EDA Case Study Enterprise & Diversity Alliance

Transcription

1 EDA Case Study Enterprise & Diversity Alliance Enhancing public sector procurement opportunities for diverse small and medium-sized enterprises: A case study of the Selling to the Public Sector (S2P) initiative. SYNOPSIS Leicester City Council s (LCC) Selling to the Public Sector (S2P) initiative was designed to encourage and support small and medium-sized enterprises (SMEs) in the city and across the county to access procurement and supply chain contracts from large public and private sector buyers, with particular emphasis on assisting female, disabled and black and minority ethnic-owned businesses located in disadvantaged areas of Leicester. Established as a delivery partnership between the local authority and the Centre for Research in Ethnic Minority Entrepreneurship (CREME) at De Montfort University, and supported by a team of consultants, the project involved the design and implementation of a structured and bespoke programme of support aimed at both the demand and supply side of public procurement. Data and information collected during the various phases of the initiative indicate that for the most part S2P exceeded the outputs and outcomes required under its contracted funding obligations, with the value of contracts achieved during the lifetime of the project in excess of 1million and several jobs safeguarded and/or created in participant organisations. There were also a number of less tangible, though nonetheless important, contributions attributable to the intervention. Overall, the project highlighted the importance of addressing issues on both the demand and supply side of procurement if public sector buying power is to be used effectively to support smaller enterprises; the reduction and removal of existing barriers to SME engagement with large corporate buyers and the need to achieve organisational buyin to supplier diversity being two key lessons to emerge for the exercise. The Enterprise and Diversity Alliance is in partnership with: 1

2 Introduction Working in partnership with the CREME, the council developed a scheme that sought to promote supplier diversity from both the demand and supply side of public procurement; consisting of various forms of intervention with local public sector purchasing organisations and a range of small, diverse suppliers. This case study looks at a recent initiative designed to enhance public sector procurement opportunities for diverse, small and medium-sized enterprises. Known as the Selling to the Public Sector project (aka Supply Leicester), the initiative began in late 2009 following a successful bid for European funding by Leicester City Council and ran until Working in partnership with the Centre for Research in Ethnic Minority Entrepreneurship at De Montfort University, and with a team of contracted consultants, the council developed a scheme that sought to promote supplier diversity from both the demand and supply side of public procurement; consisting of various forms of intervention with local public sector purchasing organisations and a range of small, diverse suppliers. The analysis below begins with an examination of the local and national context within which S2P emerged, including its links to other similar projects, prior to a detailed investigation of the component elements of the project and the approaches that were used during the delivery stage of the project. It concludes with a discussion of S2P s key learning points regarding how to promote greater supplier diversity among both procurement professionals and those firms which have traditionally been under-represented in the supply chains of public sector organisations. 2

3 The Context Small and medium-sized enterprises represent the vast majority of businesses in the UK (>99%) and the EU as a whole and are widely seen as major engines of growth and local economic development. Between 2002 and 2010 SMEs were responsible for 85% of the new jobs created in the EU, with microfirms (<10 employees) the largest contributors to total net employment growth during this period. Small and medium-sized enterprises represent the vast majority of businesses in the UK (>99%) and the EU as a whole and are widely seen as major engines of growth and local economic development. Research by the European Commission indicated that between 2002 and 2010 SMEs were responsible for 85% of the new jobs created in the EU, with microfirms (<10 employees) the largest contributors to total net employment growth during this period. Maintaining a healthy and dynamic small business sector has been seen as vital therefore in generating employment, output, investment, income and international trade and in helping the UK economy to recover from the impact of the recent global recession. In increasingly focussing attention on the supply side of the economy, successive UK governments have begun to see public procurement as one potentially important vehicle for promoting a vibrant small firm sector. Estimates for UK public sector procurement in 2011 suggest that spending on goods, services and works by public bodies amounted to around 220 billion per annum or approximately one seventh of annual GDP. Yet, research in the UK (and across the EU generally) shows that SMEs have generally fared badly in the award of public contracts (see e.g. Loader, 2005; DG Enterprise and Industry, 2010), with certain categories of smaller businesses (e.g. firms owned by women, ethnic minorities, the disabled) evidently disproportionately disadvantaged in this regard. The emerging view in government circles was that public bodies could and should use their buying power to support SMEs and to create a more competitive procurement process in the expectation that this would deliver significant social and economic outcomes. As the Byatt Report on local government procurement (2001) put it, promoting best value and community benefits via procurement could be achieved by encouraging councils to engage with a diverse range of suppliers including small and medium-sized enterprises of all types. While the notion of using public procurement to support SMEs dates back to the mid-1980s and was influenced by US experience with affirmative action, the main developments in governmental thinking and response have occurred over the last decade or so. 3

4 Key milestones have included: the Gershon Report on Modernising Civil Government (1999) and the subsequent establishment of the Office of Government Commerce (2000); the Local Government Act (2000) which permitted insertion of community benefits clauses in certain supply contracts and the use of powers-of- wellbeing ; the Think Small First initiative pioneered by the Small Business Service (2001); the Byatt Report (2001), including its call for a National Procurement Strategy that came into being in 2003; the establishment of a Small Business Friendly Concordat (2005) which focussed attention on how SMEs can help local authorities to further their social, economic and environmental objectives; the Glover Report (2008) which called for action to reduce barriers to smaller suppliers, including the introduction of a simpler procurement process; the Roots Review (2009) which emphasised the need to seek efficiency savings, including the use of electronic means of accessing and tendering for public contracts. As far as local government purchasing is concerned there can be little doubt that the introduction of a National Procurement Strategy (NPS) proved a key driver in pushing local authorities towards reform of their procurement practices. A central element in the NPS was the idea of leveraging public procurement to stimulate markets and achieved benefits for the local community, including safeguarding and creating employment and encouraging business growth. As part of this approach, councils were asked to devise local corporate procurement strategies which would address how they would develop a more diverse and competitive supply market which would include small firms, social enterprises, ethnic minority businesses (EMBs) and voluntary and community sector organisations. At local, national and intergovernmental levels, it was widely recognised that such enterprises had traditionally faced barriers when doing business with the public sector and that this problem needed to be addressed through changes at policy, institutional and administrative levels (see e.g. the report by the Business Regulation Task Force and the Small Business Council entitled Government: Supporter and Customer? published in 2003 and the EU Charter for Smaller Enterprises, 2004). In responding to the call to create an environment in which SMEs could compete more effectively for a larger share of government contracts, a number of local authorities began to experiment with ways of reducing the barriers to public procurement. Between June 2003 and March 2005 for example, Haringey and West Midlands councils ran two pilot procurement schemes aimed at making contracts more accessible by simplifying the procurement process, developing a standard pre-qualification questionnaire (PQQ) and providing guidance to SMEs on the tendering process. In the capital, the Supply London project was developed under the Mayor s Responsible Procurement Programme and was aimed at helping its diverse and small business communities to enhance their ability to supply major public and private sector organisations by making them more aware of supply opportunities and providing tailored systems of support via workshops, advice sessions and one-to-one seminars. A scheme commissioned by Leicester City Council and known as the 4

5 Access to Public Procurement Project (A2P) likewise focussed on developing the capacity of SMEs in the city to tender for public contracts by enabling them to better understand the process and requirements for public sector procurement which had been identified as major barriers to access. Underlying all these and most of the other schemes developed in the decade after 2000, was an acceptance that public procurement could be harnessed as a vehicle for local and regional economic development and that some forms of intervention in the market were needed to help traditionally underrepresented businesses to become suppliers to the public sector. The evidence from the various initiatives increasingly began to show that achieving greater supplier diversity was not simply a supply side issue, but also needed to be tackled simultaneously from the demand side of public procurement. This was a lesson that was not lost on the team which commissioned the Selling to the Public Sector project which forms the focus of the remaining sections of this case study. The S2P Initiative Leicester City Council s S2P initiative needs to be seen within the context of the council s Corporate Procurement Strategy (CPS) which called upon the local authority to use its buying power strategically to support its economic, social and environmental objectives (e.g. creating employment, delivering quality services, promoting equality and accessibility). A key strategic procurement goal highlighted in the CPS was to achieve community benefits and stimulate local markets by building a diverse, innovative and competitive supply base. Increasing the amount of business undertaken with SMEs was identified as a key performance indicator in developing a local sustainable procurement strategy. The availability of funding under Priority Axis 2 of the European Regional Development Fund (ERDF) sustainable economic and enterprise activity in disadvantaged communities provided an opportunity to develop a programme of bespoke business support aimed at helping smaller private sector firms and social enterprises to access local procurement opportunities with specific emphasis on targeting female, disabled and black and minority (BME)-owned small firms and SMEs located in disadvantaged areas of the city. Championed and overseen by staff in the city council s Economic Regeneration and Culture Department, the initiative began in late 2009 and from the outset drew on the lessons learned from previous interventions, most notably Supply London and A2P. On the buyer side, S2P aimed at working with public sector procurers to encourage engagement with SMEs in the target groups by seeking changes in procurement practices and by removing or reducing existing barriers to entry for smaller firms. On the supplier side, the initiative sought to create and develop the ability of SMEs from underrepresented groups and disadvantaged communities to become an approved supplier or to win contracts from the various public sector bodies located in the area and beyond. To achieve the project s overall aims and objectives, LCC established a delivery partnership between the local authority and the Centre for Research in Ethnic Minority Entrepreneurship at De Montfort University in Leicester. Working with four teams of contracted consultants, the partnership designed and implemented a structured and bespoke programme of support comprising three overlapping phases, covering the period late 2009 to Phase 1 was essentially the project set-up and planning stage, which included the establishment of 5

6 appropriate systems, governance structures, partnership arrangements and the production of a scoping and mapping report on current supply opportunities for SMEs. It also saw the design of an engagement strategy aimed at targeting groups of firms with the desired profiles. Phase 2 primarily concerned the development of programmes of support for both buyers and suppliers, with an emphasis on identifying and testing bespoke interventions which could deliver the project s aims and objectives. Systems for capturing and reporting on the outcomes of interventions were also devised during this phase. These interventions were then delivered in the third phase of the project and included 1-to-1 diagnostic sessions, buyer and supplier support seminars, active consultancy advice and other forms of assistance for SMEs. The delivery and monitoring aspects of the initiative were undertaken by the consultants and a team from CREME, with the latter helping to ground the interventions in the extant knowledge base via prior research and reflection. On the supplier side, three major types of intervention were employed: 1-to-1 surgeries, group workshops and meet-the-buyer events. The surgeries were used to identify firms fit to supply and which would benefit from further support, including help with PQQs and tenders to be submitted. The group workshops or seminars focussed on providing general support, with topics discussed ranging from writing successful bids and PQQs to communicating effectively and achieving tender readiness, while the meet-the-buyer events brought potential suppliers into contact with public sector buyers. The approach adopted on the buyer side revolved primarily around awareness raising, using formal presentations, workshops and the provision of a short information pack. Topics covered ranged from the aims of the project itself, supplier diversity and its benefits, to new legislation, the concept of sustainable procurement and implementing a SMART supplier diversity programme. Use was also made of outside experts on discussions related to supply diversity and the legal obligations associated with public procurement in order to ensure that participant understanding was rooted in the very latest thinking and current legislative requirements. Throughout the whole process the S2P project team and consultants held regular meetings to identify key emergent themes from the intervention programme and to promote a collaborative approach among the project s main participants and stakeholders. In addition, researchers from CREME adopted an action research methodology designed to identify ways in which supplier diversity and the initiative could be improved and to create a knowledge base for future programmes aimed at encouraging greater supply chain diversity across the public sector. 6

7 S2P s Key Outputs and Outcomes An examination of the project data indicated that for the most part the initiative exceeded the target outputs and outcomes required under S2P s contractual funding obligations and LCC s own expectations of the deliverables of the appointed consultants. The figures for the number of interventions undertaken and the increases in Gross Value Added (where GVA = Total Wage Costs + net profit before tax and interest + depreciation) were significantly higher than those required under ERDF funding. Overall, it was estimated that S2P provided 1,700 hours of support for SMEs participating in the project and delivered approximately 800 hours of support for public sector buyers. While the value of contracts achieved during the lifetime of the intervention was calculated at in excess of 1 million, with 6 jobs safeguarded and 2 new jobs created in the 12 firms which achieved an increase in GVA. The two main areas of shortfall concerned the number of businesses assisted in improving their performance and the actual number of firms which demonstrated an improvement in performance following the interventions. Less tangible, though nonetheless important, outcomes associated with the initiative included improvements in peer-to-peer networking; awareness-raising among participating SMEs of public sector buying practices; sensitisation of public sector buyers to potential entry barriers faced by smaller, underrepresented businesses; evidence of the need to simplify aspects of the procurement process. The project also confirmed the importance of tackling public procurement issues from both the demand and supply side of the market if greater supplier diversity was to be achieved. From the local authority s point of view, S2P also played an important role in the development of LCC s Local Procurement Task Force (LPTF) which had been established in 2011 with a commitment to explore how the council could support local small businesses, social enterprises and voluntary and community organisations through its procurement activities. Members of the Task Force currently include the Director of CRÈME who played a major role in the S2P initiative and who, along with other members of the project, helped the LPTF to meet its objectives regarding greater engagement with local SMEs. 7

8 Emergent Themes The support programme provided by the consultants, together with the action-research approach adopted by CREME, uncovered a number of important themes, not least the importance of meeting the information and advice needs of smaller enterprises. The project demonstrated, inter alia, the need for hands-on support for writing PQQs and tender documents advice on consortia bidding and procurement practices and processes generally greater feedback from procurers on areas of strength and weakness in tender submissions up-to-date information on websites used to advertise procurement opportunities. SMEs also expressed a desire to be informed on the role that business practices (e.g. employment conditions; environmental standards) play in procurement decisions and for more regular meetings with public sector procurers and contract managers. On the buyer side emergent themes included the need to: achieve buy-in to supplier diversity across the organisation create a procurement infrastructure and approach which will encourage greater engagement from hitherto underrepresented businesses and organisations recognise the continued existence of barriers some actual, some perceived in the procurement process that are acting as a deterrent to some potential suppliers from the small firm sector. 8

9 Key Learning Points It is worth remembering that the S2P initiative was aimed at exploring ways of enhancing public sector procurement opportunities for diverse, small and medium-sized enterprises in the belief that promoting greater supplier diversity held out the promise of benefits for businesses, the public sector and the local community as a whole. The overall lesson to emerge from the Selling to the Public Sector project was that if public sector organisations are to use their buying power strategically, then careful consideration needs to be paid to how local markets can be stimulated through public procurement and how best to bring this about, without infringing current legislation, good governance requirements and the need for public accountability. In terms of specifics, S2P demonstrated that: attention needs to be paid to both the demand and supply side of the market for public sector goals, services and works if public procurement practices are to be utilised effectively to achieve the desired economic, social and environmental benefits developing a model of sustainable public procurement requires buy-in from across public sector organisations significant barriers still exist to achieving greater supplier diversity and that these can be found on the buying as well as the supply side of public procurement overcoming these barriers will not be easy, but is a key step in ensuring that supplier diversity comes to be seen as business as usual within public sector organisations, that it is embedded in the organisation not just an add-on, a mainstream philosophy not just a passing fad. It is interesting to note that LCC s Local Procurement Task Force Delivery Plan for echoes the key learning points of the S2P initiative, including the need to take a twin-track approach to public procurement (i.e. from both the demand and supply side) and the importance of addressing public sector buying practices, processes and philosophies at a corporate level in order to achieve greater supply chain diversity. As academic research has indicated (see e.g. Ram et al., 2011), there are constraints on both larger purchasing organisations and diverse small businesses in becoming engaged, despite the obvious benefits of doing so. Identifying and addressing these constraints is a necessary part of creating a more sustainable approach to public procurement. Contact Liz Frost at: efrost@dmu.ac.uk if you would like further information about the Selling to the Public Sector project. 9

10 References Loader, K. (2005) Supporting SMEs through government purchasing activity, Entrepreneurship and Innovation, February, pp DG Enterprise and Industry (2010) Evaluation of SMEs Access to Public Procurement Markets in the EU, Final Report, European Commission Ram, M., Woldensenbet, K. and Jones, T. (2011) Raising the table stakes? Ethnic minority businesses and supply chain relationships, Work Employment and Society, 25(2), pp