Government Contracts (SMEs)

Debate between Sammy Wilson and Iain McKenzie

Wednesday 28th January 2015 Westminster Hall

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies, for what I believe is the first time. I again congratulate the hon. Member for South Antrim (Dr McCrea) on securing this very interesting debate on public procurement—having heard myself say that, I may need to get out more if I find public procurement an interesting subject to debate.

I have witnessed procurement in the public and the private sectors. Indeed, in my time in local government, I was glad that our procurement was brought into line with some of the private sector practices and brought up to date. In my local environment, we had to bring in many of the SME businesses to spread the money around and create as much opportunity as we could.

We are all aware that small and medium-sized businesses are the backbone of the British economy and we need to ensure that central Government and local government do everything they can to help them through procurement procedures. The hon. Member for South Antrim gave a lot more statistics than I ever have to hand, but I can say that SMEs account for a large part of the private sector business in the UK and, I believe, 58% of private sector employment. That equates to 14 million people up and down the country being employed in SMEs.

This is about keeping things as local as possible. We know that 83p in every pound spent by local government procurers with local businesses will go back into the local economy. That in turn will stimulate the local economy and provide real employment opportunities there. It is a question of people stretching procurement as far as they can to get the biggest payback on what they are putting out there for goods and services.

SMEs are a major driving force of our economy and deserve their fair share of public sector procurement. Public sector bodies, including central Government, spend about £220 billion a year on goods and services. That indicates the complexity of the procurement. They procure everything from paperclips to chemicals—you name it. Government procurement is extremely complex.

Progress has been made in public sector procurement, and I will go on to highlight some of the advances made by the Government. I accept that steps have been taken and advances made. We have gone from almost a “catalogue” procurement process to what we see today—an approach that is more embracing of best practice and best value. I referred to a “catalogue” approach to procurement, which was simply taking something off the shelf and saying, “We have purchased from them for the last 10 years, so we’ll continue to purchase from them for the next 10.” That was not the best way to enable SMEs to get in on procurement by public bodies.

However, more could be done to improve the best-value approach. Not least is the fact that best value does not always mean the cheapest price, and what about people doing contract monitoring over the length of a contract to prove that they have a valued and performing supplier? We need to evidence contract monitoring if we are to make progress on procuring more locally and putting more into SMEs.

Public procurement is an underused tool when it comes to keeping trade as local as possible to local government and central Government spreading contracts around the country. It is essential that the Government take that on and spread the contracts as far and as wide as possible around the country. They should not simply look at a certain area where most of the spend takes place. If we are to regenerate areas, we can do so through Government procurement.

We also need to enhance contracts that we put out there by writing into the terms and conditions employment opportunities such as apprenticeships and therefore get more for the money we spend. More than half of SMEs believe that the process of tendering for Government contracts requires, as we have heard, more time and resources than their business can allow, making the tendering process too costly and time consuming.

We can take as an example what I have already highlighted—e-procurement. This is about going out and educating SMEs on what they need for e-procurement, and a common mistake is for them to fall into the same practice they used for tendering processes. As we have highlighted, broadband issues lead to difficulties when people are trying to download a tendering document, which takes a bit of time. It will bomb out at the last minute and, hey presto, they have missed out on the contract.

[Sammy Wilson]

The hon. Gentleman is making some thoughtful and worthwhile points, but does he not accept that the more we build into the contract and the procurement process not only price, but the qualitative issues he has talked about, as well as ongoing issues such as apprenticeships and employing the long-term unemployed, the more that adds to the complexity and the paperwork involved in the procurement process and to the monitoring of the contract? There is a balance to be struck between, on the one hand, taking the simple approach of looking at price only and, on the other, looking at quality, employment opportunities and all the other qualitative elements of a procurement exercise.

[Mr McKenzie]

I accept the hon. Gentleman’s point, but if procurement does one thing, it should be to get the most for what is spent. Monitoring whether we get jobs, especially apprenticeships, out of procurement would not be too difficult. The local council in my area has done that for many contracts. Those contracts have been gratefully received, and we have been really successful in keeping our youth unemployment down to a low level using those contracts.