Report on Inquiry into Public Procurement Policy and Practice in Northern Ireland

Committee Business – in the Northern Ireland Assembly at 2:00 pm on 23rd February 2010.

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Photo of Francie Molloy Francie Molloy Sinn Féin 2:00 pm, 23rd February 2010

The Business Committee has allowed up to one hour and 30 minutes for the debate. The proposer will have 15 minutes in which to propose the motion and 15 minutes in which to make a winding-up speech. All other Members who wish to speak will have five minutes.

Photo of Jennifer McCann Jennifer McCann Sinn Féin

I beg to move

That this Assembly approves the report of the Committee for Finance and Personnel on its Inquiry into Public Procurement Policy and Practice in Northern Ireland; and calls on the Minister of Finance and Personnel, in conjunction with Executive colleagues, to implement the recommendations contained therein.

Photo of Carál Ní Chuilín Carál Ní Chuilín Sinn Féin

On a point of order, a LeasCheann Comhairle. My point of order does not concern the Minister of Finance and Personnel; he need not worry. Yesterday, during the debate on the motion on local government reform, Mr Patsy McGlone referred to our party as “provisional Sinn Féin”. Will you consider yesterday’s Hansard report and make a ruling on that next week?

Photo of Francie Molloy Francie Molloy Sinn Féin

I will refer the matter to the Speaker. As a warning to all, all parties should be referred to by their official name.

Photo of Jennifer McCann Jennifer McCann Sinn Féin

I welcome the opportunity to open this important debate. Public procurement is a key cross-cutting issue that affects all levels of government. Spending on government supplies, services and construction work forms a significant element of the local economy, accounting for one quarter of the Executive’s annual spend. When combined with local government purchasing, it amounts to upwards of £3 billion each year. Such expenditure represents an important lever that the Executive can use more strategically as a tool for supporting the long-term economic and social well-being of our community, especially at a time of economic recession when we face a more constrained public expenditure outlook. That is the core message behind the inquiry report from the Committee for Finance and Personnel.

The Committee recognises the important role that small enterprises play in our economy. Ninety-five per cent of local firms can be characterised as micro-businesses that employ fewer than 10 people, and social economy enterprises are becoming strategic players in delivering important social policy outcomes. That predominance of small enterprises offers tremendous potential for economic growth, and public procurement can provide a suitable vehicle in that regard.

Given the profile of the local business sector, the Committee expects that most public contracts are already awarded to small and microenterprises. However, as highlighted in the report, there are substantial benefits for the public sector and for the wider economy from encouraging new entrants into the public procurement market from the small and microenterprise sector and from enabling local firms to compete for higher-value contracts.

The Committee found a wealth of international evidence on the mutual benefits of the increased involvement of small enterprises in the government supply chain. For the public sector, those benefits include better value for money, business growth and innovation; for the small firms, there is the benefit of access to a large and stable market, which can provide a springboard to achieving growth.

At its meeting on 19 November 2008, the Committee agreed to undertake its inquiry into public procurement on the basis of that rationale and because it had identified concerns and barriers facing small and medium-sized enterprises (SMEs) and social enterprises bidding for government contracts.

As I say, public procurement is cross-departmental, a fact recognised in the Programme for Government, which highlights the positive role of procurement in furthering cross-cutting sustainable development and socio-economic objectives. That said, the lead responsibility for taking forward the Executive’s policy direction in that area falls to the Department of Finance and Personnel (DFP). The procurement board, chaired by the Minister of Finance and Personnel, and attended by the permanent secretaries of all Departments, has responsibility for developing overarching public procurement policy across Departments, their agencies and other public bodies. The Central Procurement Directorate (CPD) in DFP provides a centralised, professional procurement service to the wider public sector, although it does not formally extend its remit to local government.

In addition to CPD, seven other centres of procurement expertise exist to provide a more integrated service to bodies throughout the public sector. Given the wide remit of procurement across government, the Committee’s inquiry report is wide-ranging, with more than 40 evidence-based findings and recommendations. Those apply to the Executive, the procurement board, DFP, CPD and other Departments, where appropriate.

Much of our local procurement policy and practice is informed by legislation and directives that come from the European Union, so the Committee also considered examples of best practice from across Europe. Given the range and scale of public procurement, the Committee chose to focus its inquiry on specific aspects of policy and process, emphasising the end-user experience of SMEs and the social economy sector.

The inquiry’s terms of reference also sought to consider the nature, extent and application of social clauses in public contracts and to make recommendations to DFP on improvements to public procurement policies and processes that are aimed at increasing access to opportunities to SMEs and social economy enterprises (SEEs) and maximising the economic and social benefits for the local community. The inquiry was underpinned by a strong evidence base, including written and oral evidence that was supported by a wide-ranging literature review.

A stakeholder conference that was held in October 2009 is also of particular note. It gave all who were involved the opportunity to inform the recommendations that the Committee is publishing today. The conference, which was attended by more than 100 participants, was an innovative approach to gathering evidence and included representations from local SMEs, social enterprises, government purchasers and recognised commentators from other jurisdictions. Focus groups allowed Committee members to hear participants’ concerns and suggestions, and interactive digital voting allowed us to identify instantly the priorities of those in attendance.

The Committee also sought advice and views from leading procurement academics on the outcome of the conference. Along with a full report on the conference, those are included in the appendices of the inquiry report.

The message that came from the conference is clear. The participants wanted a high-level policy direction that is implemented through co-ordinated action by commissioners and buyers. The Committee agrees with that view, and it considers that it is incumbent on the Executive and the Assembly to create a public procurement environment that facilities smaller enterprises in realising their full potential and which maximises the economic and social impact from expenditure on procurement.

As a result of the inquiry, the Committee identified the need for more balanced application of the 12 principles that govern public procurement here. In particular, more emphasis is needed on the principles of integration and consistency. Indeed, the evidence from the inquiry suggests that, comparatively speaking, local public procurement practice focuses predominantly on compliance and narrow value-for-money considerations. Although those are undoubtedly important, the Committee concluded that procurement practice fails to integrate sufficiently with the Executive’s wider economic, social and environmental priorities. In other words, a more strategic and widely defined consideration of value for money is needed. Indeed, the Committee found that the CPD’s guidance advises that when the 12 guiding principles have been satisfied to an acceptable level, best value for money can be said to have been achieved.

The Committee’s recommendations address the themes that stakeholders raised in their evidence and focus on three main areas. The first of those is improving policy and processes, which includes the use of frameworks and contracts, sourcing opportunities to bid and aspects of tendering and delivering. Secondly, the Committee examined what improvements could be made to procurement policies and practices, with a view to maximising social benefits for the local community. A range of recommendations are made in that area, including a call for the Executive to issue a clear policy directive on procuring social benefit for targeted use of social clauses and for a model for measuring social value.

The Committee heard evidence about the need to build capacity for purchasers and suppliers in the procurement process. The Department of Enterprise, Trade and Investment (DETI), which has lead responsibility for the small business and social economy sectors, has a key role to play in that. A number of the Committee’s recommendations take that relationship into account, and it is hoped that CPD and DETI can find ways of working together to address those issues.

Finally, the Committee considered a range of other issues, including the opportunity to realise efficiencies through collaborative procurement, issues relating to litigation and public procurement governance arrangements. Although matters relating to local government are not within the Committee’s remit, it became apparent during the inquiry that many of the witnesses did not distinguish between local and central government procurement, because their concerns applied across the board.

As a result of the inquiry, the Committee has found that the Executive, in achieving best value for money, can strategically use public procurement as a tool to assist smaller enterprises in realising their full potential and to support longer-term economic and social well-being. I believe that that should and must be done. I look forward to hearing other Members’ contributions.

Before I commend the report to the House, I want to make a few points as a private Member. I do not think that most people realise how much money is spent on procurement. Government spend on the supply of services and construction work accounts for one quarter of the Executive’s annual spend, and the total amount spent on procurement by central and local government is £3 billion per annum. We also need to consider the issue on an all-island basis, because the total amount spent on procurement across the island is £15·2 billion per annum, which is a large amount of money.

One of the most important ways in which we can influence procurement policy is to ensure that all public spending maximises the wider economic and social benefits of the procurement process for the local community. Public procurement is also an essential part of the investment strategy. It is important that that opportunity be grasped now more than ever, because it can secure jobs and create new employment opportunities for people. Given the continuing economic recession and the constraints on public spending — we need only consider the debates about the Budget that have been ongoing here — an improved public procurement policy can help us to better spend public money.

The Committee heard about companies that had received contracts because they were able to meet base conditions, such as good wages, good-quality apprenticeships and the employment of the long-term unemployed. That is what the inclusion of social clauses in procurement contracts can provide. We must ensure that such clauses are included at the tendering stage, so that we can deliver fairness, inclusion and equality of opportunity for all people. We can effectively challenge existing patterns of social and economic disadvantage if we do that. We can also help to increase prosperity and to combat poverty in areas of disadvantage and need. I hope that the report’s recommendations will lead to those changes at policy level and will deliver benefits for everyone in the community, particularly those who are disadvantaged socially and economically.

Photo of Simon Hamilton Simon Hamilton DUP

I support the Committee’s report. It is a vast and, in some places, very technical report. I do not know how many pages it runs to, but there are 319 paragraphs in the main report; 142 documents in the appendices; 41 recommendations, as the Chair mentioned; and some 35 written evidence submissions. In future, I am sure that everybody in the Finance Committee will be extremely reticent to indulge any member who starts a sentence: “I think that we should take a wee look at that”, because the record will show that that is what happened at the start of this inquiry. Initially, we wanted to take a short, sharp look at procurement, but once we started the process, we realised that there was much more to it than we first thought. Hence, the very detailed paper that is before us today.

At the start of the inquiry, the perception of many Committee members was that there was something wrong with procurement in Northern Ireland, because there had been a number of legal challenges. There has certainly been a lot of litigation in recent times, particularly in respect of framework contracts. That was taken to be a sign that there was something drastically wrong with procurement in Northern Ireland. There was also a perception that local firms were losing out in tendering for work that was procured by Departments and other aspects of government in Northern Ireland.

At the outset, I feared that the inquiry might turn into a bashing of the Northern Ireland procurement system, and I did not think that that would have been justified. One person who gave evidence to the Committee said that Northern Ireland was the market leader in respect of litigation connected with procurement. Equally, however, we heard evidence that although we may sometimes have a few litigation cases here — there was a run of them recently — we are not as bad as other jurisdictions in the United Kingdom. Indeed, the minutes of a meeting of a big city council in the north-west of England showed that it had made the decision as to who would get a tender even before the tendering process had opened. Therefore, although people may think that we have problems here, I am sure that everybody agrees that we are not as bad as that council.

I asked the Finance Minister how many CPD-awarded contracts had been given to local companies in the previous financial year. The figure was extremely high; around 90%. Perhaps the Minister will clarify that point. The figure compares very favourably with those in other jurisdictions. In addition, during the inquiry, the Committee received evidence from InterTradeIreland that Northern Ireland-based companies were doing exceptionally well in procuring contracts in the Republic of Ireland. That is one sort of cross-border trade that I am extremely happy to hear is flourishing, and it is one that I encourage.

There is a need to balance the benefit for Northern Ireland companies through procurement with value for money. There is no doubt that £2·4 billion in procurement plus £300 million from local government procurement is a huge prize to be had by local companies. However, that needs to be balanced with value for money, which is particularly pertinent now as we are looking at an even tighter public financial landscape than we were in the past.

I am happy to endorse the report in that it did not throw the baby out with the bathwater. Everybody acknowledges that there have been issues with frameworks. However, I am not against the idea. The approach has merit in building up experience and getting value for money for taxpayers and ratepayers in Northern Ireland. A robust evidence base must be in place before we proceed with frameworks, and that is something that everybody can agree on. I was very keen to push the idea of building capacity so that those who respond to tenders have a greater appreciation of the system and, therefore, would at least know what went wrong and would perhaps not be so disappointed if they did not win a contract. A collaborative approach to procurement, whereby greater efficiencies could be delivered, is also central to the report and something that I endorse.

Maximising social benefit was an issue that I and some Committee members were a little concerned about, although we recognised the benefit that there can be for communities, in particular, deprived communities, in addressing long-term unemployed, getting apprenticeships, and even meeting environmental priorities. However, the approach taken by the report is sensible, and in trying to maximise social benefit, we cannot tip the balance too far. I am always mindful of the evidence given by Paul Davis at the stakeholder conference. Using the example of environmental clauses, he said that if we are too rigid on that, others in the EU may be equally rigid and may rule out some of our companies from applying for contracts.

Photo of Simon Hamilton Simon Hamilton DUP

There is, I have to say, a much bigger prize of €2,000 billion in procurement potential across the EU.

Photo of David McNarry David McNarry UUP

It goes without saying that the power of government spending as a tool of public and economic policy is a key factor in generating a recovery from the economic downturn, and is a means of rebuilding our construction sector, which has been so badly damaged by the slowness of the hitherto booming and buoyant property market.

The mismatch between small and medium-sized enterprises, which are so prevalent across our economy, and the need for comparatively large-scale procurement exercises was a factor about which the Committee for Finance and Personnel was keenly aware, and that came through in the evidence sessions. Access to procurement opportunities for small businesses, even micro-businesses, is an important way to regenerate our economy and to keep as much public spending as possible in Northern Ireland, benefitting, as a consequence, the jobs market. That is why the re-examination and redesign of public procurement policy is proving so important. It is nothing less than a key building block in our economic recovery. Boosting access to public procurement opportunities for local businesses is a potential driver of economic expansion.

The development of procurement solutions that help to grow small firms by using the wealth, stability and spending power of the public sector to kick-start the private sector, peopled largely by small and medium-sized enterprises, can and will help to create the depth of locally based and locally generated recovery that the private sector badly needs at present. That is why locally based solutions are infinitely preferable, and a public procurement policy is a key building block of that localised solution.

In an age when information systems are so sophisticated and widely available, surely there is no reason why small and medium-sized enterprises should not be able to easily access procurement mechanisms. That is why we also need to open up the procurement process to smaller companies through a re-evaluation of the spread of risk in any contract. It is, therefore, preferable to break big contracts down into a number of smaller contracts that are more easily accessible to smaller companies, both in risk apportionment and in the financing of those contracts.

That also means that we will address the importance of social enterprises and the social economy in Northern Ireland. The social economy should not be underestimated. In a fiscally constrained climate, the services that the social economy provides are invaluable, and we must ensure that it is given every opportunity and the support necessary to develop. I welcome the recommendations in the report that seek to achieve that.

Contractors should also be encouraged to form local consortia to access contracts that would not normally be available to them because of the sheer size and scale of the project involved. We need to learn to do that and to be able to bring that to the table. Thus, we will have a procurement process that can become an engine of recovery for our local economy, and the Assembly and the Executive can act as the catalyst for economic growth and progress.

I urge the Minister to act on the recommendations in the report. I know that he will give them serious consideration, but I am asking him to go a little bit further. Committees in this place are producing some excellent work that should not be wasted by the Government or by any Department. Therefore, I commend the report.

I also take the opportunity to thank the Committee and the staff involved in putting the report together. It goes without saying that the report was driven by a very keen Chairperson. The Committee will respect all the work that has been done, particularly by her.

Photo of Declan O'Loan Declan O'Loan Social Democratic and Labour Party

I express my complete support for the report and ask the Assembly to endorse it. The report is a major and important piece of work, and I thank the Committee staff who led the process of developing the report so well and who produced an extremely high-quality document that is very important for governance in Northern Ireland. It will not be possible to do justice to such a substantial report in the short time that I have to speak; I will only be able to touch on a few significant points.

As has been said, there are 41 recommendations in the report, and each one is substantial. Taken as a whole, those recommendations have the potential to radically restructure the procurement environment in Northern Ireland. Such restructuring would be to the betterment of public procurement and would be of huge benefit to our small and medium-sized enterprise sector and our social economy sector. I hope that that will happen. I hope that the Minister will respond positively to the report, but it is the implementation phase that will be the important part.

The implications of the recommendations are huge. They fall on the Department of Finance and Personnel and the Central Procurement Directorate in particular. The recommendations also fall on the other seven centres of procurement expertise (COPEs), and there are references to DETI and to other bodies. I have noted those references. Ensuring that the process is a coherent whole that is carried through is an important task that falls to Ministers. I hope that the Minister of Finance and Personnel, whom I see is in the Chamber, will take the lead on that matter.

The potential is huge. The procurement budget for Northern Ireland is £2.4 billion, and the total for the island is £15.2 billion. I note that an interesting point on page 8 of the report refers to the EU approach and contains a significant quotation from an EU document. It outlines a different approach to public procurement, and that is advocated in the report. The EU document says that that approach will:

“result in higher competition for public contracts, leading to better value for money for contracting authorities. In addition to this, more competitive and transparent public procurement practices will allow SMEs to unlock their growth and innovation potential with a positive impact on the European economy.”

I quoted that section because some people say that there is a trade-off here between achieving value for money and getting social benefit. If the process is done right, there will be no such trade-off. The quotation from the EU document and the report’s recommendations say that there is enough potential to achieve both outcomes. We can obtain better value for money because the more that we engage with the business sector, the greater the competitive environment that will be created, more businesses will bid and better value for money will result. If we distribute the public procurement budget in the most effective way, the key businesses in the economy will grow. That is not a win-lose scenario; it is definitely a win-win scenario.

I will address some specific issues that are mentioned in the report. The issue of frameworks is of great importance, and Members have already commented on it. I broadly support the line in the report that says that frameworks need to be adjusted. Frameworks must be accessible to the SME sector in a way that they are not currently. That means fundamentally breaking down contracts into lots. I noticed that the report contains a quotation from Sir David Varney that supports that view, and one might not necessarily have expected him to support that line of thinking. He said that we can achieve better value for money and quality:

“by breaking down large contracts, or by linking contractors with sub-contractors”.

In other words, he endorsed my earlier point that we can obtain better value for money and better quality.

The report contains an important section on bidding opportunities, and it mentions the need to make information about those opportunities easily digestible for SMEs.

Photo of Francie Molloy Francie Molloy Sinn Féin

The Member should bring his remarks to a close.

Photo of Declan O'Loan Declan O'Loan Social Democratic and Labour Party

As I said, it is impossible to do proper justice to the report, but I ask the Assembly to give it its full support.

Photo of Stephen Farry Stephen Farry Alliance

I and my party fully support the Committee for Finance and Personnel’s report. I apologise to the Chairperson for missing the beginning of her speech. However, I warmly welcome the report, which is a substantial and significant piece of work that should have a major impact on policymaking on public procurement in Northern Ireland. I join with others in praising the Committee staff for their very hard work during the considerable number of months in which the Committee examined that area.

Northern Ireland has a large public sector that is a major feature of our economy. Within that, the profile of our companies has a strong presence of small and medium-sized enterprises. Naturally, there is a desire to ensure that, as far as possible, we look after our indigenous businesses. However, at times, the European single market is seen as an impediment or a hassle that we must deal with. It is important to recognise that we should welcome it, because it brings value for money and delivers competition. It is not simply about enabling companies from elsewhere in Europe to come here to compete. It is about companies from Northern Ireland having the aspirations to go elsewhere in the UK and Europe to compete for contracts. Therefore, that should be seen as a two-way process.

We should not adopt a protectionist approach to public procurement. We should have confidence that Northern Ireland companies can compete on a level playing field, and we should encourage them to do so.

There is a natural desire, as far as is possible, to gear our procurement approach towards meeting the needs of SMEs and to break up contracts. I do not disagree with that. However, I have one small reservation: we should not celebrate the fact that Northern Ireland’s profile is overly dominated by small and medium-sized enterprises. We should encourage businesses to grow and to bulk up. It is only when businesses grow that they are able to compete more effectively outside Northern Ireland for work. Consequently, value for money can be improved. Our economy needs to be more export-oriented rather than simply being one in which local companies feed a local domestic market and that is wary of others coming in to try to compete.

No one would disagree that value for money must be the fundamental starting point in our approach to procurement. That said, my party is more than happy to consider social clauses, whether they relate to environmental sustainability or employment, training and apprenticeships and other such schemes. Public spending is about more than the simple provision of goods, facilities and services. It can be a tool for trying to achieve wider public policy outcomes, and I have no difficulty with that. To some extent, the private sector can take a lead in that by itself, without a push from government, through the concept of corporate social responsibility. There are examples of that already occurring, although it is still at an embryonic stage. There is more that we can do as a government.

However, we need to be conscious of some of the side effects of our approach to public procurement. One side effect could be a situation in which the overall cost of public procurement rises as companies pass the additional costs of complying with social clauses on to the prices that they set when they bid for contracts. We must also ask whether the most effective way to achieve public policy outcomes is through the market playing its role and by companies finding their best way to fulfil social clauses. That may seem to be the most attractive way to do it, but, alternatively, it could be done through a direct spend by government on schemes. That is a much wider debate than the report considers, but it is one that we need to be mindful of, while hoping that the answer is that social clauses are probably a more effective way to achieve the stated objectives. I welcome the report, and I hope that the Minister will embrace it warmly when he makes his remarks.

Photo of Adrian McQuillan Adrian McQuillan DUP 2:30 pm, 23rd February 2010

I apologise for missing the start of the debate.

The Committee for Finance and Personnel’s inquiry into public procurement processes has established the factors that prevent small businesses from applying for government tenders. It is only through the forthcoming changes that we can ensure that a level playing field is established for all those who wish to compete for public sector contracts.

The current economic situation has affected not only the large multinationals but the microbusinesses that make up the majority of our business community. The small business community plays a pivotal role in the development and sustainability of our economy, as it does in the rest of the UK. It is those types of businesses that have experienced most frustration with the procurement system that is used by central government, which has led to a rise in the challenges against the awarding of those contracts and highlights the need for radical change. To allow such businesses to survive and develop, we must ensure, through the changes that we are going to make, that we establish a simple, accessible and transparent procurement process that they can engage in. Such a new process should be applied to all public procurement and not just central government. It should also apply to local government procurement, although that did not form part of the Committee’s inquiry.

The development and survival of small businesses can be enhanced and realised if they can apply for tenders and can compete on a more level playing field. Any new process should be up to date and streamlined to avoid duplication of paperwork and the time that has to be spent on gathering information and submitting a tender. Small businesses should be able to utilise their time by applying to a process that avoids duplication of information and that is neither time-consuming nor costly. The cost to the public purse should be eradicated by removing duplication.

Through the introduction of the report’s recommendations, we must endeavour to assist businesses that are unable to secure work. They should be given clear guidance to ensure that the most suitable contracts are highlighted for them, thus encouraging the small business to compete. If they are successful in the tender process, payment for any completed work should be made promptly. All contracts awarded following the introduction of the process should be recorded and made accessible and transparent to all to ensure that the process is working correctly.

I add my thanks to the Chairperson and staff of the Committee for their hard work and to the stakeholders who took part in the lengthy inquiry. I support the motion.

Photo of Mitchel McLaughlin Mitchel McLaughlin Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I reiterate the thanks to the Committee members, especially the Committee Clerk and the secretariat, for their remarkable work in pulling together all the elements of our inquiry, which lasted a considerable time.

As the report points out, public procurement is an important element of the economy here, with central and local government spending upwards of £3 billion on it annually. Simon Hamilton and Declan O’Loan referred to the spend on the island of Ireland and the British and European markets. There are huge strategic interests for our economy in taking forward the type of procurement policies that would open up the potential and capacity of our local enterprises.

We have acknowledged over and over the predominance of smaller enterprises in the local economy. That issue keeps returning to the Chamber. We are absolutely dependent on them, especially given the paucity of public limited companies and enterprises that operate here. It is not just a dependency; they are an essential element of our economy. Any strategy has to take that reality into account if we want to grow the economy. There is also a growing awareness of the benefits that accrue from social economy enterprises and from operating a commercial business model that can compete in the marketplace but can also deliver social, community and ethical outcomes.

Internationally, the report addresses the fact that benefits can accrue to both the public sector and the wider economy from increasing the involvement of small and medium-sized enterprises in the government supply chain. The report also points out the obvious fact that access to a large and stable market provides social economy enterprises with a stronger basis from which they can deliver important social policy outcomes.

In light of the potential benefits, the Committee’s report calls on the Executive to develop a strategic policy for using public procurement, as far as is permitted under competition and employment legislation, as a tool to support the development of our smaller enterprises and to stimulate economic growth in the longer term. The Committee agreed that the implementation of such a policy would require a further cultural change. I agree with Members who said that this was not an exercise in bashing procurement agencies, but the Committee was obliged to draw the conclusion that there were cultural issues that needed to be addressed if innovative and more creative thinking were to be applied to the problem.

The Committee produced a considerable number of recommendations, each of which, I am sure, the Minister has read in the voluminous report. He will have a response to them all. He will be glad to hear that I do not intend to address them all; however, recommendations 8 and 9 go to the core of the issue. They advocate breaking the frameworks down into lots to make it possible to achieve the objective of involving as many of our SMEs as possible in the government supply chain and in providing services and helping to develop the economy. Those important points have already been addressed in the Assembly.

Recommendation 15, which deals with the same broad area, also points to the value of devising mechanisms, particularly through the Central Procurement Directorate, to encourage collaboration between SMEs and to enable them to compete with external competition, which may have an inherent advantage as regards critical mass, and bid for government contracts. As a matter of policy, the Executive should encourage collaboration so that SMEs can form consortia or joint ventures to compete for contracts.

Photo of Francie Molloy Francie Molloy Sinn Féin

I ask the Member to draw his remarks to a close.

Photo of Mitchel McLaughlin Mitchel McLaughlin Sinn Féin

In recommendation 18, the Committee recommended that the Minister of Finance and the Minister of Enterprise, Trade and Investment should give careful consideration to the establishment of a public procurement brokerage service to provide the benefit of a one-stop shop to companies that seek to compete.

I could say many other things, Mr Deputy Speaker, but I appreciate that you have indulged me already.

Photo of Tommy Gallagher Tommy Gallagher Social Democratic and Labour Party

I am happy to have the opportunity to speak about public procurement and will refer specifically to the prospects for business in Fermanagh and South Tyrone. My constituents often tell me that they regard the public procurement system as a waste of time and money. Having heard that view repeatedly for years, I asked the Finance Minister, in January, to detail the number of contracts that had been awarded to businesses in Fermanagh and South Tyrone. That threw up the information that, of more than 1,000 contracts that the Government offered in a two-year period, only eight were awarded to firms in Fermanagh and South Tyrone.

As has been said in many Assembly debates, there are many small businesses in the constituency of Fermanagh and South Tyrone. They make an important contribution to and provide badly needed jobs in an area that has suffered from economic disadvantage and a lack of investment. The figures that the Minister gave indicated that businesses in my constituency have received a very poor return. Contracts and, in particular, government contracts can go a long way towards helping ailing local economies.

I welcome the Committee’s report, because it focuses, in detail, on key issues, and, in compiling it, the Committee enlisted the help of experts from a wide range of interests. The recommendations that are worthy of mention relate to the perception that the procurement process favours larger companies and businesses at the expense of smaller businesses.

I am encouraged by some of the report’s conclusions and recommendations, particularly those relating to the way that larger procurement contracts can legitimately be broken down into smaller lots that can then be put out to tender. The report informs us that that practice is followed in many other countries and that it is approved by the European code of best practice. We can learn lessons from that.

The other matter that merits attention is the possibility of having a procurement website. The Department should establish a designated website, on which it should list all the contracts as soon as it is in a position to do so. The contracts would, therefore, be there for all businesses to see. It was interesting to read the surveys that were carried out by the Federation of Small Businesses and the construction industry. They showed that about 50% of firms across the business sector knew nothing about the procurement process. That demonstrates the value of education, and I hope that the Department will take that on board. I would like there to be a dedicated website.

I represent a border constituency. Some companies that are based in Fermanagh tell me that they can gain contracts in the Republic of Ireland, because they have done so previously.

Photo of Francie Molloy Francie Molloy Sinn Féin

The Member should bring his remarks to a close.

Photo of Tommy Gallagher Tommy Gallagher Social Democratic and Labour Party

An all-island website would benefit firms that are based in the border areas.

Photo of Fra McCann Fra McCann Sinn Féin 2:45 pm, 23rd February 2010

A LeasCheann Comhairle agus a chairde, ba mhaith liom tacaíocht a thabhairt don rún. I support the motion. Over the past number of months, nobody in the Committee for Finance and Personnel could have failed to pick up valuable lessons from the wide range of people who presented evidence to the Committee. It was a learning curve for me, and I drew much from the verbal presentations and many of the written responses that we received. I picked up a great deal from a cross-section of Committee members. I thank the Committee Clerks, who assisted us in our quest to find a better approach to delivering procurement, and Research Services, whose papers contained a mound of information.

We have all been made acutely aware of the huge impact that government spending on the procurement of services has had on the economy. It is also evident that we must ensure that a wider range of people in the business community have an equal opportunity to tap into that resource. Prior to the exercise, the general opinion was that, in procurement, big was beautiful. However that missed the point that the majority of businesses are small and medium-sized enterprises.

It also emerged that the microbusinesses that employ fewer than 10 people felt totally excluded from the procurement system. That highlights the necessity to adopt a different approach to ensure that the whole business community can operate on a level playing field. Time and again, we heard stories about people being discouraged from applying for contracts because of the bureaucracy involved or because they believed that the system was skewed in favour of larger companies with the capacity to manage the application system.

The Committee inquiry and the follow-up conference laid out many challenges for the Assembly and businesses alike. If the report is accepted, I hope that it will go a long way to delivering the changes that are required to deal with the sizeable problems in the procurement set-up.

The report highlights the fact that, in 2008-09, almost £2·4 billion was spent on the delivery of supplies and services and delivering contracts to the construction industry, which guaranteed the preservation of jobs across the North. I once heard it said that more than 2,000 small and micro businesses existed in west Belfast. If each could be encouraged to employ one or two additional people, the unemployment in that part of the city would be greatly reduced. Imagine what would happen if we could encourage those small businesses to tap into the procurement system.

Community enterprises find it impossible to get near the current procurement system. If that system were simplified, think of the impact that those community enterprises could have on localised employment and the delivery of services. Bryson Charitable Group is a community enterprise that is also an environmental employer. It delivers hundreds of jobs with a focus on recycling and other environmentally friendly programmes, including the warm homes scheme.

The report states that local commissioners and purchasers seemed reluctant to pursue social benefit through procurement. It also points to a need for greater clarity on the Executive’s intention for procurement policy and on the definition and measurement of social value.

I recently spoke to several party colleagues who have brought staff from the Department’s procurement section to their constituencies to meet local businesspeople to explain to them the best way to get on to the procurement ladder. For many who attended, it was the first time that anyone from a Department had been in their area. Roadshows should be organised throughout the North. Yesterday, the Minister of Finance and Personnel spoke about freezing rates and about the need for Departments to go into local areas to ensure that people have the information that they require to interface with whatever service the Government provide. The procurement gathering proved to be a huge success.

In Committee, I raised several problems faced by local builders who provide a building and design process not only for social housing providers but for a wide range of clients. That type of procurement process was challenged in the European courts, and a directive instructed that such procedures cease. I have since learned that the same procurement process was in operation in some English councils. When I asked why that was the case, I was told that those councils had adopted a more flexible approach to the European ruling, whereas staff in the Department of Finance and Personnel had adopted a policy that stuck strictly to the letter of the ruling.

Photo of Francie Molloy Francie Molloy Sinn Féin

The Member’s time is up. I call Mr Paul Butler.

Photo of Paul Butler Paul Butler Sinn Féin

Sorry, Mr Deputy Speaker. I was engrossed in conversation.

Photo of Mitchel McLaughlin Mitchel McLaughlin Sinn Féin

He was talking about the report.

Photo of Paul Butler Paul Butler Sinn Féin

That is right; I was obviously talking about the report.

I would like to speak on behalf of the Committee for Enterprise, Trade and Investment. I welcome the report, which contains five recommendations on the responsibilities of the Department of Enterprise, Trade and Investment and the Committee on public procurement. On a number of occasions, the Committee heard about the difficulties that small and medium-sized enterprises (SMEs) and the social economy sector face when tendering for public procurement contracts. Committee members are well aware of the issues, and, therefore, they will very much welcome the report’s findings and recommendations, particularly those that relate to the Department of Enterprise, Trade and Investment.

Indigenous SMEs are the lifeblood of the local economy, so it is vital that such businesses be given every opportunity to tender on an equal footing to provide the products and services that public sector organisations need to meet their objectives. In particular, the social economy here continues to grow, and it is very important to our economy. If accepted and implemented, the report’s recommendations will increase opportunities for the social economy sector and help to sustain and grow the number of jobs in that sector.

A number of recommendations consider how the Department of Enterprise, Trade and Investment and the Department of Finance and Personnel might work together. I am sure that, as the lead Departments for the SME sector and the social economy sector, DETI will work with DFP to consider and implement the report’s recommendations as effectively as possible and to the benefit of both sectors.

The report calls for the procurement board, in conjunction with DETI, to consider refining the definition of “small and medium-sized enterprise”. The Committee’s inquiry defined a small and medium-sized enterprise as an organisation with fewer than 250 employees. By local standards, any organisation with more than 100 employees is considered to be quite large. However, if we decide to change how we define the SME sector, we must be careful to ensure that any new definition remains compatible with the definition of an SME in Britain, the South and Europe.

The report also calls on the Minister of Finance and Personnel to liaise with the Minister of Enterprise, Trade and Investment to ensure that sufficient funding is in place for measures to build the capacity of small enterprises to access public sector supply chains. At present, many SMEs, including those in the social economy sector, face considerable difficulties, not least of which is the problem of attracting finance from banks. The Committee for Enterprise, Trade and Investment has engaged with banks to help to improve the situation for small businesses so that they can get loans, particularly through the enterprise finance guarantee scheme.

The Committee has endorsed DETI’s social economy enterprise strategy only if that is subject to the inclusion of financial commitments to secure its full implementation. The Committee will, therefore, welcome any constructive action to provide financial support for SMEs and social economy enterprises to build capacity.

As a member of the Committee for Employment and Learning, I welcome the report’s recomm­endations relating to social clauses, particularly those that put a commitment on businesses to have apprenticeship quotas, given the difficulties in the present economic climate. Members may recall that the Minister for Employment and Learning was asked about programme-led apprenticeships during Question Time yesterday.

The Committee for Enterprise, Trade and Investment welcomes the report overall. We hope that the Minister listens and implements its recommendations. Go raibh maith agat.

Photo of Francie Molloy Francie Molloy Sinn Féin

As Question Time is at 3.00 pm, I ask Members to take their ease for a couple of minutes. When we return to the debate, the next person to speak will be the Minister of Finance and Personnel.

Photo of Dolores Kelly Dolores Kelly Social Democratic and Labour Party

Mr Deputy Speaker, may I make my contribution to the debate after Question Time and before the Minister responds?

Photo of Francie Molloy Francie Molloy Sinn Féin

My point was that we are moving towards Question Time. You have two or three minutes to speak now.

Photo of Dolores Kelly Dolores Kelly Social Democratic and Labour Party

I will do my best. Thank you, Mr Deputy Speaker.

I will comment on behalf of the Committee for the Environment. The Committee discussed the procurement methods used by local government. In response to a request for more details about the process used by local government to award contracts, the Department indicated that a range of methods is employed. First, a business case is developed and approved at the appropriate level, which is dependant on the value of the contract. Then, the Department develops terms of reference, which are sent to Central Procurement Directorate (CPD) for a decision on whether framework agreements, call-off contracts or open competition are appropriate. At that stage, an evaluation panel is formed which, in conjunction with CPD, decides which methods will achieve best value for money.

The Department told the Committee that CPD provides assistance and guidance to local government procurement division at all stages during the process. The methodology and cost criteria defined by the evaluation panel are key to the decision-making process. The Department also provided the procurement thresholds for all public procurement along with a note that ministerial approval would be sought for any procurement exceeding £75,000.

Although that response provided the Committee with a factual account of the procedures that take place, members were quick to realise that it did not tell us how the more subjective decisions are made. The Committee is concerned that it appears that the same large firms are selected regularly while newer and/or smaller firms appear to be less successful. The Committee wrote back to the Department to ask for more insight into that. We also relayed our concerns to the Committee for Finance and Personnel, which was undertaking the review.

Subsequently, the Department explained that an evaluation panel assesses the extent to which each organisation tendering meets qualitative criteria and awards scores accordingly. That includes the panel’s consideration of whether the organisation has the capacity, experience and knowledge to complete the assignment successfully and will provide value for money for the taxpayer. The Department also suggested that, in the consideration of the latter, a company’s size might affect the result because, if the assignment is large and complex, smaller organisations with limited resources may not have the requisite capacity and experience to deliver the project. That appears to be at the heart of the procurement problem from the Environment Committee’s perspective. I urge central and local government to recognise the contribution that smaller and less experienced contractors can make and, where possible, within the guidelines, give them opportunities to develop and grow.

The Committee for Finance and Personnel recommended that there be greater synergy between central and local government purchasing policy and practice, with a view to achieving consistency in the application of good practice procurement across the public sector. Although I am unable to comment on behalf of the Committee on the precise model that may be adopted to achieve that, it is an admirable and sensible aspiration and one that could, and should, be used to help to address the problems that I have outlined.

The debate stood suspended