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19 January 2004
Conference Report: Working Together
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Morning Session
Chairman: Rene Carayol, CEO, Carayol.com |
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| Afternoon Session |
| · | Panel Debate
Chairman: Rene Carayol |
| | Panel:
| ▪ | Mark Forth - Director of Procurement, Inland Revenue |
| ▪ | Fahri Zihni - President, Socitm |
| ▪ | Michael O'Higgins - Head of IT Consulting, PA Consulting Group |
| ▪ | Martin Sykes - Director, Office of Government Commerce |
| ▪ | John Davies - Vice President Solutions Marketing Development Group, Intel |
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Morning Session
Chairman: Rene Carayol, CEO, Carayol.com
Keynote Presentation:
'Procurement: Thinking Small, Winning Big' - Martin Wyn Griffith, Chief Executive, Small Business Service, DTI
Key points:
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Martin Wyn Griffith, Chief Executive, Small Business Service, DTI
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"Small business can deliver huge benefits, not least in delivering value and driving up innovation". They are typically innovative, often at the cutting-edge and above all they are flexible and responsive.
SMEs are a major engine of growth and make a major contribution to the success of the UK economy. The importance of the sector is increasing. SMEs were responsible for nearly three quarters of new jobs created over the last five years.
The shift from large to small will also be ever-increasing. The speed of change driven by globalisation is bringing the need to constantly innovate. Small businesses find it easier to modify their products, change direction quickly and work in new and innovative ways. They are determined, ambitous and hungry. |
| - | The Small Business Service offers support, information and advice to SMEs. It plans to double the number of customers using the BusinessLink service over the next three years, and improve the availability of information and services. The Government Action Plan for Small Business has secured commitment from all major government departments and agencies, backed by action, to deliver the Government's vision for SMEs and open up better opportunities for SMEs to compete for contracts in central and local government. |
| - | SMEs have an important role in the delivery of better, more innovative public services. Government's purchasing power puts it in a good position to demand more innovative products and services and in turn, innovative solutions help achieve better public value for money. |
| - | Government can incentivise companies to develop new products and services, and by purchasing these products, provide a market to justify investment in these skills, products and innovation, assisting their ability to compete in other markets. |
| - | Yet there are very real barriers to exploiting these benefits in the public sector, finding out opportunities is complex, drawn-out, repetitious and inconsistent procurement procedures, and inadequate attention to supplier lead time can make it impossible for suppliers to deliver innovative solutions. |
| - | To address recommendations made by the Better Regulation Task Force report, two pilot projects have been set up to address some of the key obstacles preventing SMEs from participating in the government marketplace. From Spring 2005 a website will be available identifying government opportunities, with facilities for suppliers to register interest, as well as matching and alert services to notify suppliers of opportunities. To tackle bureaucracy, a common approach to pre-qualification will be provided. |
| - | Key message to Government: "You will increase your chance of success if you at least consider the additional choices that smaller businesses offer you. Get the most from innovative small businesses by managing risk in partnership with the supplier." And for SMEs: "Do take advantage of the help and support available." |
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BusinessLink Website
Comments from the floor:
[This is an edited summary of discussions - it is not intended, and should not be seen, as a complete, verbatim transcript]
"On the issue of risk aversion, in local government, a lot of barriers are put in place because individuals would rather not take a chance and put themselves out on a limb. They want to see others do it first. I've found situations where people are simply not ready to take a risk. For small SMEs a sales cycle of 18 months would put most of them out of business."
"We have some sympathies. We have people who are prepared to innovative, but invariably you have to work around rules. Public accountability and auditability prevent people from innovating."
"There is a need for culture change and internal change within organisations. A further issue is rationalising procurement processes and having consistent pre-qualification processes."
Questions
Q: The Government highlights the need for private sector expertise. At the same time I see government tenders calling for previous implementation in the public sector. How can public sector benefit from innovation, if they only want to see what has happened before?
Martin Wyn Griffith: We need to be feeding the message out to the rank and file. I hear the tone of cynicism - lets be real and pragmatic. There is a huge amount of support and commitment from government. What I think is beginning to happen is the tidal wave of concern from both sides, on the procurer and supplier side, over waste in the procurement process. It is at a time when finances are being stretched. At Cabinet level there is a commitment from the Secretary of State and she made absolutely clear to ensure that this issue is tackled. The extent that government is commited to tackling this problem is immense. I sense that opening up of some major shifts - it will take some time.
'Partnering: IT Outsourcing, Government and the Public Sector' - Graham Lay, Managing Director, EDS Defence
Key points:
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Graham Lay, Managing Director, EDS Defence
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EDS has a large supply base of
companies with 200 subcontractors supporting its work for the Inland Revenue.
Contracts may involve complex projects that require integration and effort across multiple suppliers, working together across the entire project lifecycle, such as the development of the new Joint Strike Fighter, which has used a truly global virtual enterprise to enable geographically-dispersed teams to collaborate.
This is a time of change, not just technologically. The Treasury is moving away from PFI because it was seen to offer too little flexibility, whereas business change in IT needs some flexibility. Under PFI if any one element failed to support the specification, the entire revenue was put in jeopardy, placing a huge gearing on risk factors. This shows where risk-aversion is driven from in these sort of contracts. In these circumstances you can only be prepared to take risks with companies that you have worked with for a period of time. |
| - | When dealing with companies in its supply chain, one of the difficulties facing EDS is translating innovative technology into an actual benefit that customers will recognise. Technology itself will not do that. |
| - | We are seeing a shift from verticals to horizontals - specialisms in market functions rather than particular market sectors. |
| - | In order to meet the demands that organisations are placing on us, the need to create a team has become paramount to us now, and here we are thinking of smaller rather than larger companies. |
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'Unwiring Britain with SME's' - John Davies, Vice President, Solutions Marketing Development Group, Intel
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John Davies, Vice President, Solutions Marketing Development Group, Intel
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Businesses employing fewer than 250 people account for over 12 million of the UK's workforce. Almost 250,000 companies account for the SME marketplace. There are about 7,000 companies with over 250 people, accounting for 10 million of the UK's workforce.
Intel sells to four market segments: Large Enterprise; Medium Enterprise; Small Enterprise and The Consumer, each representing 25% of Intel's business.
10 years ago Intel started a global program of selling products to customers through channels, the last count showing 147,000 channels in over 150 cities. Channels produced over a third of Intel's global business. It benefits also the channels, who through partnership can grow and extend their service portfolio.
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| - | Channel partners are classed into different tiers, according to different levels of capabilities - some could be two people providing PCs to local consumers, other 250-person companies. Many small integration houses start growing rapidly and have become reasonable-sized OEMs, or the largest provider of PCs in other countries. |
| - | Intel focuses on three key areas: Desktop PCs, Mobility (wireless) and Enterprise (servers). |
| - | Mobility is the biggest area that is changing the way people do business. Mobility not just for white-collar workers, but also people in services, support, maintenance, delivery, logical, medical... blue collar workers are now using wireless technology to increase efficiency, productivity and reduce costs. More and more SMEs are building solutions around wireless and taking them to larger businesses. |
| - | Intel has different partners for each market segment - who have proven skill-sets or capabilities within a vertical. |
| - | Wireless case study: City of Westminster - to improve key services and reduce operational costs, the city established a three-year plan to deploy citywide wireless network for government functions, part of its broader City of Renewal and Customer Service initiatives. A phased approach will be used to test and rollout wireless services based on 802.11 (WiFi) hotspots, 802.16 (WiMAX) backhaul stations and Intel Centrino mobile technology. The city expects to see a total ROI of more than £5M over the full three years. |
| - | Intel also used this technology to reduce truancy within schools through smart card technology and wireless, track students and email parents if they are bunking. |
Afternoon Session
'Scale alone is not enough.. anymore' - Sir Peter Gershon, Chief Executive, Office of Government Commerce
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Sir Peter Gershon, Chief Executive, Office of Government Commerce
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The Better Regulation Task Force report - Government: Supporter and Customer? - in May 2003 concluded the public sector procurement market works against SMEs. The report believes small business participation in the public sector can only benefit the economy as a whole.
The December 2003 OGC/Regulatory Impact Units report - Making a difference: Reducing Bureaucracy in Central Civil Government Procurement - which highlighted the effects that reducing bureaucracy can have on lowering costs, achieving better delivery and improving the Government's commercial business. The public sector market then becomes more attractive to SMEs through lower bid costs and an increased level playing field.
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| - | Improving SME access to the government marketplace is not about lowering standards, rather it is about lowering barriers. |
| - | The public sector can only benefit by working with SMEs. |
| - | Historically, SMEs do not bid for work in the public sector, a market traditionally dominated by larger incumbents. Why - Inaccessible opportunities; SMEs often do not know who to talk to about opportunities; little awareness of smaller supplies across government; SMEs view the bidding process as long, complex, and costly. |
| - | The Government is rolling-out a series of measures over the next twelve to eighteen months to address the issues that prevent SMEs from bidding for public sector contracts by:
| ▪ | Publishing below EU threshold contracts on a central web portal. The DTI Small Business Service (SBS) will implement a pilot portal by spring 2005; |
| ▪ | Ensuring local authorities produce "Selling to the Council" guidance documents and websites to give potential suppliers the information they need to bid effectively: the types of goods and service the council procures and the procurement policies must be laid out; |
| ▪ | Ensuring Government Departmental procurement websites advertise potential opportunities for SMEs, as well as listing all the suppliers they currently do business with; |
| ▪ | Developing a common core pre-qualification information document for lower value contracts, so businesses do not have to put together different information in different formats to get past the expression of interest stage; |
| ▪ | Encouraging government departments to reassess their procurement strategies to combat the notion of contracts being too large for SMEs to bid for; |
| ▪ | Publishing lists of suppliers involved in the procurement to facilitate potential subcontractor and Prime contractor relationships. Forums such as open supplier meetings provide a platform for potential Prime contractors and sub-contractors to get together and find out more about a project. |
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| - | The OGC and SBS have successfully implemented two pilot projects with the express aim of facilitating access to government contract by SMEs:
West Midlands Pilot Project
The OGC is working with Advantage West Midlands, the Government Office for the Region and the SBS to make procurement strategies more accessible and transparent to smaller companies by:
| ▪ | advertising procurement opportunities below the EU threshold via a Tenders Opportunities portal; |
| ▪ | making available advice and training for SMEs on how to do business with the public sector; |
| ▪ | piloting a common core pre-qualification information document for lower value contracts; |
| ▪ | promoting the Government Procurement Code of Good Practice; and |
| ▪ | working with Prime Contractors to enable opportunities for SMEs throughout the supply chain. |
Haringey Pilot Project
The OGC is working with Trade Local to open up opportunities. Here OGC is:
| ▪ | encouraging Prime Contractors to offer sub-contracting opportunities to SMEs; |
| ▪ | developing a common pre-qualification information document that does not make unnecessary demands on SMEs; |
| ▪ | developing the Trade Local portal to include information about how the public sector buys its goods and services, details of contract opportunities and lists of local prime contractors that sell to the public sector; and |
| ▪ | developing a toolkit of policies, documentation and good practice that can be used by other local authorities in developing their procurement strategies. |
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| - | By working in partnership with SMEs we hope to break these barriers down and widen the marketplace so that more SMEs are able to participate and bid for government contracts. This will ultimately contribute to significant long-term value for money improvements across the public sector. |
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Questions
[This is an edited summary of discussions - it is not intended, and should not be seen, as a complete, verbatim transcript]
Q: Can we change the risk-averse attitudes of some procurement professionals?
Sir Peter: There is a very strong determination at ministerial level where there is a huge convergence between the Chancellor, Patricia Hewitt and the Prime Minister that the Government has got to drive through improvements.
Q: We mailshot some 635 e-evangelists in local authorities by email and post, but have had no responses. What do you think of putting in place an e-business director or similar person in local authorities who would be the likely point of contact for anyone looking for offer commercial services?
Sir Peter: You may want to look at your own marketing techniques.
Panel Debate
Chairman: Rene Carayol
Panel:
Mark Forth - Director of Procurement, Inland Revenue
Fahri Zihni - President, Socitm
Michael O'Higgins - Head of IT Consulting, PA Consulting Group
Martin Sykes - Director, Office of Government Commerce
John Davies - Vice President Solutions Marketing Development Group, Intel
[This is an edited summary of discussions - it is not intended, and should not be seen, as a complete, verbatim transcript]
The Panel (left to right): John Davies, Michael O'Higgins, Mark Forth, Martin Sykes and Fahri Zihni
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Q: Putting this simply, how can I get into government?
Mark Forth: You have got to find the right man or woman in the organisation - these are normal marketing techniques. Sending out 600 mailshots will not work - inside or outside of government.
Martin Sykes: The issues are the same in the public and private sectors. You've got to get your marketing right and you need a lot of luck too. Where a need has been identified we are looking to ensure a wider sector of the market gets a chance. We're widening the marketplace and ways to make expressions of interest.
Michael O'Higgins: I get a lot of calls and have a limited amount of time. It's about identifying someone with a real business need. In local government circles, if something's working, then that can generate interest.
Q: Which is more important for government, compliance with procedures or value for money?
Mark Forth: The key issues are delivery and value for money. We have to live with the rules and regulations.
Q: As a district council, I think it is easier to do business with organisations that are the same size as yourself. Does the panel have any sympathy that central government doesn't understand local government - so activities that might help SMEs don't work very well?
Martin Sykes: Local authorities will also be interested in providing wealth in their local communities and may be more open. Does central government understand local government? I don't think it's a major issue. If local government can respond to engaging with their communities I'm all for that.
Q: Should we be slicing and dicing big projects into more manageable chunks?
Michael O'Higgins: There are some contracts where this is possible but the one requirement is that you have to have a strong programme management function. You can't transfer business risk to the supplier - only financial risk.
Chair: What aspect of central government procurement do SMEs particularly dislike?
Comment from the floor: Purchasing seems to be driven by risk-aversion. We are being told "We love your product, but procurement processes drive us down the road [of avoiding risk]". We fail to see action. It's going to take two years to get a website up and running? Do something now. Give us the opportunity.
Q: Should we reward employees for taking risk?
Graham Lay: People must understand what the objectives are - looking at what we want to achieve and how we can reflect that in contracts. There's a sea-change going on throughout the industry that maybe we need to do a bit of rebalancing.
The Panel (left to right): John Davies, Michael O'Higgins, Mark Forth, Martin Sykes and Fahri Zihni
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Closing remarks:
Fahri Zihni: Local authorities are very keen to sustain SMEs. There is a lot that can be done. However we need to recognise that globalisation will mean different ways of doing things and maybe SMEs should see whether they can keep up with market expectations. There is a very good match between smaller councils and SMEs.
Martin Sykes: I ask the audience to take the buyer's perspective. EU rules are there and we can be taken to court and decisions challenged - there is even more of a threat in 2005 with Freedom of Information. If you get 200 responses, sometimes you need to take pragmatic decisions. Pre-qualification processes are designed to set more and more hurdles, so you can sift out. The bigger contracts can be broken down if there are resources to manage the different bits to integrate. It's reasonable to expect that big companies need to develop and publicise how open they are to SMEs. Because if you don't show we are engaging SMEs by sharing out work, we will get legislation such as that in the US, specifying quotas of SMEs. I think that will weaken us all and just create more bureaucracy.
Mark Forth: We are not complacent - we need to open the door further to SMEs. I don't think that prescription, in any shape or form, is the answer.
Michael O'Higgins: Organisations are customer not producer-driven. This has two implications. First, delivery is key. The better part of the public sector have gone beyond risk-aversion, so don't assume because of past experience. Some will take the risk if you can set out the risk articulately. Secondly, understand the company.
John Davies: We are a private company so we don't have the restrictions, but we have very high responsibilities, so we are in a visible position. We have set goals to achieve along the way, balancing results, taking risks and maintaining discipline. We have become an e-company in two years, and it's been painful. But we're saving millions of dollars and have learned a lot. I'd like to make this offer that we are willing to share this experience of what has worked for us with the public sector.
Working Together - www.working2gether.net
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