Wednesday, September 22, 2010

Facilitating SME's in Public Procurement - is it too little too late?

The department of finance issued a circular back in August in relation to new guidance for the procurement of public works.

These new guidelines are aimed at facilitating Small and Medium Enterprises (SME's) and ensuring that the public works market remains open to these companies.

Is the publication of this circular too little too late?

The basic changes of the new guidance and the changes pertinent to the construction sector can really be synopsised in 2 paragraphs as follows:

1 - The 'dual' stage / pre-qualification procedure for projects valued below €250,000 is now history.

Prior to this change the local authorities and other contracting authorities were using the two stage system or 'dual stage' where companies had to first make a shortlist. These shortlists are usually no more than 10 candiates and more often than not they are limited to just 5 candidates (particularly where the NRA were involved), whom then get to price the actual work.

The drawing up of these shortlists of contractors for each individual project, are derived from the first stage of the 'dual' stage by means of a pre-qualification questionnaire competition, or a beauty contest. These documents created a huge additional workload for small family run operators who in the current climate weren't geared up to undertake the completion of these PQQ's. In my own experience I have carried out some of these PQQ applications and this involves multitudes of paperwork for projects that would be for example €500k, and this was just to get the chance to price the work.

2 - The vast amount of paperwork will now no longer be requested until the pricing stage is completed, i.e. the winning bidder or bidder who is coming under consideration for the project will be asked for their insurance, tax clearance, bond undertaking, company structure etc only after the price is submitted and they are deemed the most economically advantageous.

One would imagine that these new guidance issues are as a result of lobbying by ISME, IBEC the CIF and various other groups working on behalf of SME's.

Is it too little too late or is it a case of any change to the current process is a step in the right direction?

Personally I believe it is a bit of both, i.e. they could have stretched the threshold to €500k or even €750k, however in this climate I'm sure any change where SME's will be allowed enter the market is a good one.

Sometimes its best to weigh up whether a change like this will work and function the way it should by way of everyday examples:

The DOF has stated (in this circular) that the SME sector is a very important business sector for the economy and that they are not hindered from competing for Contracts.

Example: Joe Bloggs Civil Contractor has done small culvert type bridges and many other structural concrete works down the years as a small sub-contractor to one or two of the 'mega' motorway contractors. He can't pre-qual to the pricing stage for a medium type standard bridge due to alleged lack of experience and also because he won't gain enough marks in the PQQ system ahead of the 'mega' lads he has worked for in the past. How does Joe ever build a bridge or how does Joe every compete in the market if it will be closed to those who have only built bridges in the past? Will this new system allow Joe as an experienced SME get into the bridge construction market? It is highly unlikely as one doubts there will be a bridge in this new process valued below the €250k threshold, whereas if the threshold was €750k at least Joe has a chance. Even if there was a bridge project at the €250k value then the parameters set down by awarding authorities on a larger bridge project (where Joe would have to pre-qualify) would in fact hinder Joe.

This is where an opportunity has been missed by the National Procurement Service and the Department of Finance.

Another flaw is the evaluation of the projects. Who values the projects and states whether they are within the threshold or not? Is it the awarding authorities? If so what is their basis of calculating if a job falls within the threshold or not?

This blogger also notes that the National Procurement Service was set up in 2009, another quango set up slap bang in the middle of a recession? Where the hell was this outfit during the boom when we had work to procure?

The DOF circular paragraph 6 is interesting reading. Its almost as if the DOF are only now letting the local authorities know that there is an agency in place to help them with procurement matters!!

Finally, if this NPS is around then what are the National Public Procurement Policy Unit (NPPPU) working at these days? I do know they run the excellent etenders website which I note is been copied by local authorities / public authorities in cities and countries around Europe presently, so well done to them on that front but could they not also manage to carry out the role of the National Procurement Service also?

Here is the link to the relatively new circular discussed above: