With around a third of government spending each year going on the procurement of goods and services, it's vitally important that taxpayers are getting value for money and that procurement processes are carried out as efficiently and effectively as possible. This helps to maximise the impact of these public services and projects while keeping costs as low as possible. Ensuring a competitive procurement process can help to deliver this.
In this article, we look at the role of competition in public procurement, including the benefits and challenges involved when strengthening competitiveness as part of the tendering and wider procurement process.
Jump to:
● What benefits can strong competition bring to public procurement?
● How increased procurement competition can support SME growth
● Challenges when trying to increase competition in public procurement
● How public bodies can encourage more procurement competition
● How Procurement Hub can help support healthy competition in public procurement
What benefits can strong competition bring to public procurement?
Cost savings with public money
Government estimations indicate that more effective use of competition in public procurement could achieve potential savings of somewhere between £4 billion to £7.7 billion every year. This saved money could be reallocated to other public services or projects that benefit people on a national or local level.
High levels of competition in procurement encourage suppliers to offer the best possible package (prices, quality, terms etc) in order to win the contract, which is one area where cost efficiencies can be made.
Drive greater innovation
A more competitive procurement process means that suppliers have to stand out in order to win contracts. This encourages suppliers to develop new and improved services or products, especially if this is stated as a desired outcome of the project, bringing more innovation, technological development and other cutting-edge solutions to not only individual bids but to the supplier culture overall.
Improve the quality of supplier services
In a similar way, public procurement processes that are highly competitive mean that suppliers need to step up the levels of service they offer to differentiate what they offer and have a greater chance of winning contracts.
Increase social value
It’s not all about suppliers submitting bids at the lowest possible cost. Today’s public sector strategies need to take areas such as sustainable procurement into account too, along with the wider social value that suppliers can help to deliver. With lots of potential bids in the mix, it encourages suppliers to factor social value into their tenders to help give them a competitive edge.
How increased procurement competition can support SME growth
Many SMEs may have automatically discounted tendering for public sector contracts in the past because there hasn’t always been a straightforward way for them to have access to do so, or certainly not on a level playing field with larger companies that may have more extensive experience of the sector or simply be a bigger ‘name’.
By making public procurement more competitive, buyers can encourage SMEs to bid for contracts by making the project details easier to access and ensuring that the process is transparent. There are also many benefits in partnering with local small and medium-sized suppliers that live and work in the communities impacted by public sector projects and services, creating jobs and investing in the local economy as well as the wider goals of the contract in question.
Challenges when trying to increase competition in public procurement
We’ve already established some of the many benefits of increasing competition in public procurement, but the practical process of doing so isn’t without challenges. Some of the key challenges to increasing competition and greater supplier diversity include:
- Traditional and complex procurement strategies that make it harder for new suppliers to participate.
- A lower awareness in the market for SMEs, who may not know where to find public sector contract opportunities or how to best compete with bigger and more established suppliers.
- A lack of digitisation, making the procurement process very difficult for new suppliers to engage with effectively.
- Buyer concerns about quality if they award the contract to a less well-known supplier.
- An established market dominance by certain suppliers.
- A lack of skills, experience or time for the procurement team, which leads them to pick the easiest or just the cheapest option, rather than the best option which will deliver on several fronts at once.
The implementation of the Procurement Act 2023 will help to address some of these challenges but there is always more that can be done by public bodies to encourage more competition for contracts.
How public bodies can encourage more procurement competition
There are various ways in which public bodies can encourage more bids from a wider pool of qualified suppliers, without having to compromise on the quality of the goods or services being procured. These include:
- Using open and transparent procurement processes that provide equal opportunities to suppliers of different sizes.
- Actively engaging with a diverse range of suppliers, including SMEs and social enterprises, to ensure they are equipped to bid if they wish to.
- Breaking large contracts down into smaller lots provides more opportunities for smaller or newer suppliers to bid and deliver effectively.
- Ensuring the tender documents are clear and accessible for all potential suppliers.
- Utilising digital procurement frameworks that make it easier for more suppliers to bid.
How Procurement Hub can help support healthy competition in public procurement
Procurement Hub is part of Places for People, the largest social enterprise in the UK, and we understand the many challenges faced by public bodies in procurement.
Public sector projects need to spin several plates at once and can sometimes benefit from support to ensure the procurement strategy is efficient, competitive and drives the best possible outcomes. That’s where we come in.
Our CIPS qualified procurement team are experienced in creating robust but flexible solutions that are tailored to your individual needs and can help boost high quality competition. Our procurement solutions bring together top suppliers from national to SME covering all your business requirements. We aim to make the procurement process as simple as possible.
Whether you're looking for consultants, contractors or suppliers our solutions offer the very best in procurement.
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