MPs investigating local authority procurement have been given a damning picture of poor practice and inefficiency in construction procurement by a trio of industry witnesses.
On Tuesday, MPs on the Communities and Local Government Select Committee focused on construction in their inquiry into value for money in council procurement, hearing evidence from FMB procurement group chair Bola Abisogun, Alasdair Reisner, newly appointed chief executive of the Civil Engineering Contractors Association, and Alan Rogers, business development director at Keepmoat.
All three flagged up how poor procurement practice was loading additional costs onto bidders, and undermining efforts to deliver public sector projects to the government’s target of 15-20% less cost.
Questions in the session covered the unnecessary costs linked to duplicating pre-qualifications procedures, and how local authorities are “gold plating” the EU procurement directive in an effort to insulate themselves from any future legal challenge from suppliers.
But a recurring theme was the low level of procurement expertise among local authorities and framework organisations.
Watch the Communities and Local Government Select Committee session here
CECA’s Reisner identified a lack of leadership on procurement reform in local government, which he said compared badly to central government. “With local government, it is much slower, and there is no mandate to say, ‘You will do this’, that has been a blocker to a lot of the things that we would like to see happen in terms of change in the industry: things like pipelines for investment in local authority construction… or mandation of single pre-qualification forms. You’ve almost got to go to every single local authority and explain the benefits – that is quite an arduous task.”
Asked about levels of competence in procurement teams, he said: “…understanding of modern best practice as to what it is to procure can be fairly sparse in some organisations. The sector is diverse and there will be some very good practice… but there some examples of terrible practice out there.”
Abisogun, who runs London-based social housing contractor Urbanis, also painted a picture of variable standards: “There is no real structure or direction that [local authorities] can follow, and I believe that should be led by central government. It should be that people who are procuring specific services are fluent in the technicalities of that service. If they understand the brief, that will lead to some level of success, but without that, which tends to be the norm for a lot of our members, it is unfortunate that you just get people who are… doing a job.”
“There’s no real structure or direction that [local authorities] can follow, and I believe that should be directed from central government. It should be that people procuring specific services are fluent in the technicalities of that service, but that’s not the norm.”
Bola Abisogun, FMB procurement group chair
Both highlighted the need for policies that allowed local “micro business” – rather than the official EU definition of SMEs that includes businesses with turnover up to €50m – to win local authority work.
Reisner told the MPs: “You have to balance off the benefits of these large [contract bundling] deals with sustainable business opportunities for SMEs in the area. I don’t think it’s impossible, but you have to create the right structures.” For instance, he said that some low value contracts of £100,000 to £250,000 could be reserved for small firms, as larger firms with larger cost bases would be less competitive for contracts at this level.
Meanwhile, Keepmoat’s Rogers suggested councils should maintain databases of local construction SMEs, as main contractors delivering “local pound” policies often have to incur costs in engaging with local suppliers through advertising and events.
The trio told the committee that collaborative procurement arrangements, where neighbouring authorities sign up to joint framework arrangements, often work poorly in practice. “The the market responds, and that is quite an attractive opportunity, but once they have gone through the huge cost of that procurement process – because this is not a cheap business – the local authority have to put their hands up and say, ‘Actually, we do not represent them’.” He added: “The costs of that end up sitting in the supply chain, and those costs only ever go back to the client elsewhere as raised costs for future work.”
Keepmoat’s Rogers added: “There’s no guarantee of workload for contractors, so we can’t then take that guaranteed workstream to our supply chains to drive efficiency savings. If we could give them real numbers on the number of windows or bathrooms or kitchens, that would start to drive down costs.”
He gave a recent example of framework inefficiency, saying that Keepmoat was one of six contractors for internal refurbishments of social housing for the London Housing Consortium. But when additional local authorities wanted to link in to the LHC’s framework, they appointed consultants to re-qualify the six, again adding to costs.
Rogers also called for more standardisation in pre-qualification and the assessment of tenders, and highlighted how local councils were hiring awyers and consultants to advise them on compliance with EU procurement regulations, again adding to costs and hampering efficiency.
The witnesses undertook to submit further written evidence to the committee. The next evidence session will be on Monday 11th, with input from Transparency International, and the Chartered Institute of Public Finance and Accountancy.
