Business and Finance

UUP seeks procurement reform

Sandra OverendagendaNi sums up the Ulster Unionists’ main proposals on procurement reform and the consensus in the Assembly that more action is needed to help SMEs.

Plans to reform procurement policy have remained on the Assembly’s agenda over the last three years, partly due to lobbying by the Ulster Unionists. The UUP’s decision to focus on this area followed on from a Finance and Personnel Committee report in 2010. It wants policy to be “tailored specifically” towards providing opportunities for local SMEs and the social economy.

Current Finance Minister Simon Hamilton was a member of the committee at the time and he contends that most of its proposals are already being implemented. UUP economy spokeswoman Sandra Overend (pictured) has prioritised the following recommendations:

• encouraging joint ventures between SMEs;

• breaking contracts into smaller and more manageable parts;

• facilitating secondments from the private sector into the public sector to increase understanding of procurement processes; and

• improving access to information through the public procurement online portal (eSourcingNI).

Northern Ireland, the party says, “still lags behind” Scotland and Wales in procurement reform. The Procurement Reform (Scotland) Bill was published last October and is currently going through the Scottish Parliament. The Bill requires larger agencies to publish procurement strategies and annual reports.

Wales’ strategy – ‘Opening Doors’ – was published in 2008. The Welsh public sector, in particular, promises to become more familiar with Welsh SMEs, “remove or lower” the barriers which hold up doing business with SMEs, and also avoid assuming that larger suppliers always offer better value for money.

Public procurement accounts for around £2.7 billion of spending in the Northern Ireland economy: approximately one-tenth of gross value added.

In 2010-2011, businesses in Northern Ireland received 77 per cent of the Executive’s contracts, 67 per cent were awarded to SMEs and 51 per cent went to microbusinesses i.e. with fewer than 50 employees. The SME rate compares to around 60 per cent in Scotland and Wales and 10 per cent in England although those rates reflect stronger private sector economies with more corporates.

Sandra Overend describes public procurement as the “most easily accessible market” for the province’s small businesses. She brought forward a motion for debate in the Assembly in September 2013. Outlining the UUP’s approach, Overend warned against the tendency to “gold-plate” EU legislation by implementing it too rigidly.

She stated: “If we are serious about keeping in step with and even leading the rest of the UK and EU in how we reform public procurement, continuous development and improvement is necessary.”

PEYE 140911KB1 115 Steven Agnew added an amendment, calling for government contractors and sub-contractors to pay a living wage to employees. The Living Wage Foundation calculates this as £7.20 per hour outside London.

The DUP’s Peter Weir welcomed the motion and described European regulation as a “bureaucratic nightmare”. He contended that Northern Ireland’s record on SME procurement compared well with Scotland and Wales but acknowledged that the province could learn from their good practices. Weir claimed that the living wage would add to bureaucracy and put firms which adopt it at a competitive disadvantage.

Lack of expertise

Sinn Féin economy spokesman Daithí McKay said that it was important to make procurement a priority “because we are not where we were 10 years ago and we need to make the public pound go much further.”

As a committee member, he had found that the ‘centres of procurement expertise’ were “anything but expert in some of their operations” and proposed that they “should not have that name unless they actually live up to it.”

For the SDLP, Dominic Bradley emphasised the need for collaboration and joint ventures between SMEs, and between SMEs and larger organisations, as well as better tender-writing skills and providing more opportunities to “converse with buyers.”

Alliance MLA Judith Cochrane chairs the all-party group on SMEs and highlighted three common procurement problems still encountered by those firms: inexperience among new businesses trying to enter

the market; over-the-top insurance requirements; and delayed payment of invoices.

In her view, the living wage was “hard to define and is ineffective economically.” Cochrane added: “It is better to drive up wage levels through increases in productivity and to achieve that through increasing skill levels.” She suggested a UK-wide review of the national minimum wage, which has only risen from £5.98 to £6.50 since the last general election.

NI21 leader Basil McCrea called for more discussion about the forthcoming EU Procurement Directive. He planned to follow up the Directive with a private member’s Bill. McCrea welcomed the ability to exclude companies on poor performance grounds, a review of thresholds used in procurement policy, and a requirement to take the relevant skills and experience of individuals into account at the award stage.

Simon Hamilton commented that the Procurement Directive was “catching up with approaches that have already been adopted in Northern Ireland.” For example, in a recent office furniture contract tender, suppliers were permitted to self-declare details of their financial position and only the successful bidders’ audited accounts were checked.

The Executive was also the first devolved administration to run a Small Business Research Initiative competition – to supply mobile phone apps to the Northern Ireland Tourist Board – and SMEs are also developing solutions for disposing of poultry litter.

His department’s legal advice was that making a requirement to pay employees at a level above the national minimum wage would contravene European legislation: “Contracting authorities can encourage contractors to pay a living wage but that cannot be taken into account when awarding contracts.”

The UUP motion was carried and the Green Party amendment fell, on an oral vote. In closing, Simon Hamilton offered an open door to SMEs: “If anybody has issues with procurement, please feel free to bring them to me. If there are things that we can do to resolve those problems, we will.”

Social clauses

The concept of social clauses was initially dismissed as a “crazy notion” by officials, Peter Robinson told the Assembly when he was Finance Minister. The clauses require contractors to provide apprenticeships and placements for unemployed people.

Speaking in October 2012, Robinson added: “I am glad to say that, since then, we have been able to make this a standard and routine part of what we do with major contracts.” A NICVA report found last year that construction companies were obliged to report the number (and timing) of apprenticeships but not whether these led into jobs. NICVA therefore called on ministers to ensure that companies created lasting jobs for successful apprentices.

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