Local authorities in England and Wales spend £25 billion a year on goods and services. Much of this is up for grabs by local companies, especially now procurement has moved online and there is a concerted effort not just to get value for money, but also to foster links with local firms. Local government is big business – it makes 35-28 million purchases a year and deals with 800,000 suppliers. It has 1.8 million employees, many of them responsible for contracting out business.
An increasing number of councils insist that the firms they do business with are incorporated companies. Councils are attracted by the limited liability that incorporation brings and although they state it makes no difference if a company is a sole trader or limited company – contracts are awarded to those who offer the best value for money and services to the public sector, providing that the company can meet the criteria set out for the tender – limited company status increasingly wins the business.
Local government is changing fast. More efficient and transparent contracting is part of the drive to modernise the sector and bring cost savings. The biggest shake-up has been on line. Now councils trade electronically, all contracts are easily accessible. Technology allows transparency and contracts can be audited so the risk of corruption is reduced. The fact that limited companies are registered with Companies House and their accounts and business can be scrutinised on-line can only add to the transparency local government wants to create.
The government backed government portal supply2.gov.uk focuses on lower value public sector contracts, typically under £100,000. Developed by the Small Business Service and the Office of Government Commerce it enables all organisations across the public sector to publicise their lower-value contract notices and for the first time, all types of businesses can access them in one place. For suppliers this opens up the public sector market worth billions of pounds to all types of business including small firms and social enterprises, and provides a quick and easy way to source new business opportunities in the public sector. Of course now it is open and transparent, there will be more competition for the contracts and those companies that have limited status will have particular appeal.
Many of the smaller contracts are to supply goods and services to local government from people who have never considered limited status before and councils can help here. It is not just the obvious catering and building work that is tendered out, but also new initiatives like Extended School Communities, where large numbers of local people are involved. These people often need help with initial company formations and registration with Companies House. For people unused to the paperwork that incorporation status undoubtedly brings, company secretary services (which include annual returns and reminders for company return deadlines) may be an attractive option. If charities or companies limited by guarantee are needed, those involved need to state the aims and objectives for each.
There are huge financial benefits to the communities when locals join together and bid for contracts. Research in Northumberland found that every £1 spent with a local’s supplier is worth £1.76 to the local economy and only 36 pence if it is spent outside the area. That makes ever £1 spent locally worth almost 400% more and this is an enormous incentive to use local suppliers and boost local economies. To encourage local suppliers councils need to communicate contract needs to small and local suppliers as well as those already supplying them.
Online contracting may reduce the price of goods and services and savings could be as much as 8%. Officers’ time and transaction costs could be cut by as much as 70% and combined savings, in some cases could result in a reduction as large as 15%. Councils now handle their approved supplier lists over to privately run accreditation firms. Suppliers’ finances, as well as their policies on health and safety and recruitment, are scrutinised much more vigorously than in the past. Although this costs money, the process is seen as fair. Companies have to get accreditation, and again incorporation status is again helpful.
supply2.gov.uk also includes information on where to find advertised contract opportunities, contract details and links to the equivalent sites in Scotland, Wales and Northern Ireland. Businesses can search for lower value public sector contracts by using keywords, register for email alerts for relevant contracts, look regionally or nationally and learn how to put a bid together for a public sector tender. Notices from a range of public bodies including the NHS, educational establishments and many other authorities are also included and there is a standardised and simplified pre-qualification questionnaire to make it easier to tender.
The benefits of selling to government is that they have to be fair, honest and professional and must pay accounts within 30 days (or any other agreed credit period) of receiving a valid bill or notice. Firms may also find that trading successfully with the public sector gives added credibility with private sector customers.
Small companies are often successful in public sector contracts because they can offer expertise sometimes not available in larger companies, a better understanding of their products and client requirements and a willingness to work closely with clients in partnerships.
