Contractors have insisted they will continue to prioritise existing supply chains despite signing up to an online portal to offer SMEs access to work on government contracts.
The government announced that Amey and Balfour Beatty were among nine companies to “sign up to publish their government subcontracting opportunities” on the government’s online portal, Contracts Finder (CF), while Mitie has agreed to do so in principle.
But CN understands that contractors will not be obliged to offer work outside their existing supply chains.
Contractors will be “encouraged” to use the portal for public sector contracts and to voluntarily record whether work has gone to SMEs.
Balfour Beatty was required to register its £10 million Scottish Crime Campus fit-out contract, announced this week, on the Scottish PCS online procurement portal as a condition of contract.
But the Cabinet Office insisted it would not require contractors to publish subcontract work via the Contracts Finder portal in new contracts.
A Balfour Beatty spokeswoman said: “As a requirement of the contract and in support of central government’s initiative to support SMEs, Balfour Beatty has committed to use the [Scottish] PCS Portal to invite pre-qualifications for work packages specifically on this project.
“As a natural consequence of our strong relationships we would expect our established supply chain to be aware of the opportunities and have registered an interest on the portal.”
Speaking about Contracts Finder, the company reiterated it would use it “wherever we have an open opportunity on a government project”. It added: “Clearly every step that can be taken to encourage SMEs to seize the chance to grow is to be welcomed and we will look to use this where appropriate and where it will complement our strong supply chain relationships.”
However several contractor sources hit out at what was described as “burdensome” moves by the Cabinet Office to interfere with supply chains after years of supply chain rationalisation.
Interserve commercial director Roy Bloom said the company already subcontracts 68 per cent of its government work to SMEs and that the government should “take care to ensure that its good intentions are not resulting in mixed messages”.
He added: “To move to open tendering with unknown suppliers would not seem to be conducive to best practice or our customer’s interests.”
Amey told CN it would decide on a project-by-project basis whether to advertise work on the portal.
Mr Bloom added that the contractor was also frustrated with moves towards across framework buying to save money where contractors are being asked to do deals with single suppliers to gain maximum benefit on bulk buying. He said this will lead to a smaller number of large contractors being able to respond to the challenges.
A contractor source said mixed messages were coming from different government departments about the level of SME involvement on projects.
He said: “Using SME consortia (see box) might work on say a particular regional programme of work but there are projects that can’t be sliced up, when SMEs don’t have the balance sheet. There seems to be mixed messages about who is best placed to deliver work.”
A second source said: “There is already a lot of concern about the stability of supply chains at the moment anyway. Everyone is worried about supporting their existing supply chains, there is a lot being done without a new guy coming in and undercutting the competition via Contracts Finder.”
Chief construction adviser Paul Morrell insisted the government did not want to interfere and that the CF portal was designed for contractors to find new suppliers where they wouldn’t already have an established supply chain.
He said: “This does not signal any departure from the principle that is deeply embedded in the Government Construction Strategy: that the potential to realise significantly better value for the taxpayer lies in integrated supply chains, working in long-term relationships (both with Government clients and, more critically, with each other), and challenged to come up with ever better ways of delivering projects against clear measure of cost and value.
“Assembling those supply chains is principally a matter for prime contractors, and there is no desire to interfere with that.
“There will always, however, be a need to refresh supply chains from time to time; and there will be packages of work for which, because of their scale, location or nature, there is no established supply arrangement. On those occasions prime contractors will want to cast their nets wider - and the way to do so is via Contracts Finder, so that SMEs in particular (who cannot afford the overhead of a sizeable business development resource) will know where to look.”
Amey procurement director John Cully said the company was not obliged to sign up, but supported the government move, despite already running its own online procurement portal.
He added: “For our existing supply chain arrangements we will continue to look at each procurement opportunity on its own merits and decide where CF can help us engage SMEs who we haven’t worked with previously.
“We would still take [new suppliers] through our robust PQQ process, which we have already simplified.”
Cabinet Office promises to SMEs
The Cabinet Office announced a series of measures to further support SMEs last week (click here for details). They include:
- From April, government buyers will ‘informally post’ online descriptions of potential future work packages for SMEs to outline services they can offer.
- An SME panel will work with the government to look at ways for SMEs to form consortia to win government business.
- Project bank accounts will be rolled out to other industries after their successful use in the construction industry.
- The Cabinet Office will investigate complaints about unfair practices in the supply chain of government contracts. By mid-February 2012 the existing system had received 151 cases, of which 111 have been closed.