5 ways COVID-19 has impacted UK public sector procurement
What a difference a few months make.
Earlier today I was looking through my New Year resolutions. I’ve always loved the start of year. It’s a blank page, a time which rings with promise. Everyone has the the opportunity to cast off any lingering yuletide lethargy and embrace the potential of new opportunities and a fresh start. At least that’s the case most of the time.
This year, as we all know, has been transformed by the Covid-19 Pandemic. The crisis has turned our lives upside down, with no aspect of society or the economy left untouched. Here are five ways Covid-19 has changed and may change public sector procurement.
1. The short term response
Covid-19 has created urgent needs for equipment or services measurable in hours. This has meant that running conventional competitions over weeks or months has simply not been fast enough. Powers (with appropriate justification) to accelerate these have been granted, as have powers to place direct awards.
Interestingly, to support the economy policymakers have also instructed their agencies to pay on time and ensure that extensions were granted to in-flight projects, primarily to avoid work stopping while project reviews occurred. There was a real danger that any project that paused could end up in a semi-permanent holding pattern as civil servants lacked the capacity to review – leading to more business failures and eventual project non-delivery as a result. From a supplier perspective the collapse of large parts of the private sector means that having at least some of your business with the public sector looks essential right now. Given the number of firms who might now be attempting to secure public sector work, we might see some aggressive price cutting to win positions so be careful when selecting which work to go for. This could also lead to longer term reductions in price clearing points.
2. Spending patterns.
In the short to medium term public sector spending is up considerably, with a large (and rising) number of new initiatives such as the extra £2 billion for transport infrastructure being released. Some of this funding will form part of the government’s wider ‘Levelling-up’ agenda, but much will also be specifically to support the economy. Given the depth of the incoming recession there will be significant pressure to sustain or increase spending to mitigate its effects, while some areas may have minor cuts in areas that don’t support the economy, or that don’t provide much support to fighting the pandemic. However, It is likely that most areas will keep their predicted funding until the end of the current financial year at least. The longer term picture is another story. The Treasury has taken on an unprecedented financial burden, which is likely to be unsustainable leading to spending cuts 2021. Public opinion is likely to be a big factor here, though, with NHS and other ‘front-line’ spending presumably inviolate for the foreseeable future. Other areas may therefore take the brunt of any cuts, their only defence being if they sustain large number of jobs in the economy.
3. Greater push to digital procurement.
There was an initial slowdown of tenders in March this year, but activity recovered quickly in April and continues to grow. Initially, like many other organisations, procurement departments have had to deal with a conversion to digital and home based working, causing an initial hiatus. Now that change is complete and home based working is proving no barrier to normal operations, it would seem strange to revert to the old ways of doing things when the crisis abates. Procurement processes are likely to become increasingly digital in their operations, with video-calls replacing industry days and conferences. People will be wary of large groups and will find alternative ways to do things.
We predict that greater use will be made of publicly available data and greater data will be published (under such measures as the Open Government licence) – steepening a trend established a while ago.
A greater use of digital methods for procurement and sales should have costs savings for all – resulting in reduced costs to the public purse. As a result, businesses should review how they handle data, both their own and that of the market. Those that can’t manage to operate efficiently with greater digital customer engagement are likely to lose out.
4. Greater consideration taken for supply chains and local impact in procurement
Procurements generally focus on a few key decision metrics, such as technical quality or price. While arguments have long raged over whether to include points such as Corporate Social Responsibility, SME engagement and sovereignty of supply, ultimately price and technical remained the primary drivers – the Hauwei debate being an excellent example. However, we believe that procurement bodies will increasingly look at other factors.
Covid-19 has starkly highlighted that certainty of supply is vital in an uncertain world; it is no use getting securing the cheapest products if they never arrive. This could see a proliferation of other considerations such as sovereignty, certainty of supply chain and ultimately potentially contribution to the exchequer as public finances become increasingly stretched.
Large international procurements have used economic benefit measures for decades – in which firms have to hit investment targets believed to have value to the buyer’s economy. It would not be a stretch to include a firm’s tax commitments when bidding for public works, with those firms indulging in complex offshore tax arrangements suffering as a result.
5. Full digital transformation across the public sector.
So far relatively few organisations have fully transformed digitally – despite much hype and bold claims. A full digital transformation should be designed around the user or customer and organisational boundaries changed to meet their needs.
A re-engineered digital integration built around the individual should be able to both save considerable funds and improve the experience of all those involved. This would involve breaking up and changing the organisations involved, rendering it extremely challenging to achieve so it has not been attempted.
With the demonstration of the potential of digital technology and need to both save money and better care for our people,Covid-19 might just provide the necessary long term stimulus. For procurement, this could see some major changes as organisations adjust and investment in technology increases. Supplier organisations would need to beef up their digital understanding and offerings and accept that wholesale changes to their sales strategies might be needed to ensure they keep up with the new structures.
The scale and duration of the changes brought on by the pandemic are still to fully crystallise. Much hinges on the ongoing efforts to “flatten the curve” and whether a second wave emerges later this year.
For now, though, all of us working in and around public sector procurement need to adapt to these different circumstances. At a time when effective government has never been so important, we all need to play our part in ensuring that politicians and civil servants alike have the support and services they need – both now and into the future.
About the author
Sandy Boxall is Director of Contract Finder Pro