The new EU tendering rules support smaller firms – but handle with care, says Mike Rumbelow.
Mike Rumbelow
That sinking feeling that I suspect has struck more than a few smaller contractors on opening a public sector tender form has just about been consigned to history. Thanks to the new European Union procurement rules, bidding for contracts has become much less daunting for SMEs.
However, there are still a few creases that need ironing out if we want to get the best out of the new, streamlined approach to tendering.
More than half a year since the Public Contract Regulations 2015 came into force on 26 February, we are starting to see how they will work in practice. Overall, the tender process has been simplified well. It is less time-consuming for contractors, requiring them to provide less detailed information – and they no longer need the considerable resources to weave together an expansive, polished presentation.
The encouragement that the new rules provide for clients to subdivide contracts is equally welcome. They must now demonstrate their reasons for not doing so, which encourages them to break up chunks of work, so that a contract of, say, £10m will be made into a series of smaller, individual jobs to bid for.
Another positive change is that the rule that a contractor cannot take on a job that would represent more than a quarter of its turnover has been scrapped. Now, contractors can bid for deals worth up to 50% of their turnover. All these steps open up public sector work to smaller contractors, finally addressing a problem that SMEs have faced for a long time.
"Being able to bid for a job of up to half your turnover is a vital way for a thriving smaller contractor to grow."
I also believe that the new stipulation that the full tender document be written, finalised and available to potential bidders before the contract is advertised is sound. It does create extra pressure on us procurement advisers – we are now expected to produce the tender document as fast as possible in order to get the advert out there.
However, the approach ensures that the client cannot, after advertising the job, stray from the original brief, which brings more clarity for bidders and reduces the risk of bidders going through the prequalification process but then withdrawing after seeing the full tender. In addition, the tender period has been reduced from 40 to 30 days, which goes some way to countering the extra pressure on the procurement team.
Now for a few words of warning. Under the new regulations, by October 2018 all tender communications are to be 100% electronic, which means bidders must use each government body’s online portal. This is a laudable principle but the problem is that while some electronic portals are very user-friendly and effective, others are frankly baffling.
Again, SMEs are less likely to have the time and experience needed to navigate around the more unwieldy portals. I believe that there will be a move to more standardised portals in time. But if we are serious about supporting smaller contractors to win work, this shift can’t come soon enough.
In addition, being able to bid for a job of up to half your turnover is a vital way for a thriving smaller contractor to grow and, in the ideal scenario, the contract will not represent such a large slice of the firm’s business for long, as it swiftly goes on to win multiple larger deals. However, if that does not turn out to be the case, the contractor is left dangerously dependent on a single contract.
In short, the new 50% rule is something of a blunt instrument, and so it should be handled with care. It is therefore up to clients and those advising them to ensure that such proportionally large deals are only awarded to firms that show every sign of growing rapidly to accommodate the contract more comfortably.
A final cause for some concern is that the new regulations stipulate that, as long as prior notice is given, the contracting body can reduce the tender period to 10 days. I have yet to see clients using this new mechanism but I fear that there could be situations where, because a programme has fallen behind, the 10-day period is seen as a quick fix.
My worry is that the quality of tenders prepared in such a short time would be poor to the point of the tender being meaningless. While there may be exceptional circumstances where this condensed time frame is appropriate or unavoidable, it is important that the new rules are not seen as “normalising” 10-day tender periods.
All in all, these are welcome changes that will make a real difference for SMEs trying to win public sector work. However, clients and their advisers will have to use their own judgment to ensure that the new regime works to best effect.
Mike Rumbelow is a partner at property and construction consultancy Ridge & Partners
