In 2021 the government put £50 billion worth of contracts out for tender. Out of that 70% were awarded to large firms leaving contracts totalling £15 billion in the hands of small and medium-sized businesses (SMEs). The need for accreditation and IT infrastructure are often sighted as reasons why SMEs don’t enter the government procurement arena. Red tape has also been a significant deterrent. Historically the process can seem invasive to SMEs when their financial status, resilience, supply chain and risk of insolvency are probed. Because taxpayer funds are being spent, there is an additional requirement to safeguard the public purse. Crown Commercial Services impart this requirement to government departments, agencies and bodies.
Crown Commercial Services
The CCS has existed in various incarnations since 1991. It is responsible for public sector procurement. Its purpose is to standardise how goods are obtained and achieve the best value for taxpayer money. The CCS provides standardised contracts for each industry. Competitive and uniform pricing are key elements of the procurement strategy. In decades gone by, a company could sell the same product to two different PSOs (Public Sector Organisations) at two different prices. With the CCS framework that same supplier must see the Crown as one supplier and give parity on price to both PSOs. It also opens the door to selling products to many other PSOs with relatively little extra effort.
Is the Government a Good Credit Risk?
Since 2014 the UK public sector has employed over 5.4 million people, which is roughly 8% of the UK population. The primary areas of employment are social care, healthcare, housing, emergency services, refuse collection, education, council, and government departments. The Prompt Payment Code requires all undisputed public sector invoices to be paid within 30 days to SMEs. Public sector spending is guaranteed by the public purse and unlike a private company, leaving creditors high and dry through liquidation is not an option. Governments and councils don’t face the same kind of insolvency a company would. The terms of borrowing would change based on the plans to stop haemorrhaging money, international sanctions could be imposed, and GDP would fall sharply in line with market crashes. The services being provided by the PSO and the communities dependent on it cannot simply disappear.
The Exceptions – Bankrupt Councils
Government departments and councils don’t go bankrupt in the true sense of the term, it is more like a restructuring programme. In 2018 Northamptonshire County Council became the first in over twenty years to file a Section 114 notice. This is the equivalent of declaring oneself bankrupt. Drastic spending cuts were implemented and even the most vital services faced a reduction in funding. Thanks to government intervention suppliers were not left unpaid. The county council was later disbanded and replaced by two regional councils. Since then, Croydon London Borough Council followed suit in November 2020 and Slough Borough Council filed their Section 114 in July 2021. Croydon and Slough are trading through bankruptcy by reducing services, selling assets and receipt of government funds.
Advocate Debt Recovery V Government Procurement
Over the years Advocate has had many successful debt recovery cases against councils and government departments. Some county and borough councils appear so frequently we are set up as a supplier! Recovery action for government procurement is relatively straightforward. The Late Payment of Commercial Debts Regulations 2013 Advocate uses was introduced by those the PSO ultimately answers to. Sighting the Prompt Payment Code as well makes it a slam dunk of reasons why the PSO must pay immediately. In short, PSOs know the game is up when Advocate has been instructed to commence debt recovery action on behalf of a contract holder.
Your Crown Needs You!
It was once said ‘the difference between ministers and civil servants is that ministers get parole’. Whilst it is an occupational hazard of the incumbent government to undo the changes made by the previous, reversing Civil Service initiatives is seldom achievable or wise. In October 2021 the current Minister of State for Efficiency and Transformation announced new measures to help small businesses obtain government contracts. This will have a direct and lasting impact on the Crown Commercial Service (CCS) which falls under the Civil Service.
Tasked with engaging more business and encouraging trade on behalf of the CCS is the Small Business Crown Representative. The government recognises there are many SMEs with innovative products and specialist services not currently accessible to the Crown. The Small Business Crown Representative is tasked with raising awareness of PSO contracts and removing the barriers which deter SMEs. This is being done with some of the initiatives below:
Contracts Finder: this portal can be found at https://www.gov.uk/contracts-finder It shows previous, current and upcoming tenders which SMEs can apply for. Contracts start at £10K for central government and £25K for regional tenders. Meet The Buyer events are now taking place online so SMEs can get an idea of how that trading relationship may look before submitting a bid/proposal. Even if your business is not successful in securing a contract, you can see who else has been. There may be an opportunity for you to work with a Crown supplier instead. Advocate has numerous clients working with large Crown suppliers and gaining experience of what that entails. Unfortunately, SMEs taking debt collection action against large Crown suppliers is far more common than with PSOs. We are the debt collection agency of choice for clients seeking to recover payment from Crown suppliers.
Contracts Finder Below Threshold: with the UK now operating outside of the EU, our PSOs are no longer obliged to seek tenders from a wide geographic area. Using the same portal as above local Voluntary, Community and Social Enterprises (VCSEs) can now be given priority for tenders below the £10K threshold. VCSEs are normally more apprehensive about instructing a debt collector because their skill set is mission orientated. Advocate acts on behalf of a number of VCSEs tactfully recovering payment without jeopardising future revenue.
Tender Finder: this portal can be found at https://www.gov.uk/find-tender It works in a very similar way to Contracts Finder, however, the threshold is for large tenders typically exceeds £122K.
Dynamic Purchasing System: there are industry-specific frameworks set up to streamline finding and applying for contracts. A successful contract holder will become a preferred contractor added to the pool of existing suppliers.
Communicating the Brief: in days gone by a department would start out with a vague brief and be met with tenders offering a mishmash of solutions. These days a specific and clear brief is outlined. This is to save everyone time and effort. It also focuses attention on exactly what is required.
Public Procurement Review Service (PPRS): if you’re concerned about being overlooked or unfairly treated by the stiff wheels of government procurement, then the PPRS has your back. The era of debt collectors and magistrates being called to right the wrongs of dodgy government agreements is behind us (hopefully!). If your SME has missed out on a contract for questionable reasons, or your team is being treated unfairly then you can get intervention from the PPRS. At Advocate, we’ve come across several cases where the PPRS were already involved and still been able to extract payment.
Help to Grow: not content with encouraging SMEs to tender for PSO contracts, the Help to Grow programme offers courses and software grants to give businesses the tools for growth. It also goes some way to helping SMEs fully appreciate what is needed to undertake government contracts.
Not Just all About the Money!!!
Providing a customer with value for money and quality goods/services is a standard requirement when supplying other businesses. There is an increasing focus on environmental impacts and the Climate Emergency. PSO contracts take it one step further which is something SMEs and VCSEs can capitalise on. The Social Value in PSO contracts is more important now than it has ever been and is split into three areas. The Economic Value by way of creating jobs, enabling apprenticeships or work-based training. The Social Value by way of bringing a community together. The Environmental Value by reducing the carbon footprint.
Supplying the crown is not just paper and hospital machines. There is much more to it. Contracts for facilities management, technology, defence and rail don’t have to be the preserve of international behemoths. By the same token, VCSEs could benefit their mission and community in winning PSO tenders that would normally be gobbled up by global brands. As more and more SMEs apply for Crown Commercial contracts, Advocate will no doubt see more clients who have been let down (albeit unintentionally) through non-payment. A lot of debt collection agencies steer clear of PSOs. Advocate is different. If you are a government supplier and are struggling to get payment, please do get in touch with Advocate to see how we can assist.