The Impact of Procurement Policy in Wales

I’m pleased to move the amendment in the name of Paul Davies. Presiding Officer, Public procurement is a crucial piece of the Welsh economic jigsaw and I welcome this debate today, indeed I think this is an area worthy of far greater discussion in this chamber.  We need to better scrutinise the evolution of Procurement Policy and the overall impact of public procurement across Wales. And the Government must fully grasp the role of procurement as a tool for stimulating home grown economic growth.

(While some in this chamber will start blaming the Westminster Government, no matter that we talk about, whether it’s Labour’s debt legacy or the Conservative-Liberal Coalition’s policies to deal with it,  I will use my time to talk about the Welsh procurement.)

As the Minister for Finance said in her statement in 2012, public procurement is a key tool to lever opportunities for Welsh businesses and I couldn’t agree more. The Welsh Government is clearly the biggest customer within Wales, spending about a third of total GVA every year, about £4.3 billion to be more precise so it’s important you get it right. We were told that the launch of the Wales Procurement Policy Statement in December 2012 was an important step to improve the procurement system in Wales. The McClelland Review helped develop a set of principles that would support the Welsh economy and deliver value for money. So where are we today. Well it’s good and bad. While some positive effects have been witnessed since 2012, there is still room for improvement. We certainly need regular updates, especially on how Local Authorities are adopting and putting in practice these principles.  And we need all important figures/data on contracts being awarded and the real outcome of these contracts on local economies.

So more needs to be done to collect information and data on how much money is being spent locally and by who through the public procurement process; and all findings should be presented in this chamber to be discussed.

The aims behind the Community Benefits Policy was a step in the right direction but at the same time we have to hope that this won’t make the bidding process more difficult and even discourage possible bids. As my colleague Paul Davies has said, we need a system that records the bid that will deliver the best results, not the bid that ticks the most unnecessary boxes. And at risk of sounding like a broken record, it is essential that all procurement processes must be completely transparent, because transparency will increase public awareness and understanding of the Welsh Government’s procurement practice and will ensure stability and confidence in the procurement system, and for that we need to monitor the procedures.

On the face of it 2013 was a busy year for reforming and upgrading the procurement system in Wales. The National Procurement Service started in late November last year and is promised to be a strategic collaborative vehicle to buy common and repetitive spend once. The Minister for Finance has said that this service will be able to self-finance after 3 years and that it will of course be funded by Invest 2 Save at the start. The FSB consider it to be an opportunity for Welsh businesses and a chance to improve the quality of the procurement process for SMEs in Wales. The scheme’s principles are good, but we will need to monitor its progress, particularly how it is delivering for all important SMEs and if this service really provides value for money. It is also important that Local Authorities still have appropriate flexibility to contract local SMEs.

We’ve also got the the Joint Bidding Guide, of course, the collaboration between Value Wales, Wales Co-operative Centre and Wales Council for Voluntary Action which aims to promote consortium bidding as a way of providing greater access to public sector contracts for SMEs and Third Sector organisations. In the “Progress towards improving public procurement” report published by the Welsh Government in March 2014, the Joint Bidding Guide was still under development, working on pilot projects.  It is good for the Welsh procurement to have different tools to work with in order to get the best outcome, and it is the Welsh Government’s responsibility to make sure these tools are functional and adopted by all Local Authorities and everyone involved in Public Procurement System.

According to the Minister’s March statement, Welsh contractors win 75% of all major construction awards, with a 30% increase prior to use of SQuID. I hope that the Minister won’t stop at this percentage, and that the number of contracts awarded to Welsh businesses headquartered here will grow. Sell2Wales after merging with Buy4Wales in 2013, increased its number of advertisements for contract opportunities and continues to grow and this opening up of more contract opportunities is vital for smaller, local suppliers and third sector organisations. But the FSB stated in 2012 that 6 out of 10 businesses reported that there were barriers to accessing public sector procurement opportunities, and that this is out of businesses that responded. In a report published last year, FSB underlined that 78% of small firms that responded had not bid or worked on any public sector contracts and, from those that had bid, only just over half were successful in winning at least one contract. The FSB recommended that there should be a breaking down of contracts into lots and that the simplification of the process should continue. What progress has been made in doing this?

The report found that every £1 spent last year by a participating local authority on local SMEs generated an additional 63p of benefit of their local economy whilst local large firms generated only 40p so there is a clear benefit in backing SMEs.  We need much earlier, positive and proactive engagement with SMEs suppliers as part of the procurement strategy. It would allow supply chains to prepare in time to tender for contracts and could be used to promote supply chain awareness of contract opportunities when they arise. This in turn would improve the image of local authorities as clients, and would help them to maximise the retention of their procurement spend within the local economy. Don’t forget, 98.4% of Welsh businesses are classified as SMEs, a closer collaboration with FSB is necessary to create that environment that would encourage more SMEs to participate in the bidding process and win more contracts; boosting local economy and helping SMEs develop.

So in conclusion Presiding officer, let’s have more debate about procurement. On-going updates from the Welsh Government are essential. We need to ensure that local authorities are implementing this strategy properly, a far greater focus on SMEs and getting their contracts up. I will ask again the Welsh Government to improve the dialogue between businesses and procurement authorities. Let us not keep hearing from SMEs that the procurement criteria has been changed without any advance notice. companies should feel that they have opportunities to tender for contracts and that there is effective planning to ensure that smaller companies can tender on a level playing field where SMEs can properly compete.