect of including social clauses in procurement specifications. The public procurement process focus on measurement tends to be fiscal. This focus needs to be broadened to take account of outcomes. The problem with current measures of value and how taking account of social value in market economies can address inequalities in society is explored in the Cabinet Office, Office of the Third Sector publication titled “Why measuring and communicating social value can help social enterprise become more competitive" Nov 2007.

There are a number of management tools currently used by SEEs to measure social value and impact, for example, Social Return On Investment (SROI), social auditing and social accounting. Social accounts are becoming an accepted reporting format for SEEs in England and Scotland.

According to a Social Economy Scotland Briefing – the Scottish Government has produced guidance on including social issues in public procurement, including the ability to purchase wider social benefit as part of procurement. The guidance concludes that it is entirely possible to recognise wider social issues within a procurement process, as long as they are part of the primary purpose of the contract and they are incorporated into the specification.

A Cabinet Office, Office of the Third Sector publication titled “Why measuring and communicating social value can help social enterprise become more competitive" Nov 2007 explores the problems associated with measuring social value and identifies a number of solutions.

SEN Recommends that the understanding of social value be embedded in the practice and processes of public procurement and that the application of specific weighted criteria for social value be incorporated into specifications for tenders.

If the goal, as it should be, is to increase the capacity of SMEs and SEEs to submit and secure public sector contracts, it is essential to address the barriers they face in competing for public contracts. This will only be achieved through addressing the structural barriers inherent in the process, through the provision of awareness raising and training on the social economy sector for public procurement practitioners and the provision of appropriate information, training and effective support for SEEs to ensure transition to a level ‘playing field’.

Ulster Community Investment Trust
Social Enteprise & Public Service Delivery

Recommended Actions for the Committee for
Finance & Personnel

Introduction

• Ulster Community Investment Trust (UCIT) is a charity which provides flexible loan finance and business support to social enterprises in Northern Ireland.
• UCIT’s mission is to assist social enterprises to become more financially viable and self-sufficient, and as a result encourage economic development and job creation in some of the most disadvantaged communities in Northern Ireland.
• Since 2001, UCIT has invested almost £22 million and supported over 150 social enterprises in Northern Ireland.
• A snapshot of UCIT’s activities in Q1 2009, reveals that we are currently investing £12.7 million into 81 social enterprises, which provide employment for almost 700 people, have 1,300 volunteers and provide workspace for an estimated 600 SMEs that provide a further 2,450 jobs.

Social Enterprises are a Vital Part of the NI Economy

• There are an estimated 1,200 social enterprises, employing over 20,000 people in Northern Ireland. This represents 3% of an estimated 37,855 Small & Medium Sized Enterprise (SME) employers in the region.
• Social enterprises are businesses with a social, community or ethical purpose. This means that profits are reinvested for the benefit of the community rather than for shareholders or directors, making the social economy an excellent way to lock wealth into disadvantaged areas.
• In the first quarter of 2009, the Northern Ireland economy contracted at a faster rate than any other region in the UK, foreign direct investment continued to decline and unemployment reached 43,900, following large scale redundancies in manufacturing and construction. In contrast, UCIT’s clients continue to perform well, retaining jobs and contributing to sustainable economic development in some of the most deprived areas in Northern Ireland.

Proposed Actions vy Ucit to Support Social Enterprise Growth

UCIT aims to create a public procurement brokerage service that helps social enterprises successfully tender for public service contracts.

There are three reasons to help social enterprises win public service contracts

1. They make a vital contribution to the local economy, particularly in the provision of services such as health and social care, and environmental regeneration in areas that are often underserved by the private sector.

2. Social enterprises have a strong sense of community ownership, being managed by local people for local people, which makes them a highly effective way to deliver public services to vulnerable sections of society.

3. Better access to Northern Ireland’s estimated £2 billion public procurement marketplace would support social enterprise growth, job creation and sustainable economic development.

A public procurement brokerage service would help like-minded social enterprises come together to win public service contracts. The key objectives would be to:

• Build the business capacity of social enterprises and their readiness for public procurement
• Facilitate business links and strategic alliances between social enterprises and with the private sector to help build the sectors’ collective business strength and ability to tender for public service contracts

The brokerage service would be managed by a Committee made up of three organisations:

• UCIT – financing social enterprises and providing capital for administering the brokerage service
• Social Economy Network – facilitating business links and identifying new tender opportunities
• School for Social Entrepreneurs in Ireland – Building the sectors’ business capacity and skills base

UCIT aims to increase the supply of finance into the social economy in Northern Ireland.

• Over the past 2 years to 31st December 2008, a quarter of all social enterprises approved for finance by UCIT have come from start-up enterprises unable to access credit from the banking sector, and more established enterprises unable to expand their operations because their existing bank is unwilling to offer them additional finance or more competitive terms.
• Without access to additional investment, start-up social enterprises will face greater barriers to market entry and existing enterprises may not be in a position to expand their operations, with the risk of job loses, closure of essential community services, and additional costs for public finances.

Recommended Actions for the Committee for Finance & Personnel

UCIT has identified two areas of intervention by the Committee for Finance and Personnel that will increase the supply of finance into the social economy and help the sector win public service contracts.

1. Ring-fence part of the unclaimed funds from Dormant Bank and Building Society Accounts for investment by UCIT into the social economy.

Unclaimed funds will be used by UCIT to establish a social investment loan fund that reinvests capital into an increasing number of social enterprises on a perpetual basis. A key part of this proposal would be to use a portion of the capital generated by interest repayments to finance a public procurement brokerage service on behalf of social enterprises in Northern Ireland at no additional cost to public finances.

Evidence of how unclaimed funds can be used to support social investment

In England, part of the unclaimed funds will be distributed by a ‘social investment wholesaler’ to develop the long-term sustainability of ‘third sector organisations’, including social enterprises (Dormant Bank and Building Societies Act, 2008).

The Irish Government has acknowledged that its experience of distributing unclaimed funds in the form of grants under the Dormant Accounts Act 2001 has raised questions about the sustainability of grant funding and highlighted support for using these funds to create a more sustainable social investment loan fund.

Evidence of Regional Support for Social Enterprise and Public Service Delivery

In England, the Government has invested £215m into Futurebuilders England Ltd. to provide a mixture of loans and grants to social enterprises seeking to deliver public services.

The Scottish Executive will invest £30m into social enterprise growth over the next 3 years (2008 – 2011) as part of its strategy to build the capacity of social enterprises to bid for public service contracts.

2. Lobby Central Government to extend FSA regulations and public guarantees to UCIT to be used to secure investment into the social economy from:

• The private sector, including banks and high-net-worth-individuals who view security as a key barrier to social investment – bringing new private investment into the sector
• The social economy, including housing associations and the credit union movement, which have already expressed an interest in using UCIT as a social investment vehicle, but view security as a key barrier – unlocking existing capital within the sector