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8/7/2019 Getting the Little Guys In Doc

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Getting the Little Guys In:

How Government can Involve SMEs in ICT Projects



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Current obstacles to

SME Participation in

Public Sector ICT

Multiple obstacles exist to the participation of SME’s in Public Sector ICT, some of these

are described below.

It takes too long, and costs too much, to bid

As an example, a typical tender process for application development services in the public

sector will take from 6 to 9 months, and in some cases can be considerably longer. In

addition, the routine use of milestone based payments, whilst sensible in their own right,

mean that the winning bidder is likely to be in negative cashow on an opportunity for a

signicant period following contract award.

In order to sustain themselves, bidders need to be able to:

commit sufcient bid resources to support multiple tender processes, with an

average lead time from inception to receipt of income in excess of a year

maintain the specialist expertise required to understand and comply with the

standard terms of business used in the public sector

have sufcient nancial strength to sustain themselves during the period from

contract award to receipt of initial payments.

For a small supplier of ICT, it is easy to see that sustaining a quality pipeline of business

in this environment will be difcult and fraught with risk.

There are Incentives

on Customers to

Aggregate Demand

The cost and time overheads described above apply equally to public sector buyers.

Whilst there are opportunities to streamline the processes being used, all public sector

buyers must comply with procurement regulations, follow their own local policies, and

ensure that they engage effectively with a wide range of internal stakeholders in

delivering ICT projects.

These activities do not scale in a linear fashion with the size or complexity of the project.The cost of procurement, as a percentage of contract value, reduces signicantly as

the value of the contract increases. It would be difcult for any public sector buyer to

manage an ICT competitive dialogue process in a compliant manner with a budget of less

than 250k. It is no wonder that, when faced with a minimum cost base such as this,

sensible managers elect to aggregate requirements together and place larger contracts.



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Conicts of Interest

n Current Framework

Arrangements.

In response to the xed costs of running OJEU-compliant procurements, many

departments and collaborative procurement agencies have established framework

agreements: pre-competed lists of suppliers where the majority of the terms and

conditions are agreed in advance. These have great advantages: transaction times

and costs can be signicantly reduced and much of the specialist legal and commercialexpertise is no longer required.

However, the way in which current framework arrangements are placed creates obstacles

to the participation of SME’s.

The rst obstacle is one of size: framework agreements need to accommodate potential

contracts of widely varying values. As a result, bidders will only be able to succeed in the

framework competition if they have a high enough turnover and nancial strength to

support the largest potential contract. This locks out companies who are able to meet

some, but not all, of the opportunities being placed through the framework.

Most smaller companies respond to this by seeking to partner with existing, larger

framework providers, and with the prime systems integrators who support larger pub-

lic sector organisations. In exchange for a markup, the framework provider/prime will

subcontract most or all of a package of work to an SME, thus enabling a limited level of

participation.

However, this creates the second problem: the arrangement carries within it an inherent

conict of interest. Framework providers/primes will only seek the involvement of

a subcontractor in cases where it cannot meet the requirement with its own resources.

The current moratorium on ICT contracts illustrates this issue starkly: the rst response

of larger systems integrators to the cost reductions being sought is to cut out their

subcontractors in order to preserve their own staff. A logical reaction, but one that drives

SME’s out of the equation at exactly the time that the government wishes to bring them in.



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A new approach:

Framework-based

Electronic

Marketplaces

Any new approach to involving SME’s in public sector ICT projects needs to meet the

following success criteria:

It must be compliant with EU procurement regulations.

It must reduce the time taken to select suppliers and place contracts

signicantly, when compared to current procurement routes

It must reduce transaction/overhead costs for all parties

It must be supported by procedural changes in the way that ICT projects are

dened and delivered, to enable more exible, rapid decision making.

It is possible to change this, and to change it quickly, through the implementation of

one or more Framework-based Electronic Marketplaces. These would have the

following characteristics:

The scope of each framework is limited to a dened ICT category (potentially

in line with those used for existing BuyingSolutions frameworks)

Only one provider is selected per framework - the Market Manager

The role of the Market Manager is to:

establish and maintain an electronic trading environment for

SME’s to provide in-scope services, and for public sector buyersto publish requirements

provide central administrative services including registration,

prequalication of SME’s for different sizes of opportunity,

process management, provision of security vetting services for

market participants, marketing and promotion of the marketplace

within each market, to maintain and apply Market Rules: standard

terms and conditions and contracting procedures that enable the

rapid selection and engagement of individual SMEs to support

specic requirements.

The Market Manager recovers their costs through the application of a markup

to the services procured through the framework.

Crucially, the Market Manager must be a neutral party - not involved in directly

delivering the services themselves. This removes the inherent conict of

interest in the operation of current framework agreements.



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The Market Rules within each framework could then be tailored in order get the best value

from each class of services. For example, the contracting approach and terms for Agile

software development project may be very different from those for CLAS consultancy.

Framework-based electronic marketplaces offer a potential mechanism for delivering thisnew approach. This approach is based on tried and tested models already in use in both

the public and private sectors. The work currently being undertaken on the Government

App Store (G-AS) provides an opportunity to implement this kind of approach in a way

that complies with EU procurement law and widens the participation of SME’s in public

sector ICT.

Electronic marketplaces are not new - a number have been established within the public

sector in the course of the last decade. They provide an electronic trading environment

in which buyers can advertise their requirements to a pre-selected group of suppliers,

with the majority of the steps in the purchase to payment process automated.The Zanzibar platform provides an example of the efciencies that can be released

through this approach. However, these have tended to focus on improving the efciency

of existing supply arrangements, rather than as a mechanism for enabling new

providers to enter the marketplace. A Framework based e-Market can deliver a fast,

efcient mechanism for extending the involvement of SME’s in the delivery of

government ICT.

Next Steps We’re passionate about helping to make public sector software projects a success

story, whilst delivering signicant savings for the UK tax payer. We would welcome

the opportunity for a conversation about how we could help you deliver this vision.

Please contact

Kelvin Prescott

[email protected]

for more on the ideas in this paper

Andy de Vale

[email protected]

for more on the Agile Delivery Network.

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