Saturday 16 December 2017

Love me tender: the art of winning a State contract

With €9bn a year spent on public procurement, it's a goldmine

PURCHASING POWER: Paul Quinn, the State’s Chief Procurement Officer
PURCHASING POWER: Paul Quinn, the State’s Chief Procurement Officer

Simon Rowe

Paul Quinn manages the biggest business in Ireland yet few people know his name or indeed what he looks like.

The 47-year-old Dubliner spends a whopping €9bn a year on an eclectic range of goods and services, from paper clips and toilet rolls to hospital equipment and IT contracts, yet his name won't appear in any annual rich list.

As the State's first ever Chief Procurement Officer for the public service, Quinn's form of 'retail therapy' is the type that keeps thousands of Irish firms in business. Simply put, nobody buys more from Irish suppliers than the State itself - and he's the man who signs the cheques.

Quinn's appointment two years ago formed part of a massive shake-up in government procurement policy. To maximise the State's purchasing power - and make targeted savings of €500m by 2016 - the sourcing of all goods and services in the public service has been amalgamated into one body, the Office of Government Procurement, covering four key sectors - health, defence, education and local government.

The days of separate state agencies buying goods and services from the same supplier at different rates are over.

The National Procurement Service and the central National Public Procurement Policy Unit transferred over to the newly minted Office of Government Procurement in January this year, and a new executive management team was put in place headed by Quinn, a renowned cost-cutter recruited from Eircom.

Since then, the Office of Government Procurement has centralised state purchasing, setting up new framework contract arrangements and eliminating duplication with the aim of providing "one voice" for the market.

Quinn and his team - along with colleagues from Enterprise Ireland and InterTradeIreland - have been actively engaging with Irish suppliers, encouraging the increased use of electronic tendering and reaching out to SMEs with information roadshows.

Public procurement may not sound glitzy but it's the biggest show in town for Irish firms.

When spread across all government departments and agencies, state contracts account for 10-12pc of Ireland's GDP. Outside Ireland the opportunities are even larger. The UK spends about £200bn annually on public procurement and the EU procurement contracts' market is worth an eye-watering €2.4 trillion.

Winning a state contract is a goldmine for any SME. But the opaque nature of the tendering process in Ireland, along with fears over red tape and corruption, previously deterred many small firms from bidding for lucrative deals.

However, the commercial landscape has changed. New government guidelines promote the sub-dividing of larger state contracts into lots, where possible, to enable SMEs to bid for these opportunities. Also, SMEs are encouraged to form consortia where they are not of sufficient scale to tender in their own right.

There have also been significant moves towards greater transparency, such as the eTenders procurement website and the recent government announcement that all winners of public sector contracts must be published.

This announcement represents a sea change. Just 18pc of award notices were published for the 6,500 tenders up for grabs last year, said Tony Corrigan of Tender Scout, a firm that advises others on tendering for state contracts.

Such a lack of transparency in the procurement process can fuel suspicions, said Corrigan. "I would be most concerned that there is a perception among the supplier community that there is collusion or some form of favouritism going on," he said. But the reality is that this lack of transparency is probably due more to apathy than the fact "they are hiding anything in particular" he adds.

However, a recent European Commission report on corruption, which threw a spotlight on Ireland, singled out public procurement as a major concern.

Given that "approximately one-fifth of the EU's GDP" is spent every year on state contracts, the report warns that "it is an area vulnerable to corruption". It adds: "Corruption continues to be a challenge - a phenomenon that costs the European economy around €120bn per year."

The report cites a 2013 survey which found that 28pc of Irish firms believe corruption prevented them from winning a public tender. Moreover, 39pc of the respondents considered that corruption is widespread in public procurement.

But it's not just a lack of confidence in the integrity of the process that deters firms, it is the cost. Tendering for work from state bodies costs a minimum of €4,500 for a contract valued at €25,000 or more, rising to hundreds of thousands of euro for larger contracts, said Tony Corrigan.

Given the time, money and research needed, many are put off, he said.

Indeed, despite the vast sums of money involved in winning lucrative state contracts, only 10pc of Irish SMEs actually participate in the bidding process.

Chambers Ireland, which represents 10,000 businesses, says many small firms in Ireland are excluded from the procurement process due to a narrow focus on cost and a complicated system.

"There is a clear sense of anger and frustration amongst the SME community that they are being sidelined by government in favour of cheaper overseas options," said Chambers Ireland chief executive Ian Talbot.

The business lobby group has urged the Office of Government Procurement to use measures such as job creation and the long-term benefit to the economy as well as cost when awarding contracts.

"Too many contracts continue to be awarded on price alone without taking into account the number of jobs created in Ireland or monies that could be lost in tax revenue," said Talbot.

Tony Corrigan says there has been a surge in government contracts awarded to bidders based abroad.

He said firms based in the UK and Northern Ireland are the main beneficiaries.

"UK firms have a big focus on the procurement space, they invest in putting tenders together, while in many cases Irish businesses are not even bothering to compete," he said.

Figures on exactly how many public contracts are won by foreign firms are hotly disputed.

In the Dail a few weeks ago, the Minister for Public Expenditure and Reform Brendan Howlin claimed that "less than 5pc of the overall public procurement spend is now won by foreign companies".

But Tender Scout boss Tony Corrigan claims the true figure for the number of contracts awarded by state bodies in 2013 to companies based outside Ireland was "around 28pc" - up from 18pc the previous year. "This puts Ireland at the top of the list of countries most likely to award contracts to foreign companies," he said.

Meanwhile, Chambers Ireland estimates 8.8pc of public contracts, worth an estimated €800m, are awarded to firms outside Ireland every year - well above the European Union average of 3.5pc.

Tony Corrigan blames a lack of transparency for the confusion. He points out that in 82pc of cases there is no published record of the companies awarded contracts or the value of the contracts won.

"Just 18pc of award notices have been published for 2013. So I have only been able to analyse that 18pc," he said.

"It may be the case that the other 82pc of notices that they haven't told us about tell a different picture. But I don't believe they have that information and I don't think they've collated it.

"If companies are looking to compete for a contract in the future, they don't know what happened in the past - like who won it, how much it was, and when it is likely to be re-tendered again. SMEs need to know that information to compete."

Sunday Indo Business

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