RIA Response to Public Procurement: Growing British industry, jobs and skills
QUESTION 1a: To what extent do you agree or disagree that mandating large contracting authorities with spend over £100m p.a. to set 3-year targets for their procurement spend with SMEs and VCSEs and publish annual progress against these targets, would help increase spend with SMEs and VCSEs?
Mostly agree.
QUESTION 1b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. The targets set in 2015 by the UK government to achieve 33% (minimum) SME spend by 2020 had a clear positive result, shown in part by the overall increase in Network Rail’s SME spend over several years, from 12.77% in 2017/18 to 33.11% in 2023/24, with a peak of 40.15% in 2020/21.
2. For future reporting, RIA recommends that spend reporting be separated into:
a. Categories (for example, HR; utilities (hard); utilities (soft), etc.), which would facilitate more detailed analysis of the data and enable supplier groups and trade associations to monitor progress more effectively.
b. Direct spend (expenditure with SMEs contracted directly by the Contracting Authority) and indirect spend (expenditure with SMEs through the Contracting Authority’s Tier 1 and Principal Contractor supply chain). This approach offers a clearer picture of overall spend.
3. It should be noted that determining an entirely accurate figure for SME spend presents significant challenges, as the Contracting Authority depends on reporting from their supply chain. The complexity increases in the lower tiers of the supply chain.
4. Clarifying the definition of an SME is important, including consideration of small businesses owned by larger enterprises based overseas.
5. To reduce administrative workload for Contracting Authorities, it is worth considering whether suppliers should indicate their SME status during the tender process, such as ticking a box on an ITT or whether they can indicate it on the Central Digital Platform. Implementing this could support improved tracking, particularly if extended to procurements conducted by Tier 1 suppliers.
QUESTION 2a: To what extent do you agree or disagree that extending the requirements of section 70 of the Act to publish information on (i) all payments made under public contracts and (ii) payments under notifiable below-threshold contracts, would help increase spend with SMEs and VCSEs?
Disagree.
QUESTION 2b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. The proposed measure will likely not directly increase spend with SMEs and VCSEs, as it doesn’t introduce any new requirements around where the spend should be going. However, it could facilitate improved analysis of client spend by trade associations and supplier forums, especially looking at spending trends over time.
2. To support increased spending with SMEs, addressing barriers to entry and securing contracts remains important, including:
a. Ensuring ITT questions are streamlined, clear, and relevant to the framework or contract content and scope.
b. Utilising provisions in PA23 to reserve suitable contracts and frameworks for SMEs and VCSEs.
c. Enabling groups of SMEs to form bidding consortiums, which may help sustain competition in the market.
d. Additional measures as appropriate.
QUESTION 3a: To what extent do you agree or disagree that requiring contracting authorities to exclude suppliers from bidding on major contracts (+£5m per annum) if they cannot demonstrate prompt payment of invoices to their supply chains (within an average of 60 days) would help improve late payment by suppliers to the public sector?
Agree
QUESTION 3b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. Meaningful changes often require a binding target, as demonstrated in 1b.
2. RIA SME members have consistently identified prompt payment, including from ALBs and Tier 1s/2s, as a key priority, and something that regularly negatively impacts cashflow.
3. RIA also recommends clarification on the period used for calculating average payments and proposes a 12-month rolling average. This method would reward consistent positive behaviours over time while allowing suppliers working to improve their metrics to see change reflected more quickly.
4. RIA would suggest that disputed invoices should not be counted in reported figures as to not unfairly penalise companies; however, companies should be required to report their proportion of disputed invoices. If there is a consistently high proportion, this should flag a concern to be investigated.
5. Clarity will need to be provided on whether such policies would apply throughout the supply chain, similar to the 30-day payment terms in PA23; and the duration (if any) of any exclusion of suppliers, and any resulting impact on the availability of relevant suppliers for tenders. Long-term mandatory exclusion for suppliers unable to demonstrate prompt payment compliance may create challenges if it results in limited supplier options on critical procurements. Flexibility may be needed for suppliers who show improvement trends, or where issues stem from system problems or a high proportion of disputed invoices.
6. RIA notes the intent detailed in the consultation to reduce the payment target and recommends bringing it down to 45 days as soon as practical. Publishing a roadmap or timeline with milestones for reducing the target would ensure transparency.
7. Finally, a mechanism may be needed to track invoice values alongside prompt payment metrics. For example, a supplier could pay a large number of small invoices
very quickly, but delay the payment of a smaller number of large invoices, which would positively skew their average
QUESTION 4a: To what extent do you agree or disagree that there should be flexibility for contracts for people focused services to be awarded without competition?
RIA will not respond to this question.
QUESTION 4b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
See 4a.
QUESTION 5: Are there other services delivered to vulnerable citizens (beyond adult and children’s social care) that warrant procurement processes not permitted in the Procurement Act 2023? Please include i) the CPV code where possible and description of the services; ii) the nature of the problem faced; iii) the optimal policy solution(s).
See 4a.
QUESTION 6: Do you have any examples where people-focused services have been procured well? Do you have any suggestions for changes to the processes available under the Procurement Act or guidance that could improve procurement of these services?
See 4a.
QUESTION 7a: To what extent do you agree or disagree that contracting authorities should be required to undertake a public interest test and publish it when making sourcing decisions?
Somewhat disagree
QUESTION 7b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. A public interest test would introduce a regulatory/procedural barrier to procurement and could deter individuals in CAs from outsourcing and could increase costs (because of the need to appraise many factors). There is a risk of unintended consequences. The concept needs to be approached at a strategic level, not a case-by-case level. A more realistic approach would be to expect all CAs to produce a multi-year sourcing strategy, which is consulted on with the supply chain and supports greater certainty and visibility on procurement approaches.
2. In rail especially, much of Network Rail has moved to become a ‘thin client’ and outsource a proportion of technical capability to the supply chain. A change in the opposite direction would be extremely challenging. The railway is reliant on a wide range of niche technical skills, many of which are not required consistently throughout the year or are in short supply – it would be unrealistic for a client to
bring these skills inhouse. For example, with transport budgets being devolved to city regions, for every city region to have in-house capability would require a huge uplift in the skilled workforce across the country.
3. For any test, CAs should carefully weigh the whole-life value, costs, and savings associated with both insourcing and outsourcing, and publish a cost/benefit analysis. While insourcing may offer up-front savings, outsourcing can deliver wider benefits, such as access to specialised supply chain expertise – especially relevant in complex sectors like rail. Outsourcing also often benefits the broader UK economy by supporting domestic companies, creating jobs, and contributing to public finances.
4. If this proposal is taken forwards, there should be a minimum threshold (e.g. £1m, suggested by some RIA members) that triggers a public interest test; and a system should be put in place for the supply chain to challenge decisions if there is clear insufficient market knowledge or inadequate consideration.
QUESTION 8a: To what extent do you agree or disagree that requiring authorities to set an award criteria which relates to the quality of the supplier’s contribution to jobs, opportunities or skills for all public contracts over £5m and with a minimum evaluation weighting of 10%, will help to deliver social value that supports economic growth?
Somewhat agree.
QUESTION 8b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. Applying standardised criteria to every contract or project is challenging; therefore, criteria should be flexible enough to accommodate different contexts. Clarity would be needed on what activities would be/not be in scope.
2. Engagement with supply chain and local authorities prior to the publication of an ITT will be key for CAs to choose criteria that are relevant and achievable for the types of suppliers bidding for the contract.
3. The award criteria should be proportionate so that SMEs or organisations with different functions are not disadvantaged due to limited resources or capacity to hire or train employees. It should be clarified whether social value (SV) activities aimed at improving skills and opportunities in the broader community external to the organisation (e.g. participating in school engagement; charitable work; supporting local VCSEs/initiatives) are seen as equally beneficial as hiring and directly employing local people within the organisation. Organisations differ in their capabilities according to their size and type of operation, which leads to varying capacities and approaches to SV work.
4. Certain contracts, by their nature, may offer fewer opportunities to generate SV. For example, consultancy frameworks often involve the consultant providing personnel already employed by the supplier into the client for defined periods, limiting the scope for job creation, new skills, or training. In such cases, SV might need to be generated through wider activities by the supplier.
5. RIA SME members report struggling to meet the same targets as larger companies, particularly when suppliers of different sizes compete for the same contracts. SMEs
often do not have dedicated bid teams and can struggle to respond to long and complex ITTs
6. It is also worth noting that SV other than jobs, opportunities and skills can be extremely beneficial and should not be pushed out entirely – a move in this direction could create an unfair playing field.
QUESTION 9a: To what extent do you agree or disagree that, where authorities have set social value award criteria relating to jobs or skills, mandating that they also set at least one KPI on social value delivery, and subsequently report performance against a social value KPI (published in the contract performance notice), will support transparency of progress against social value commitments?
Agree
QUESTION 9b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. RIA members regularly report that they are required to respond in detail about their proposed social value activity when tendering for public works, and spend a significant amount of time and internal resource planning a social value programme for the duration of a project, only to not be measured on their work or asked for updates. This makes social value often feel like a tick box exercise in the tendering stage, and does not encourage true social value but 'quick fixes'. Many suppliers are committed to delivering true social value, and are active in the communities that they are based in and work, and this work should be reflected in the wider benefits of public projects. The proposed approach would also hold any companies overpromising in beds and tenders to account.
2. KPIs will need to be flexible to allow for changes in funding/project scope/other unseen complications. RIA has heard from several members that they have seen a much lower level of work coming through frameworks than anticipated and so have been unable to fully meet the social value commitments that they originally made in their bids.
3. Finally, suppliers need certainty of forward pipeline in order to invest in skills and training. A long-term, high-value framework with a good availability of work will allow suppliers to create new jobs, hire new employees, and provide development opportunities, but a supplier on a framework with uncertain work availability will struggle to achieve the same results.
QUESTION 10a: To what extent do you agree or disagree that requiring contracting authorities to use standard social value criteria and metrics selected from a streamlined list (to be co-designed with the public sector and suppliers) in their procurement of public contracts will help to deliver social value in a proportionate manner.
Somewhat agree
QUESTION 10b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. The point is somewhat oversimplified - in order to produce an ITT that encourages proportionate assessment, the criteria should be left as open as possible, and the metrics clearly laid out and made as simple as possible. Simplicity of approach is good, but it needs to be adaptable and flexible enough to be applied to the wide range of contract types across the public sector. Metrics also only go so far – for example, ‘volunteering hours’ can constitute a wide range of activities with differing social value
QUESTION 11a: To what extent do you agree or disagree that contracting authorities should be permitted to define the geographical location of where social value will be delivered as described above? Do you have any suggestions for innovative ways of delivering social value including by creating more flexibility in the current requirements in the Act on relevance and proportionality?
Somewhat agree.
QUESTION 11b: If you wish to explain why you do or do not agree that the proposed measure reflects or delivers the policy intent described above, please do so here.
1. For projects anticipated to take longer than an agreed period (some RIA members suggested a minimum of one year), CAs should be able to define the geographical location as being local to the project. 12 months would provide suppliers with enough time to plan and execute social value (SV) activity around jobs and skills local to the project. However, it is worth noting that companies report needing approximately three years of work certainty to invest in new jobs, so this must be considered when planning SV metrics for contracts.
2. As mentioned above, any SV requirements must be proportionate to the type of organisation expected to bid. For example, an organisation that works on the physical infrastructure of a project will be much more likely to be able to demonstrate wins in employing local people, whereas a digital systems integrator or components manufacturer may struggle, especially if the majority of their operation is desk-based or tied to one or more specific locations (factories, depots, etc). CAs need to be able to take this into account when setting SV requirements.
3. It will be important to set out how location may or may not affect how a bid is measured, e.g. if the location is determined by the supplier's base, would responses from more socially deprived areas be given more consideration than those from less deprived areas; and will this unfairly benefit some suppliers over others?
4. Innovative approaches and technologies often rely on regional take up with routes to national scaling. It is important to ensure that geographical SV requirements do not inadvertently prevent this growth from occurring.
5. Many suppliers will have developed an SV model that aligns with the current requirements, which often do not require for SV to be generated in the local area to a project. Any changes to how SV requirements can be set must be communicated clearly and well in advance so suppliers can modify their approach accordingly without incurring significant costs.