My Manifesto for Public Procurement

I commented recently on the major UK political parties’ manifestos in terms of their procurement ideas, and literally thousands of readers – well, one or two – said “so what would you do then, smart-ar**?”

So here we go.

A Public Procurement Manifesto from the Peter Smith Party

The UK public sector spends over £300 billion a year with third party suppliers – although different definitions of “third-party spend” give somewhat different numbers.  That is £6,000 for every adult in the country, every year. Suppliers are also central to every aspect of public services, from provision of tanks and ships for our country’s defence to medical and social care, from administering benefits to building schools or roads.

So the first priority here must always be to obtain excellent value for money for the taxpayer  – buying the most appropriate goods and services to support effective management of all the country’s public organisations.

Unfortunately, the Conservative government has been responsible for some of the biggest fiascos and wastes of public money that we have even seen, such as HS2, the PPE scandal, Ajax armoured cars that literally deafened the troops inside them, awarding contracts to ferry companies that did not have any ships, or the Carillion disaster, which jeopardized numerous NHS projects.  

Much (but not all) of this has been down to political failings, but procurement officials must play their part too if we are to improve the situation. There have been some positive developments in recent years in terms of procurement capability, in central government in particular, but we need to see more focus on spreading that capability across local government, the NHS, education, police and all government bodies.

Procurement related fraud and corruption has also increased under the Tories’ watch. In 2022 Britain slumped to its lowest-ever international ranking in the independent Transparency International’s global Corruption Perceptions Index (CPI). There needs to be more focus on transparency and competition – the first of those is addressed somewhat in the new Procurement Act, the second imperative is not.

And value for money is about a lot more than “getting a good deal”, or finding the lowest possible price for an item. Public procurement and the way it is carried out is relevant to many different goals, from fighting against corruption to supporting exciting new businesses.

So I will address this be delivering on key themes in terms of how this massive amount of public money is spent every year.  I have 3 key goals for public procurement. As well as delivering on the core value for money promise, we will use these billions of taxpayers’ money  to:

1. Drive economic growth for the UK
2. Release cash to invest in better services
3. Fight against corruption and fraud

Let’s look at the broad objectives my party will pursue under each of those headings.  

1. Drive economic growth for the UK – we will:

• Encourage and provide early opportunities for innovative young UK businesses.
• Introduce a programme to identify and support “critical national industries”, including how they can be helped through public procurement.
• Drive carbon reduction with a stronger approach to public sector supplier requirements.
• Use government procurement and spend to support charities, CICs, social enterprises, SMEs and minority owned businesses, and make “social value” more relevant locally.

2. Release cash to invest in services – we will:

• Drive more competition for contracts, with potential to save billions (as the NAO has independently identified).
• Reduce spend on consultancy services by 50% (including managing risk of “leakage”).
• Identify and take action where public sector suppliers are making clearly excessive margins.
• Conduct a thorough review of major capital programmes, particularly HS2, to identify the failings of last decade and the way forward. 
• Introduce a sceptical “NAO type review” process BEFORE major programmes are started.
• We will hold an open competition titled “how do we sort out defence competition”? The best response will win £100,000 and a seat on the MOD main Board.

3. Fight against corruption and fraud – we will:

• Investigate the PPE contracting process.
• Appoint a “Procurement Ombudsperson” to improve relationships between suppliers and government buyers and to handle complaints, whistleblowing, etc.
• Introduce stronger safeguards against conflicts of interest.

If you really want further detail… here we go

1. Drive economic growth for the UK

Encourage and provide early opportunities for innovative young UK businesses

We will launch an innovation programme that gives start-ups the opportunity to “pitch” their offering to government, with the promise that they will be awarded some sort of contract if they are amongst the “winners”. That should be possible under the new UK procurement legislation if handled properly.  The programme would be supported by publicity and promotional opportunities for the participating firms.

Programme to identify and support “critical national industries” including through procurement

The pandemic identified goods and services that really should have some domestic providers within the supply landscape. Proper analysis needs to take place to determine critical areas of weakness, which could range from PPE to complex electronic components. Appropriate actions can then follow, which might take the form of grants, targeted procurement with a UK focus or even government-backed start-ups.

Drive carbon reduction with a stronger approach to public sector supplier requirements

Firms bidding to win large government contracts already have to provide carbon reduction plans. But they only have to show a plan with achievement of a 2050 target – a long way away. So an intermediate (2035?) target should be introduced and the current threshold for this applying reduced to bring more contracts and firms into the policy.

Support charities, CICs, social enterprises, SMEs and minority owned businesses

The long-standing SME spend target simply has not worked. Indeed, it is a classic example of the many Tory policies that were both badly designed, and then not implemented properly. We will replace that with a much more carefully constructed programme and KPIs that focus on a wider range of “deserving cases” in terms of suppliers; businesses with a social purpose, minority owned firms, social enterprises and charities – as well as smaller firms, particularly innovative start-ups. But we will not lose sight of the value for money issue, so  “social value” weighting will be capped at 15% in procurement exercises, at least until proper academic research analyses performance to date of this initiative.

2.         Release cash to invest in services

Drive more competition for contracts, with potential to save billions (as per NAO report)

Competition for major government contracts has decreased under the Tory government. Lack of competition means the taxpayer gets worse deals from suppliers and is also an indicator of corruption. There have been too many examples of contracts being given “to your mates” in recent years – if there is no competitive process, this often suggests some nepotism or favouritism even if we are not looking at outright fraud.

Competition also drives suppliers to give government the best deal. The National Audit Office (NAO) in a July 2023 report showed that 72% of large contracts were bought through frameworks (which restrict or eliminate competition) in 2021-22 compared to 43% in 2018-19. NAO estimates that lack of competition has cost the taxpayer £4 – £7.7 billion per year. So our new policies will drive government bodies into using proper competition in all but the most unusual situations. Use of frameworks and of collaborative buying organisations, including Crown Commercial Services, will be reduced, by legislation if necessary.  Single-supplier frameworks will be banned and non-competitive call-offs controlled more actively, with disciplinary action for transgressors.  

Reduce spend on consultancy services by 50% (including managing risk of “leakage”)

Consultancy spend has risen dramatically in recent years. Some of that is down to lack of skills in the public sector, some is because of the unhealthily close relationship between the big firms, Ministers and senior civil and public servants. Much tighter rules on consultancy frameworks will be introduced and the CCS framework re-tendered with a proper focus on value this time around. 

Labour and the Conservatives have announced that spend will be reduced by 50% through tighter controls on expenditure. But there will need to be close management of “leakage” – consulting spend must not be re-classified as “interim staff” or “managed services” – if that is to succeed. That is what happened when the Tories tried to implement a similar policy in 2010, a policy that initially had some success but quickly dissipated.  

Identify and take action where public sector suppliers are making clearly excessive margins

There is nothing wrong with good suppliers making decent profits from supplying the public sector. However, there comes a point where excessive profit margins indicate a “failed market” and action needs to be taken. For instance, one firm that supplies software to the NHS – and the NHS is virtually its only customer – made £45 million profit last year on a turnover of £70 million, a margin of over 50%. Coincidentally the same firm has become a huge donor to the Conservatives.  That cannot be right on several counts. Such examples will be identified and targeted negotiations will take place to reduce margins to reasonable level and free up cash for spending on key services.

Review of major programmes particularly HS2 to identify failings of last decade and way forward

This is a very important step towards making sure the UK spends public money wisely.  We cannot make progress with the capital investment the country needs if we do not spend the money needed wisely and effectively. We will also publish the review into the Nuclear Decommissioning Agency  procurement fiasco with Bechtel that cost the taxpayer over £100 million. It has been supressed for five years now.

Introduce a sceptical “NAO type review” process BEFORE major programmes are started.

The National Aduit Office does great work in explaining why billions of pounds have been wasted. The problem is that it’s too late by then to do anything, and the lessons learnt become lessons forgotten very quickly. We will introduce an independent, transparent review process (by NAO or equivalent body) to examine all programme plans before money starts to be spent. We will introduce legislation so that government cannot commit to initiatives before they have been validated.

We will hold an open competition titled, “How do we sort out defence procurement”? The best response will win £100,000 and a seat on the MOD main Board.

Frankly, I do not know how to sort out defence procurement. Perhaps someone out there does.

3.         Fight against corruption and fraud

Investigation into PPE contracting process

Labour has announced this and we agree – it is a necessary investigation into the many billions of public money was wasted on PPE during the pandemic. We need to identify the reasons behind this huge loss to the public purse, identify where corruption played its part and look to recover money wherever possible from crooked and incompetent suppliers.

Appointment of “procurement Ombudsperson” to handle complaints, whistleblowing, etc.

Countries such as Canada have appointed an ombudsman whose role is to act as a neutral and independent arbitrator that helps resolve contracting disputes between businesses and government bodies.  Such a role can help improve the competence of procurement but also acts as a bulwark against corruption and fraud in public procurement.

Conflicts of interest

We have seen a worrying growth in “conflicts of interest” affecting public procurement during the Tory government. That is not just friends of Ministers being awarded PPE contracts; it covers MPs and Ministers getting too close to government suppliers and taking up lucrative roles whilst they are in office or immediately on their departure. The same applies to senior public and civil servants, and MOD is probably the major area of concern where conflicts of interest are endemic and ongoing. But other areas such as senior tech roles in the NHS are of increasing concern. We cannot have a situation where the best route for a supplier to win contracts is to quietly promise senior decision-makers in the public sector jobs later if they favour the firms now. That is happening too regularly today.

Vote Peter Smith!

June 2024