To tender or not to tender for local authorities

We’re noticing a growing trend in the public sector for a formal tender when procuring civil enforcement services and look at what local authorities might want to consider before taking this step.

What the law says

Procurement regulations apply in the following situations (source:

  • The contract is for public works, services or supplies
  • The following thresholds apply for public contracts
  • Supply, services and design contracts: £164,167
  • Works contracts: £4,104,394
  • Social and other specific services: £589,148

The over-riding policy states that value for money must be the paramount consideration when dealing with a public-sector procurement process. This is described specifically as “the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought”.

Tender for specialist services

Tendering can be a costly and lengthy process. If, for instance, you had an urgent requirement or didn’t feel that a sufficient team was in place for a robust assessment of the bids, then it would not be worth the time or effort to go out to tender.

Another noteworthy disadvantage is that although the procurement professionals put in charge of the tender process are highly skilled in their area of expertise, however they cannot be experts in all areas. This can impact on the aspects of the contract that are more specific to the business area that the tender relates to.

There are often, especially with an area as specialised as civil enforcement, compliance and other unmeasurable aspects that that need to be considered carefully.

These aspects can only really be understood by having the experience of working within a revenue and benefits team or fully having comprehensive help and support from the team who may not have time due to the seemingly constant cuts being made by central governments to their budgets.

Shared services

There has also been a marked increase in Local Authorities sharing services. This means in terms of pricing, that some economy of scale can be achieved.

The downside of this is that not each and every consortium member will have the exact same need and there will always be one or more party that feels a degree of dissatisfaction as the needs of the most dominant party may prevail.

Too big to fail

As with some government tenders, the negative publicity generated by awarding contracts nationally to a single large supplier can be avoided by bringing in smaller firms and making the whole process more competitive and transparent.

The problem with the large suppliers is that although they are too large to fail, they may also have used their size to leverage savings; this also means they need to do all they can to protect the margins.

This can sometimes lead to a reduction in the quality of the service delivered, sub-contracting, staff on zero hours contracts, reduced investment in staff and their training resulting in less than satisfactory outcomes.

There is another way – concessions contracts

Concessions contracts regulations that came into force in 2016 state that a contractor who is not in receipt of a direct payment from the contract, such as where they will only be acting to profit from works or services that are encompassed in the contract can be issued with a concessions contract.

There is an assumption that operating risks in such contracts transfer to the contractor and not the procuring authority.

You can read the concessions contract regulations here.

Increasing opportunity of SMEs

The government has put in place targets to increase opportunity for SMEs, this will look to tackle some of the barriers currently in place which include overly complex qualifying and pre-qualification requirements, lack of visibility of opportunity and direct access to pitch and promote innovation.

“According to the National Audit Office (NAO) report on Government spending with Small and Medium Sized Enterprises (March 2016), compared to other providers, SMEs offer innovative approaches, local investment, more flexibility, better value for money and improved social outcomes”

The Government’s target for the level of procurement spending to reach SMEs by 2020 is set at 33%. With this in mind it’s worth considering that if you are moving forward with a formal tender process that it should be ‘SME friendly’. You can read the NAO’s report here, which gives more insight into how you might approach this.

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