Procurement policy big business for Wales

An article in the Daily Post last month reported that of the £552m in goods and services procured by local councils last year, just £155m was spent in north Wales.

At a time when the local business sector needs to be fully supported as it struggles to emerge out of recession, the finding that 72 per cent of local authority procurement is obtained from outside of the region is a shameful figure.

In fact, when you consider that even if only half of the goods and services that councils buy were purchased from local firms, this would bring an additional £121m into the North Wales economy, generating thousands of jobs.

Of course, it is not only councils that should be under the spotlight and I would also like to see health boards, universities, colleges and the Welsh Government itself release similar data for the region.

Certainly, it is an issue I have been writing about since on a regular basis 2004 and I am glad that this is finally getting some of the attention it deserves by politicians across all political parties.

But local procurement is not an issue only for north Wales. Recent research from Europe showing that small to medium sized firms (SMEs) won less than third of all contracts above £5million. Micro-businesses, which employ less than ten people, got only 6 per cent of the total market of contracts in terms of value.

It has been suggested that this situation is exacerbated by the tendency to issue large single contracts, which seem to benefit bigger companies. Instead, critics have suggested that public authorities should promote the practice of breaking down tenders into smaller lots, a move that would increase the probability of smaller local firms becoming successful.

One of the recommendations I made as Chairman of the Welsh Conservatives’ Economic Commission was for the Welsh Government to promote is the imposition of targets for spending public budgets with local small firms, as is the case in the USA where the Office of Government.

Contracting works to create an environment for maximum participation by small businesses in federal government contract awards. With the US government spending billions of dollars in purchasing goods and services from private firms every year, targets have been set for every government department as to the proportion of expenditure that will go to SMEs. More importantly, legislation in the USA ensures that the public sector must conduct a variety of procurements that are reserved exclusively for SMEs.

Those who defend the status quo in Wales suggest that it will be the taxpayer that will lose out if we favour smaller local firms over larger and, allegedly, more efficient, companies. There is simply no evidence for such a supposition.

I recently met with a group of north Wales construction companies who had expressed serious concerns over the new framework agreements for public sector construction in North Wales. These, they suggested, had been designed specifically to keep local companies out of consideration by a process that favoured larger national businesses.

Certainly, those public servants in charge of putting together these contracts, which are worth hundreds of millions of pounds, need to answer such concerns. However, when I asked the companies concerned about competition is that they said they would welcome it, as long as they weren’t excluded and given the opportunity to compete.

Indeed, as one of the owners of these firms stated quite firmly, “I have never lost a business contract to a large company and I am not about to start now”. Clearly, the evidence shows that the public sector in Wales needs to consider its policies towards supporting local firms through procurement.

However, it could start to address this issue immediately by ensuring that as a matter of course, every local business that wants to compete for a public sector contract is given the opportunity to do so.

And on such a level playing field, I would certainly back our companies to win these contracts every time.