Andrew Bingham
Main Page: Andrew Bingham (Conservative - High Peak)Department Debates - View all Andrew Bingham's debates with the Cabinet Office
(10 years, 11 months ago)
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Andrew Bingham (High Peak) (Con)
It is a pleasure, Mr Hollobone, to serve under your chairmanship. I congratulate the hon. Member for Ogmore (Huw Irranca-Davies) on securing this very important debate. He spoke with great passion and I agree with many of the points that he made.
I ran a very small business for many years and know how hard it is to procure contracts with public sector organisations. When dealing with private sector businesses, I used to find that the public sector had three questions. “Can you supply the goods? What is the price? Is the quality of the product good enough?” Indeed if any of us were buying something for ourselves, whether a three-piece suite or a new carpet, those would be the three questions we would ask. However, I understand that when considering public sector procurement, life is not quite as simplistic as that; there are other significant issues to be addressed. Moreover, as a public body dealing with public money, there are certain other considerations that should be taken into account. Ostensibly, though, they should be looking for the same thing: a good reliable service or product that is properly produced at a competitive price and has a robust after-sales back-up service.
Let us stand up for the public sector. Small businesses derive one advantage from dealing with a public sector organisation—as I can vouch from experience—and that is security of payment. I have lost count of the number of times over the 25 years that I was in business when private customers delayed payment, were slow in payment or, even worse, went into liquidation or receivership owing my business money. Sometimes they owed me very small amounts. Thankfully, it was only on a few occasions that I was owed large amounts. At this point I could veer off into the issue of phoenix companies, but I am sure that you, Mr Hollobone, would soon call me to heel.
We are talking about SMEs, which can employ 100 employees, but I also want to bat for the micro-businesses with five or six employees. When a public sector body sends an inquiry to a small business, that SME knows that its money will be safe, which is important. My late father used to say, “It is not sold until it is paid for, son.” An order from a local authority was almost as good as getting cash in the bank. When the public body comes knocking, it should be a cause for hope and perhaps even celebration for a small business; they have an inquiry from a responsible public authority that they know they will be paid for and from which they can hopefully make a reasonable profit. However, in reality, for the people I have spoken to, that is not the case. I know of businesses that have actually ignored public sector inquiries on the basis that they are not worth the effort the business has to put in to get the work. I understand the amount of rigour that has to be undergone for some huge infrastructure contract, but let us be honest, a company the size of Laing O’Rourke has the capacity and resources to deal with all that stuff. I am talking about the SMEs that do not have such resources.
From my experience, when a small company gets an inquiry from a public sector body, it comes bound up in a lot of bureaucratic red tape. The small business owner, which is what I was, looks at it and considers what they have to do even to put a price in. When they work that out and look at the value of the contract, they find that by the time they have fulfilled all the bureaucratic criteria, the profit is so small that it is not worth doing. Some people might say, “So what? There are plenty of other companies that will do it.” That is not the point. The big companies might do it, and the hon. Gentleman made some good points in that regard, but is it necessarily achieving the best result for the taxpayer? I do not believe that it is. Although I do not want to alienate the large companies in my constituency, I have to say that many small and micro-businesses run lean and tight ships.
Neil Carmichael (Stroud) (Con)
I have been listening carefully to the debate, although I arrived late, for which I apologise. One point of great relevance is about missed opportunities. A large number of small businesses have quite useful inventions and new technologies that do not always see the light of day. They apply to the national health service or to some other large public sector organisation and the simple process of getting them on to the table for negotiation is impossible. Let us think too of the lost opportunities in new inventions and new engineering ideas.
Andrew Bingham
My hon. Friend makes a good point, and I will come to something along those lines in a moment.
As I was saying, many small and micro-businesses run tight ships—they are hyper-efficient. Consequently, they can offer products and services at much reduced prices, and every bit equal in quality. However, all the bureaucratic muddle and red tape is not only depriving small businesses of the opportunity to supply but means that public sector bodies are paying more money for the services they procure. The process is costing public sector bodies more twice over. First, someone in the public body must administer all the paperwork, with all the forms having to be read, checked and all the rest of it, so that creates a higher cost for procurement. Secondly, because the public sector bodies are ruling out—shall we say?—more competitive companies by their system, they are also paying more for the products they procure. In many respects, the public sector is paying more for goods; I hate to use the phrase, “paying through the nose”, but it is paying a premium because of its own processes.
About 18 months ago, I held a small business event in my constituency to help my local small enterprises deal with local authorities and other big public bodies, to try to break down some of the bureaucratic barriers that the public sector bodies put in their way; to be honest, sometimes they do so unwittingly. In total, 85 local companies came along to that event, and they all came with a very similar tale. They all mentioned the dreaded pre-qualification questionnaire, or PQQ, which seems to be the bane of every small business person’s life. As the hon. Member for Ogmore said, public sector bodies seem to have a system whereby they say, “This is the procurement package we use, whether the contract is worth billions, millions, thousands or tens of pounds.” It just seems to be the same process and it seems like a sledgehammer to crack a nut.
In discussing the PQQs, I will change the names, because I want to protect both the innocent and the guilty. I have one PQQ here, which is 64 pages long. It was given to me by a local small supplier. I will not say what the company does, because that would give a clue, but we will work on the theory that it supplies wallpaper, because that fits. Obviously, I do not want to disclose the company owner’s details, because it is not fair on him. He tendered for a fairly modest contract with a public sector organisation, which will also remain nameless. He sent me a PQQ that is 20 pages long and asks for information such as cash-flow forecasts. It also asks for a bank letter outlining the company’s current cash and credit position. I am sure that the bank would supply that information, but from my experience of dealing with banks I would say that it will probably charge him.
Looking at the level of detail of the contract, I see that there is an extra cost. It does not matter about all the paperwork and all the rest of it; the company owner has got a bill from his bank. The public sector body wants details of his company’s equal opportunities policy, its health and safety policy and it even asks him to
“describe your organisation’s current workforce development and training programme”.
The company is a micro-business that employs three or four people, supplying goods—as I say, we will go with wallpaper—and it has to supply all that information. I read the form with incredulity; I have even torn the page off, so that the cameras in Westminster Hall cannot pick up who sent it to the company owner. I could go on at great length, and given that we have the time I could actually read the whole of a 64-page PQQ I have, because I could get it all in before the debate finishes. In fact, I was thinking that there are people who collect different things, and we should have a name for people who collect PQQs, because I could be one of them.
The Parliamentary Secretary, Cabinet Office (Miss Chloe Smith)
I hope that my hon. Friend will excuse me for quickly intervening. I am sure that he is right to want to protect those involved, but anyone watching this debate and regretting that they cannot pick up the details on camera might like—if they know the details—to go to the Mystery Shopper page on the Cabinet Office website, which I will discuss in my response to the debate, and before the end of the debate we can “shop in” some bad practice.
Andrew Bingham
Perhaps so, but I have promised not to give out any names and with the greatest of respect to the Minister she does not vote for me and those people do, so I do not want to upset the applecart from that point of view.
As I say, the PQQ that I referred to is just 20 pages long; there are some that are much longer. I have seen some that are 64 pages, and more. If someone was procuring, for example, High Speed 2, I could understand that process, but for buying some wallpaper it is absolutely ridiculous. I could give the House numerous examples from my own experience. I remember tendering to supply power tools to a local authority. I lost the contract and I am not bitter about it because it was 20 years ago—well, I am not very bitter about it. I lost it by a very small amount of money. However, what was not factored in was the fact that the local authority I was tendering to, which was very close to my premises, wanted an option to pick up and take away tools. I lost the contract, but I lost it to a supplier 70 miles away. Because my headline price was a little higher than they had quoted, I did not get the contract, but I thought, “Well, how much is it going to cost for the vans for the authority to go to and fro 70 miles to pick up odd bits and bobs for the next two years?” It was then that I started to see the difficulties and—shall we say?—shortcomings in dealing with local authorities.
Not many years before I was elected, we had a campaign in Glossop in my constituency to restore some park gates, which were a big thing in Glossop. I instigated the campaign, I raised the money, I put in for the planning permission and I managed to get a local company to make the gates. The local authority at the time put up what I think it called an “interpretation board”. The chap putting it up said to me, “How much did the gates cost?” I told him and he said, “Crikey. The interpretation board cost more than that.” That made me think, “Hang on a minute, who’s buying smart here?”, and I think that “buying smart” is the phrase we should use.
From my experience, I do not think that the public sector does “buy smart”. I think that the Government are trying to get to grips with the problem and they are doing some good things, but from what I see across a wide range of public sector bodies there seems to be too much focus on the process and not on the outcome. As a former small business man myself, that drives me mad. The process is absolutely ridiculous: it costs the authority more to administer; it costs the suppliers more to fill in all the paperwork; and it is just a form-filling culture. That culture does not exist in the private sector—small businesses do not send forms round, tick them and all the rest of it.
Somehow we have to drive that practice out of the public sector. I know that we cannot get rid of all of it but we really need to clamp down on it, because our small businesses, as I have often said, are the engine room of the country, employing a huge percentage of our work force, and we need to give them every chance to supply big public sector organisations for all their different contracts, be they for pens and paper clips or for roads and railways. We need to give our small businesses a fair chance, because they will put people in employment, and all the community benefits will keep spinning through our local communities.
What public procurement should be about is buying the right goods or services at the right price and the right time, and getting the best value for money for the taxpayer. The evidence I have seen is that there is still a long, long way to go with public sector organisations to make that happen.
Miss Smith
On the first question, all central Government contracts of more than £10,000 must be advertised on Contracts Finder; I am sure that those who have their smartphones out will find it a helpful source of information. The second question brings me to a point that I shall make later. We need to leave some areas of professional competence for the contractors themselves. It may be under the headings that the hon. Gentleman mentioned. There are instances in which a particular contractor will need to find particular characteristics that suit their procurement.
I turn to a couple of other points that have been made. Hon. Members have asked for there to be ways of giving feedback to unsuccessful bidders. We have used the mystery shopper to provide that in some cases; I am interested in how we can encourage it as a far wider practice. I will also give an example of the move away from frameworks, another point made earlier. In some cases, it can be an instance of poor procurement practice when frameworks are used inappropriately. They can certainly be a blunt instrument. I point hon. Members to the example of the G-Cloud, a way that we are procuring for IT across Government that has done away with frameworks entirely. There are many more such examples.
PQQs, or pre-qualification questionnaires, are undoubtedly a burden to small and medium-sized businesses. To address that, we have eliminated their use in 15 of 17 Departments for all central Government procurements under the EU threshold of £100,000. The two Departments still using PQQs are doing so only for security reasons.
Miss Smith
I am terribly sorry, but I need to finish some points before I run out of time. For procurements that still require a PQQ, we have introduced a much simpler standard set of questions that reduces the burden on suppliers.
On late payment, we recognise that being paid promptly is vital to enabling SMEs to manage their cash flows. Again, we have addressed that by making Government a fair payment champion. We have a policy of paying 80% of undisputed invoices within five days and ensuring that prime contractors also pay suppliers in tier 2 within 30 days. We expect our suppliers to follow that example.
My hon. Friend the Member for High Peak briefly mentioned the fact that Government can end up paying through the nose for procurement. I make the point in passing that we are one of the best clients going. I think that the hon. Member for Islwyn said that, actually, we have some of the best credit available as a Government purchaser. We can take advantage of that and get results for the taxpayer, which is crucial because that is whom we are procuring for, as well as shaping the market. I suggest that fair payment is a way in which we can do that.
I turn to a couple of other points about assistance to SMEs. Hon. Members have spoken about the small business research initiative, under which we have provided more opportunities within Government for SMEs. To address a further point made by the hon. Member for Islwyn, we have also produced a series of “top tips” videos that help SMEs and voluntary organisations pitch for Government business. Again, he should get out his smartphone right now and find out how good those videos are.
On how the measures are giving results, I should say that direct spend with SMEs across Government has increased from the paltry 6.5% when we took office to 10% in 2011-12. We will shortly announce, two years on, the results of our efforts in that area. SMEs have also benefited from a further 6% in indirect spend through the supply chain in 2011-12, meaning that spend with SMEs across Government has increased steadily since 2010.
Looking ahead, we must keep up the pressure on Departments. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) will be delighted to know that I am personally scrutinising plans from Departments to increase their spend with SMEs and sharing them with the Prime Minister throughout. We have appointed SME champions to do so at ministerial and official levels in all Departments.
Hon. Members will also be pleased to know that we are working closely with the Department for Business, Innovation and Skills to ensure that unified advice is available to SMEs. To conclude, we are aware of the recommendations in Lord Young’s work, and I want to do more to support growth with SMEs throughout the public sector.