TenderScout Irish Public Procurement - Survey & Analysis 2014:15

The State of Irish Public Sector Procurement 2015A study of Cost, Competiveness and Collaboration – the steps to success

..Cost Competitiveness Collaboration

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EDITORIAL SUMMARY

REPORT OVERVIEW

SURVEY FINDINGS – AT A GLANCE

SECTION1 SETTING THE STAGE: UNDERSTANDING THE PUBLIC PROCUREMENT LANDSCAPE The Irish Procurement Market – background and impact of new initiatives Perception and study of The Office of Government Procurement

SECTION2 COST, COMPETITIVENESS, COLLABORATION The Cost of Tendering Competiveness for business growth Collaboration – Collaborate or Die

SECTION3 THE FUTURE The Legal Services sector – a window to the future for all

SECTION4 CONCLUSIONS & RECOMMENDATIONS Report Conclusion Report Recommendations

SECTION5 ABOUT TENDERSCOUT / THE REPORT & INDEX About TenderScout About this Report - data points Index & Key References

TABLE OF CONTENTS5

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Public Procurement 2015

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Editorial summary

About the AuthorTony Corrigan is a leader in public sector procurement in Ire-land. He is the Founder and CEO of the multi award-winning TenderScout. Tony provides competitive intelligence for com-panies competing for public and private contracts.

With public sector contracts representing 12% of the Irish economy, public procurement impacts on more than185,000 businesses and is, a cornerstone of sustainable economic re-covery. After five years in decline, spending will rise in 2015 by €0.5 billion to an estimated €9 billion1.

Multiple government initiatives from the formation of the of the Office of Government Procurement (OGP), to Circular 10/14 and the Tender Advisory Service (TAS) which pro-vides guidance on specific tenders have been launched with a view to increasing participa-tion amongst suppliers and diversity for buy-ers.

And yet, despite these reforms and some streamlining of the procurement process, it has become considerably harder to win gov-ernment contracts.

The OGP, formed in 2013, has had a dramat-ic effect on the procurement market. It has spearheaded public procurement prossional-

ism at such a pace the private sector is strug-gling to keep up.

Moreover, our analysis shows that the num-ber of opportunities for small and medium sized Enterprises (SMEs) is decreasing, as con-tracts become larger and qualification criteria more challenging.

However, there a number of key areas in-cluding transparency and more timely mar-ket engagement which, if effectively tackled, would make a real difference to perception, participation and success of the system.

Public procurement is the single most im-portant mechanism whereby government can demonstrate its commitment to the recovery of the economy. By providing a public pro-curement framework that enables business to compete to the best of their ability, govern-ment is not just supporting domestic growth, but is also providing a platform for Irish busi-ness to compete in global markets.

1 http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2014101700011

Tony CorriganCEO

Public Procurement 2015 Public Procurement 2015

Next Chapter : REPORT OVERVIEW

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Report OverviewThis report is based on the findings of a TenderScout Survey, which gives voice to those most

impacted by public procurement changes – Irish businesses. Our national survey was conduct-ed in November 2014 in conjunction with Amarach Research.

We have analysed responses under

• The Cost of competing for public sector contracts• Competitiveness within public procurement processes• Collaboration as a tool to effect better outcomes

- the three crucial components of supplier success.

We have also provided an examination of the Legal Services sector. The changes we see in this industry serve as an early warning to other sectors as it is at the forefront of public procure-ment reform and serves as an indicator of public procurement’s evolution.

More importantly, this report provides recommendations based on our engagement with over 1,000 suppliers across the country to boost confidence in the system. Without confidence that the system is working for both the government and business, suppliers will not participate. Government will ultimately receive less value for money and suppliers will not develop the ca-pability to compete in other markets.

A total of 115 separate Irish firms, tendering into the public sector took part in the survey. 68% of respondents were executive managers, while 20% were part of the sales function.

The firms were primarily tendering in the following categories:

The survey of Irish Suppliers 2014 includes

Firms were primarily located in Dublin


Next Chapter : SURVEY FINDINGS – AT A GLANCE Next Chapter : SURVEY FINDINGS – AT A GLANCE

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Survey Findings – at a glance

Top 10 OBSERVATIONS FROM THE TENDERSCOUT SURVEY

22% of companies don’t request a debrief from the buyer – they are unlikely to ever improve their performance

43% of companies are unlikely to collaborate with other businesses – effectively ruling them-selves out of many opportunities

29% is the average success rate for suppliers – indicating a ‘spray-and-pray’ approach to ten-dering

58% of companies don’t use competitive intelligence – they lose twice as often as those that do

€25 million is the amount spent by suppliers competing for tenders that are ultimately can-celled

69% of contracts are awarded primarily on price – this is the most significant factor in winning or losing

57% of suppliers wait over three months for the result of a tender competition, which impacts their ability to operate their business efficiently

26% of suppliers are more encouraged to participate as a result of Circular 10/14 – but they’re not likely to be successful without other measures

€2.7 billion is the value of government contracts that aren’t advertised because they are below threshold

>70% of tendering companies have fewer than 50 employees – they win less than 20% of the time

Setting the Stage: Understanding the Public Procurement Landscape

The Irish Procurement Market – background and impact of new initiatives

A welcome improvement to etenders.gov.ie is the availability of historical tender documents. This increases overall transparency and provides SMEs with a better understanding of buyers’ requirements over an extended period.

However, the current eTenders system doesn’t go far enough. There is no facility to deter-mine whether a contract has been awarded or cancelled, leaving suppliers in the dark over the outcome of contracts; a significant omission considering that 13% of tenders are cancelled with-out any award being made.

Even when award notices are published, there is significant inconsistency in the format and content of the information provided. In several cases, award notices were published without any actual award information3.

The number of missing award notices improved in 2014, although the rate of compliance is still dreadful. On August 18th, buyers were directed by the OGP to enter award details and value for all tenders and all competition types - including mini-competitions – in accordance with Cir-cular 10/14. Interestingly, up to that date, some 26% of tenders listed on eTenders had a corre-sponding award notice, yet after that date compliance slumped back to 20%, giving an annual average of just 24%. In 2013, the rate was 20%, so the trend is going in the right direction but is still unacceptably low. If suppliers are to have faith that the system will treat them fairly, the very first step has to be full disclosure around contract awards.

2 http://reformplan.per.gov.ie/downloads/files/Reform%20Plan%202014.pdf3 https://irl.eu-supply.com/app/rfq/publicpurchase_frameset.asp?PID=77845&B=&PS=2&PP=ctm/Supplier/PublicTenders

The Public Service Reform Plan 2014-20162 sets out an ambitious proposal to generate sav-ings of up to €500 million over a three-year period. Its strategy is based on the recently established Office of Government Procurement (OGP) setting and enforcing policy, cou-pled with centralised spending.

Success is dependent on strong compliance across the public service. Unfortunately, buy-ers all too often procure outside of formal contracts or frameworks, sub-divide contracts to avoid having to advertise opportunities, or in some cases simply ignore the rules.

SECTION 1


Next Chapter : SETTING THE STAGE: UNDERSTANDING THE PUBLIC PROCUREMENT LANDSCAPE Next Chapter : COST, COMPETITIVENESS, COLLABORATION

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Circular 10/14 - Participation does not equal success

Circular 10/144 - the only reform measure associated with SME participation - introduced in April 2014 has found favour with SMEs. 26% intend to participate more in 2015 as a direct result.

However, a guidance document on its own will not change the culture and practices amongst buyers. Without penalties or sanctions when directives are ignored and training to support full adoption across the public sector, it’s difficult to see that these measures give anything more than false hope to suppliers.

4 Circular 10/14: Initiatives to assist SMEs in Public Procurement, 16 April 2014, Department of Public Expenditure and Reform

26% of TenderScout Survey respondents are encouraged to participate more in 2015

Frameworks

Frameworks designed to cover national purchasing requirements are increasingly common. Circular 10/14 promotes subdividing a framework into lots so that smaller businesses can bet-ter compete for public contracts. The policy is clear that the division of public contracts into lots

Award notices are up 5%, although the number of contracts is down.

Supplier education inititatives may increase participation but not quality

Supplier education initiatives, such as Meet the Buyer and Go-2-tender, are failing to stem the volume of poor-quality submissions. With increased participation comes the responsibility of ensuring that suppliers understand the cost of participation and managing expectations of success. Otherwise, the impact of higher participation levels will be a further rise in the amount of money wasted writing losing proposals (estimated by TenderScout to be more than €150 million in 2014).

5 http://www.per.gov.ie/greater-opportunities-for-smes-in-e12-billion-public-procurement-market/6 http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/smes-access-and-aggregation-of-demand_en.pdf, pg96

New initiatives are increasing competitionThe TenderScout survey suggests that the number of companies that competed for one or

more public sector contracts in 2014 was around 11,000, just 6% of all firms registered in the state. A recent Intertrade Ireland report notes that 14% of business (both North and South) competed for a contract in at least one jurisdiction5.

The highest levels of participation come from large suppliers in sectors such as legal, utilities and ICT and who typically compete over 50 times per year.

The TenderScout Survey shows that the extensive government efforts to encourage participa-tion are having an impact: 31% of all respondents are either fairly or completely encouraged to participate in light of new initiatives.

Irish contracts currently attract an average of 6.7 proposals6 and it’s not unreasonable to expect this average to increase to 8 proposals in 2015.

should not compromise efficiency and value for money. Lots should be obligatory, as allowed for in the new directives, but many contracts (e.g. implementation of an IT system) may prove unsuitable and therefore be out of reach of smaller businesses.

31% of TenderScout Survey respondents intend to compete for more contracts in 2015


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The TenderScout Survey shows that 30% of suppliers only compete for contracts below the €25,000 threshold that necessitates a formal tender. A further 39% of suppliers compete na-tionally and the remaining 31% compete for high-value tenders advertised throughout Europe.

So, no room for SMEs?

TenderScout interviewed more than 100 SMEs throughout 2014 and their comments support the assertion that despite government claims of improved access, in reality SMEs find that ten-ders are designed to minimise SME participation (e.g. minimum turnover or insurance require-ments, or the catch-22 prerequisite of prior experience within the public sector).

Furthermore, the government policy of promoting participation without improving proposal evaluation can have only one outcome: more SMEs writing more losing proposals. The impact of this is the very real loss of jobs in communities throughout the country.

Programmes such as Meet the Buyer provide training and access to buyers. But above all, they provide hope. Many of the SMEs we interviewed that have completed this training have in-deed been encouraged to participate. Unfortunately, these events don’t result in more success for SMEs, merely more participation.

Government policy should not aim to increase participation, but to increase success rates for SMEs. By way of comparison, SMEs won over 50% of Australian contracts in 20147. The OGP itself notes that, “SMEs account for 99% of total companies, they deliver less than half of the re-quirements of contracting authorities. And small companies deliver less than one third of these business opportunities.”8

7 http://www.supplymanagement.com/news/2014/smes-win-more-than-half-of-australian-government-contracts8 http://www.procurement.ie/sites/default/files/are_tenders_on_your_radar-2.pdf

TenderScout Survey respondents compete evenly across different procurement thresholds

The OGP is an office within the Department of Public Expenditure and Reform. It has been tasked with centralising public sector procurement arrangements for common goods and services.

9 http://www.cmi-ireland.com/news/2014/01/21/the-office-of-government-procurement-(ogp)-commences-next-phase-of-re-cruitment-campaign10 http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2014120900084#WRJ0050011 http://www.limerickchamber.ie/wp-content/uploads/2012/11/ChambersIreland_AStrategicPublicProcurementPolicyforIre-land_Final2.pdf12 http://www.procurement.ie/news/20713 http://www.procurement.ie/news/212214 http://www.sfa.ie/Sectors/SFA/SFA.nsf/vPages/News~submission-to-the-public-accounts-committee-on-smes--and--public-procurement-07-04-2014/$file/PAC+re.+Public+Procurement.pdf

Training has commenced to ensure that members of the OGP staff have the skills and knowl-edge to work to a common standard in the areas of Core Procurement & Category Management Training, Public Sector Procurement and Customer Service by early 2015.

Despite several years of standardisation, which started with the National Procurement Ser-vice, the quality of Requests for Tender (RFT) is often poor and the experiences of suppliers when participating is highly variable.

Increased training and centralisation will certainly improve this, but until such time as OGP staff are fully trained and sufficiently empowered to impose standardisation across the entire public procurement sector, suppliers will have to spend far more effort than is necessary to respond to public procurement opportunities.

A Chambers Ireland report in 201211 expressed concern that locating the OGP within the De-partment of Public Expenditure and Reform suggests that its main priority is cost-cutting. The evidence would suggest that it has been very successful in this regard, achieving a 30% saving on the supply of personal computers12 and an estimated €3 million in respect of Freedom of Information training to public bodies13 to name but two instances.

However, it is not clear that these savings are sustainable. While the OGP has, as noted else-where in this report, led the way in the professionalisation of procurement in Ireland, it is doing so at the expense of a vibrant SME sector and with a very real impact on the ability of SMEs to sustain existing employment levels.

The Small Firms Association’s (SFA) submission to the Public Accounts Committee14 found that 82% of members surveyed believed the emphasis was on price rather than value for mon-ey, a figure mirrored by the TenderScout Survey.

Perception and study of The Office of Government Procurement

Initial staffing levels for the OGP were set at 2269 and later revised to 213. As of Decem-ber2014, 139 positions have been filled (60%) with 55 (25%) starting in Q1 of 2015. This leaves just 34 positions to be filled10.



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Suppliers are essentially saying that the public sector is not effective, commercially astute or accountable. This is surely unacceptable, given the central role of public procurement in pro-moting jobs recovery and a vibrant economy.

We also asked business to rank, in order of importance, the features they felt were character-istic of a government buyer that is a “world-class customer” .

What business is looking for and how its rates the OGPWe asked business to consider their experiences with government buyers in terms of the

characteristics of the procurement process that were most important to them.

Public sector buyers are rated either very bad or fairly bad on average 48% of the time across all features of “world-class customer”. Buyers are rated as fairly good just 12% of the time, while the only category where buyers perform reasonably well is Payment on Time.

Suppliers felt that the most important aspects of engagement with a “world-class customer” were centred around ensuring effective sourcing of suppliers, a commercially astute process, that both buyers and suppliers were measured on outcomes and that there was timely en-gagement. The aspiration is informed buyers selecting and managing suppliers effectively and measurably.

TenderScout Survey: effective, commercially astute, engaged and outcome-focussed buyers are rated highest

TenderScout Survey: public sector buyers rated fairly bad or very bad 48% of the time, compared to a “world-class buyer”

The Tender Advisory Service (TAS) will make little difference

In order to address the concerns of SMEs, the OGP launched the Tender Advisory Service (TAS) on February 1st, 201515. This service gives an informal outlet for potential suppliers to raise concerns relating to any live tender process and increases the professionalism and consistency of procurement across the public service. General queries around procurement are answered by this service, while more complex queries are directed to the procuring authority (which in an increasing number of cases is the OGP itself).

It’s difficult to see how the TAS is adding anything meaningful to the procurement landscape. General information is already provided through the Meet the Buyer programme, while procure-ment regulations should provide for transparent communications on more complex queries.

Calls have been made for the creation of an Ombudsman. ISME16 has suggested that a pro-curement Ombudsman could audit buyers and contract awards and hear from suppliers, in order to make recommendations for improvement.

15 http://www.procurement.ie/sites/default/files/tender_advisory_service_final.pdf16 http://www.irishexaminer.com/business/smallbusiness/calls-for-public-procurement-ombudsman-office-297583.html



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What’s next for the OGP?

In 2014, the number of frameworks increased by 30% from 201317. However, most framework agreements do not place any obligation on the purchasers to actually buy anything. In fact, the OGP is constantly challenged by public sector bodies purchasing outside of frameworks, if the requirement doesn’t fit into the framework agreement or they think they can achieve better val-ue for money by not using it. The use of frameworks will increase in 2015 and higher compliance can be expected as the OGP nears its full complement of staff.

17 etenders.gov.ie – 249 in 2013, 327 in 201418 http://www.procurement.ie/sites/default/files/ogp_target_schedule_of_contracts_and_frameworks_2015_1.pdf

2015 Target Schedule of OGP Contracts/Frameworks

Cost, Competitiveness, Collaboration

For below-threshold tenders, 57% of suppliers spend a maximum of €2,000 on their submis-sion. 26% spend up to €5,000 and just 14% spend more than that.

Below-threshold tenders (<€134,000)

19 http://www.procurement.ie/sites/default/files/national_procurement_conference_-_the_irish_procurement_landscape_-_vincent_campbell_16.02.02.pdf20 www.lexmundi.com/Document.asp?DocID=671, TenderScout Analysis of 200+ winning proposals

TenderScout Survey: 60% of suppliers are under-investing in their proposals

There is limited research globally into the real cost of supplier participation in procure-ment markets. The National Procurement Service has estimated that the cost of partici-pation in a procurement competition is €4,500 per supplier19. LexMundi estimates a legal proposal, for example, will take 40-5020 hours to compile (at a cost of around €6,000).

The TenderScout Survey, together with an analysis of over 100 procurement competi-tions in 2014, has been used to develop a comprehensive understanding of the real cost of participation and success.

Many of the suppliers that attended our seminars in 2014 expressed scepticism over the cost of competing for a contract, while at the same time noting that their success rates were approxi-mately 10%. It’s not unreasonable to assume that the suppliers who invest more are more likely to win more.

SECTION 2

The Cost of Tendering


Next Chapter : COST, COMPETITIVENESS, COLLABORATION Next Chapter : THE FUTURE

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For above-threshold contracts, 48% of suppliers spend up to €5,000, while 35% spend up to €10,000. Some16% spend more than that.

Investment in above-threshold contracts (>€134,000)

TenderScout Survey: Suppliers take higher value contractsmore seriously and invest more

Analysis of the success rates volunteered by survey respondents paints a worrying picture of the true cost of winning a tender. On average suppliers only win one in every four tenders they compete for.

For below-threshold tenders, suppliers need to spend at least €8,000 to win a single contract, while the above-threshold figure is at least €19,000.

The real cost of winning a tender

TenderScout Survey: suppliers write four proposals to win one contract

The worst performing 25% of suppliers spend 1.7%21 of turnover on tendering activities to achieve a 16% success rate. They compete opportunistically. They write proposals for opportu-nities as and when they arise on etenders.gov.ie, typically without any prior knowledge of the buyer needs or whom their competitors are likely to be. Often without any prior knowledge of the buyer and certainly with limited procurement expertise.

The best performing 25% of suppliers spend up to 5.8% of turnover on tendering and enjoy a success rate of 60%. They compete strategically; they tend to know about the opportunities they want to compete for before they are advertised publicly. They invest in sales development activ-ities such as relationship management, building proposal material and seeking out competitive intelligence to give them the best chance of success.

Success in procurement competitions is closely aligned to the level of investment in pre-sales activities

Most suppliers tend to put their own proposals together. Nonetheless, it is quite rare to find a supplier that is as familiar with competitive procurement as they are with the core elements of their business. The figures bear this out. 85% of proposals submitted to procurement com-petitions lose. Our experience of evaluating proposals for and interviewing buyers suggests that of those 85%, at least 60% of proposals submitted to the majority of competitions should never have been written. They stood almost no chance of success because they were not credible and demonstrated poor understanding of the buyer or the required solution.

Public sector procurement has become increasingly professional and specialised; suppliers that are successful have developed their own in-house capability. They may occasionally sup-plement this with outsourced procurement expertise.

The cost of procurement expertise

21 intergon.net/crcci2006.doc, Clients Driving Innovation: Moving Ideas into PracticeCost of Tendering: Adding Cost Without Value, Professor John Dalrymple, http://governmentexpress.com/articles-proposal.html

Opportunistic vs Strategic


Next Chapter : THE FUTURE Next Chapter : THE FUTURE

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Outsourced procurement expertise costs from €400 per day to over €1,000 for the most skilled practitioners. Rather than investing in ‘proposal writers’ suppliers would benefit more from developing writing skills in-house and utilising external expertise to provide market intel-ligence and insight that directly impacts the chance of being successful.

Competiveness for business growth

Competing in a buyer’s market

With centralisation has come a concentration of expertise and, more significantly for sup-pliers, a better understanding of how to extract maximum value from suppliers. Indeed, the transformation has been so successful that many private sector contracts are starting to follow similar rules and procedures.

Suppliers and industry bodies have been so focussed on the impact to their business that they failed to take note of the changing landscape. In this new era, suppliers can no longer rely on their status as incumbents or long-standing relationships with buyers. Many have already been caught unawares as established contracts are put out to tender for the first time this year. Suppliers with limited experience of competitive tendering are suddenly finding themselves at a disadvantage when it comes to retaining contracts.

The increased professionalism of the public sector is best demonstrated in the two market surveys conducted by the OGP for legal services22 and consultancy services23 (October 2014). In each case, suppliers were asked to voluntarily contribute market intelligence about the range of services they provide, how and what they charge, who they provide services to, what metrics their performance was measured by and what their competitive differentiators were.

Many of the suppliers that we spoke to were naturally concerned about how this information would be used, but provided it anyway. It’s not clear how they thought that providing compet-itive information about their market position to their primary customer was likely to benefit them – it’s certainly not information they would give to a competitor.

22 https://irl.eu-supply.com/app/rfq/publicpurchase.asp?PID=79038&PP=ctm/Supplier/PublicTenders&B=&PS=123 https://irl.eu-supply.com/app/rfq/publicpurchase.asp?PID=82257&PP=ctm/Supplier/PublicTenders&B=&PS=1

Much industry commentary in 2014 has focussed on the perceived short-comings of Gov-ernment Policy or it’s implementation at the hands of the OGP. The fact of the matter is that the OGP has been at the forefront when it comes to adopting a professional ap-proach to procurement. Their use of competitive intelligence techniques such as market surveys and data analysis is giving them a comprehensive perspective on the procure-ment landscape and the strategies required to maximise the value achieved form.

Unless suppliers take a similar attitude and improve their ability to compete both against each other and within a more competitive landscape, they are going to end up competing on price and can expect to lose more often.

TenderScout Survey respondents make littleuse of competitive intelligence to improve success rates

Competitive intelligence: process or tool? Difference between winners and losers.

The most commonly used process, bid/no-bid, involves decision-makers discussing the rel-ative merits of an opportunity and deciding whether or not to develop a proposal. If this is the only technique used, decisions tend to be based on instinct and more proposals are written that should be.

The most commonly used technology is Customer Relationship Management (CRM) for main-taining client information and sales leads. CRMs are not ideal however for capturing or inter-preting decision-making information around the procurement process and consequently have limited impact.

The TenderScout Survey found that competitive intelligence tools and processes are most impactful when used in combination. Suppliers that used just one technique were successful between 25% and 31% of the time. Those that used four or five of the techniques identified in the survey won between 47% and 49% of the time. Unfortunately, the vast majority of suppliers use minimal competitive intelligence and consequently lose the vast majority of proposals they write.

The TenderScout survey found that 43% of the time suppliers use a standardised bid/no-bid process to decide whether or not to write a proposal. Techniques to better understand the cus-tomer’s needs, buying preferences and relationships are used 27-29% of the time, while just 32% of suppliers profile their competitors. In a further 17% of cases (Other) the most common response was, “We use instinct.”



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Number of Techniques Used

TenderScout Survey: extensive use of competitiveintelligence doubles success rates

Competitive landscape - a look at success rates

According to the TenderScout survey, the average success rates for Irish suppliers when competing for below-threshold tenders is 29% and 26% for above-threshold tenders. However, within this result are extreme variances – from10% to 90% for individual suppliers.

A similar survey commissioned by the European commission, DG Internal Market and Ser-vices notes that success rates do not differ by size of supplier. Smaller firms in sectors where volume pricing is important fare less well than larger ones, a fact noted by the Irish Book In-dustry Forum in their briefing document Government Needlessly Ruining our Book Industry24

TenderScout Survey: the average win rate is less than 30%

24 http://www.publishingireland.com/wp-content/uploads/2014/04/Irish-Book-Industry-Forum-Briefing-Document.pdf

In follow-up interviews, many suppliers consider a success rate of almost 30% to be a great achievement. In actual fact, the top suppliers are winning 50% to 70% of tender competitions.

Competition from abroad

Estimates of the number of contracts awarded to non-Irish companies vary. Government sources suggest a figure of 5%25 but most other studies are significantly higher. The European Commission, DG Internal Market and Services report places the figure at 24.4%26. TenderScout research research which is backed up by an authoritative report commissioned for the Europe-an Commission27, published in 2014, estimates the number of contracts awarded to non-Irish firms at 14.3% a result typical of small open economies. This places Ireland behind only Malta, Luxembourg, Cyprus and Estonia.

The OGP has recruited data analysts and is in the process of compiling data from buyers about how they buy, from whom, how often and for how much. However, hardly any public pro-curement data is made publicly available (e.g. details of award winners), despite government protestations around the transparency of public procurement.

The recently launched Ireland Stat website is designed to provide a “whole-of-government performance measurement system28,” yet public procurement doesn’t even warrant a mention, despite accounting for nearly 12% of GDP.

Instead, we have to rely on reports from the European Commission or Intertrade Ireland to give us even high-level data. The only commentary on the subject of cross-border trade, for ex-ample, comes from Intertrade Ireland, which has noted in studies going back to 2009 that most of the traffic is North to South29.

25 http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/(indexlookupdail)/20140604~P?open-document26 http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/cross-border-procurement_en.pdf27 http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/smes-access-and-aggregation-of-de-mand_en.pdf, pg66.28 http://www.irelandstat.gov.ie29 http://www.intertradeireland.com/media/All-Island%20Procurement%20-%20A%20Competitiveness%20Report.pdf

Cost competitiveness

The TenderScout Survey noted that 69% of contracts that respondents participated in were awarded primarily on the basis of cost. With so many contracts awarded on the basis of the price paid, a short-term benefit, there is a concern that buyers are foregoing longer-term value for money, which takes into account elements such as equipment lifetime, levels of support or quality. A more balanced approach to award criteria is required.

TenderScout Survey: 69% of contracts are awarded on cost

The TenderScout survey asked respondents to score a range of criteria to reflect the impor-tance of a more balanced approach. Typically, a tender will allocate from 40% to 90% of the total award criteria to price. Our respondents felt that 21% was more appropriate and noted that an additional 18% should be allocated to value for money.



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Government constantly speaks of the need for innovation in our economy, yet rarely does the public sector value innovation within the procurement process. Our respondents believe that allocating some 8% to innovation would be of benefit to the procurement process.

TenderScout Survey respondents’ recommended % for award criteria

Too long to wait

For European contracts, the maximum time between submission and award is 48 days30. However, over 70% of respondents reported a wait time of over 90 days. There is no good reason why suppliers should have to wait so long and why EU guidelines should be so ignored. When combined with the number of tenders that are cancelled, or are just never awarded, it demonstrates a lack of respect for suppliers and the effort and expense they have gone to in making their submission.

30 http://www.achilles.com/files/buyerpdfs/EUServices/achillesbriefguidetopublicsectoreuprocurementlegislation.pdf

70% of TenderScout Survey respondents wait twice the European guideline for a result

Competitive Insight - Debriefs help you understand why you lost out and someone else won

There are two points at which a supplier can gain some insight into a procurement process. The first is before it begins, typically through a supplier briefing meeting. The second is at the end of the process, through the debrief process. The Department of Finance Circular 10/10 notes, “All contracting authorities should constructively debrief unsuccessful bidders in line with current policy and guidelines and their obligations under revised Remedies Directives.”

Our survey notes that an incredible 20% of suppliers almost never request a debrief and another 29% only do so occasionally. Considering the effort that goes into a procurement com-petition, suppliers that don’t avail of the opportunity to gain constructive feedback are doomed to repeat the failures of the past.

TenderScout Survey: 20% of suppliers almost never request a debrief

Of those that do request a debrief (which is their legal entitlement), 45% report that they never or almost never receive one. Our interviews with buyers indicate a lack of clarity in their understanding of the rules with most believing that they only need to advise suppliers whether they have won or lost.

TenderScout Survey: 45% of suppliers almost never receive a debrief

In fact, the EU Remedies Directive – the recommended guideline for all procurement com-petitions throughout Europe – states that suppliers should at minimum be provided with their scores, as well as the winner’s scores, for each award criteria and a rationale to explain the difference in scores.

It makes a mockery of government participation initiatives, such as Meet the Buyer and Cir-cular 10/14, if public sector buyers are not compelled to fully participate in the debrief process. How can suppliers be expected to trust a system without collaboration or indeed be expected to improve if they aren’t given an opportunity to learn?

Incumbents not as competitive as perceived

Suppliers often avoid the procurement process because they believe that incumbent suppli-ers have the contract “tied up”. The TenderScout Survey shows that the incumbent is only likely to be successful in 28% of contracts. It is clear that the government’s drive to professionalism is driving out ‘cronyism’ and giving suppliers a fairer chance of success.



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31 http://www.tca.ie/images/uploaded/documents/Consortium%20Bidding%20Guide.pdf32 http://www.oireachtas.ie/parliament/media/committees/pac/correspondence/2014-meeting1200304/[PAC-R-1329]-Corre-spondence-3B.9---Irish-School-Art-Supply-Federation.pdf33 http://www.cso.ie/en/media/csoie/releasespublications/documents/multisectoral/2012/businessinireland2012.pdf34 Joint Committee on Jobs, Enterprise and Innovation by Dr. Paul Davis, Oct 21st 2014

Collaboration – Collaborate or DieCircular 10/14 and other government initiatives, such as Meet the Buyer, aim to en-courage participation through collaboration. The reality for most companies is that they won’t win government contracts unless they collaborate. Some suppliers have been ret-icent to do so because of fears that they will be seen to collude or that they may be infringing on competition law. The Competition Authority, in their recent publication How to comply with competition law when tendering as part of a consortium – A Guide for Small and Medium Enterprises (SMEs)31, is clear that consortium bids will not breach competition law if efficiency gains can be demonstrated, competition is not substantially eliminated or/and where the consortium members could not fulfil the re-quirements on their own.

The public sector is risk averse and suppliers with limited capacity or capability represent risk. Smaller suppliers account for over 50% of proposals, yet their success rate is very low (in the region of 10-20%).

With public sector buyers continuing to professionalise, the policy of maximising value, large framework contracts and expectations around sophisticated infrastructure, the ability to deliver and quality systems all count against smaller suppliers.

Irish firms are particularly resistant to forming consortiums, partly because they don’t un-derstand how the consortium should engage with the procurement process or with the buyer post contract award, but mostly because they don’t necessarily trust that collaboration will be to their benefit.

The Irish School Art Supply Federation (70 micro-businesses with 1,600 employees), in their submission to the Public Accounts Committee, noted that, “The government is our only custom-er; if we cannot supply schools then we will have to close.”32 Their proposed solution is full en-actment of EU procurement directives. Yet, in spite of directives, these businesses will find it too expensive to participate in procurement competitions and will be severely challenged to offer the same value for money as larger suppliers. Their only solution is to compete as consortiums.

Micro-business (<10 employees) accounts for 91% of companies in Ireland33 and over 50% of tender submissions, according to a recent report by Dr Paul Davis34. Companies of this size rarely possess the level of procurement expertise necessary to effectively engage in this increas-ingly competitive market. Indeed, the cost of compiling a proposal for any competition above

TenderScout Survey: the incumbent is only successful 28% of the time €25,000 is likely to prove prohibitive. For these businesses, the governments push to increase access to opportunities is unlikely to have any impact whatsoever.

The TenderScout Survey revealed some very concerning results regarding the inclination of Irish sup-pliers to collaborate. 43% of respondents are either fairly or extremely unlikely to col-laborate in the future.

35 http://www.procurement.ie/suppliers/contracts/2088

TenderScout Survey: 43% of companies are unlikely to collaborate

Collaboration in action: Office26

There are very few examples of collaboration and those that exist tend to be sub-contractor relationships. Suppliers are reticent about collaborating, but when they do it can prove to be very effective. In 2014, 15 stationery suppliers formed a consortium under the name Office26 in order to compete for a €32 million framework for the supply of stationery and office supplies35. Competing against the largest firms in the state, the consortium’s ability to provide a nationwide desktop delivery service contributed to their selection onto the framework. This would not have been possible had they not recognised the unique advantage of their community-based pres-ence; this should give encouragement to other potential consortia that the government and the OGP is very much open to collaboration.

It should, however, be noted that selection onto a framework is no guarantee of actually securing business. Mini-competitions run amongst framework participants are often heavily weighted (in some cases 90%-100%) towards lowest cost. It is therefore important that consor-tia are confident in their ability to compete on the basis of price, rather than relying on their service/product quality, delivery capability or location.



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The Future

The Legal Services sector is at the forefront of public procurement reform and serves as an indicator of public procurement evolution.

Many of the engagements with public bodies that legal services firms currently enjoy go back decades – long before public procurement was commonplace. Increasingly, these public bodies are putting the work up for tender and incumbents are finding themselves in the position of having to compete for the business without ever previously engaging in the porcurement process. Crucially, this business may well represent a very significant proportion of their turnover.

The Legal Services sector – a window to the future for all

SECTION 3

36 http://ted.europa.eu/udl?uri=TED:NOTICE:187316-2014:TEXT:EN:HTML&src=0

Encouraging collaboration

TenderScout’s submission to the transposition of the new EU Public Procurement Directives: Consultation Document advocated the establishment of standard terms for economic/financial standing, technical and professional ability. It is important to have clarity around how financial standing (in particular turnover and credit rating) is determined, how overall responsibility is defined and how insurance (in particular professional indemnity) is to be provided.

It is also crucial that the formation of groups is not hindered by award criteria that penalise a group because of a weakness in one of its elements. A recent example of this was in a personal protective equipment contract for Bord Gáis36. One prospective grouping included a company with a poor credit rating and although this did not impact the ability of the prime contractor to deliver, it did affect the overall scoring of the consortium.


Next Chapter : THE FUTURE Next Chapter : CONCLUSIONS AND RECOMMENDATIONS

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37 http://www.oireachtas.ie/parliament/media/committees/pac/PAC---Third-Interim-Report-on-the-procurement-of-legal-ser-vices-by-public-bodies---January-2011.pdf38 http://www.tca.ie/images/uploaded/documents/Solicitors%20and%20barristers%20full%20report.pdf39 http://www.lawsociety.ie/Global/eNewsletters/ezine/2013/Survey-Irish-law-firms2012.pdf 40 http://download.pwc.com/ie/pubs/lawfirmssurvey_new.pdf41 http://www.altmanweil.com/dir_docs/resource/f68236ab-d51f-4d81-8172-96e8d47387e3_document.pdf

The characteristics of the most successful legal service providers

The Irish Government spends some €0.5 billion annually37 on legal services, the majority of which has not previously been put out to competitive tender. There is a strongly held view, going back to the Competition Authority’s 2006 report38, that due to a lack of competition the cost of legal services in Ireland is amongst the highest in the developed world. Many contracts are allocated on the basis of administrative convenience, where the incumbent provider of such services is familiar with the needs of the public body.

A new era

Yet, change is very much on the way. A range of public bodies have unilaterally sought and achieved reductions in legal fees, and the proposed Legal Services Regulation Bill will put fur-ther pressure on fees.

The OGP is increasing pressure on buyers to procure competitively; over 100 legal tenders were published in 2014 (double the 2013 figure). In Q3 of 2015, two significant frameworks will be put in place: Solicitors Legal Services (Local Government) and Legal Services (Education and Training Boards), which will further consolidate the States legal spending.

The lessons of recent years about tougher competition, commoditisation of legal work and billing trends are sinking in. 64% of all firms (92% of the top 20)39 have increased their sales and marketing efforts to 2.4% of revenue. While this is at the lower end of expenditure, it is highly significant in a sector where business development has been a ‘partner’ activity rather than that of a professional sales manager40.

Legal firms have recognised the impact of public procurement changes to their business faster than other sectors. Although not previously known for radical reform41, they (particularly the larger firms) are now developing strategic responses that protect and grow market share.

Little competition in the past


Next Chapter : CONCLUSIONS AND RECOMMENDATIONS Next Chapter : CONCLUSIONS AND RECOMMENDATIONS

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Conclusions & Recommendations

Public procurement underwent a radical transformation in 2014, underpinned by a relentless focus by policy makers on value for money. This is coming at the expense of a diverse, vibrant and innovative supplier base and will have a significant impact on Irish jobs, businesses and communities.

There has been an increasingly professional approach to the business of buying, which is leaving suppliers behind. Cronyism is being washed out of the system, as centralisation and impersonal buying takes over. Relationships are still important, but they matter less – as incum-bents are finding to their cost.

However, the real story is how competitive intelligence is tipping the balance of power in the direction of buyers. Information gathering on an unprecedented scale, by buyers, is feeding into new frameworks and contracts constructed to ensure that the public sector achieves the best prices that it can. On the other hand, the public sector places little value on promoting innova-tion or realising sustainable value for money.

Nonetheless, suppliers are making a difficult situation harder for themselves. Many refuse to participate in a public procurement system they believe to be unfair and opaque. Suppliers tend to invest opportunistically and shun the notion of building sales pipelines strategically or utilising competitive intelligence to improve their performance. Most worryingly of all, they are resistant to collaboration, leaving public procurement markets permanently closed to them.

Report Conclusion

Report Recommendations

SECTION 4

A fresh approach requiredWe used the themes of cost, competitiveness and collaboration to analyse our survey results,

as we feel strongly that these are three areas of procurement where innovation would bring the most benefit to both the public sector and Irish business.

Cost

Buyers should: reduce the real cost of participation and value innovation, social impact and value for money in proposals.

Suppliers should: develop a strategic approach to procurement to drive down the cost of participation in individual competitions.

Competitiveness

Buyers should: be transparent around all aspects of public procurement – publish 100% of award/cancellation notices, share data compiled from surveys and analysis of buying trends


Next Chapter : ABOUT TENDERSCOUT / THE REPORT AND INDEXNext Chapter : CONCLUSIONS AND RECOMMENDATIONS

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42 http://opo-boa.gc.ca/index-eng.html43 http://www.globallegalpost.com/blogs/commentary/irelands-tender-process-needs-transparency-82980171/44 http://www.independent.ie/irish-news/water/irish-water-crisis/irish-water-boss-defends-100m-overrun-on-water-meter-installations-30768689.html45 http://www.irishexaminer.com/ireland/ombudsman-to-receive-eircode-complaint-302383.html

and conduct both supplier briefings and debriefings.

Suppliers should: use technologies (e.g. CRM) to capture market intelligence, qualify oppor-tunities, build differentiation and increase success rates.

Collaboration

Buyers should: demonstrate a commitment to collaboration by constructing opportunities to facilitate participation and promote success stories to encourage participation.

Suppliers should: proactively seek collaboration opportunities with like-minded suppliers.

An Ombusman needed to ensure transparent aribitration

Transparency is the single biggest issue impacting on confidence in the system and ensur-ing a fair system which does not find itself open to scrutiny when a company feels it has been wrongly passed over for a particular contract. To that end, there needs to be public procure-ment Ombudsman.

Suppliers that identify a potential conflict of interest should have access to a reporting mech-anism before the award of the contract (and ideally before the initiation of the competition). As soon as an intention to tender is known, suppliers should be invited to submit any potential or perceived conflict, so that it can be arbitrated before the competition is awarded rather than through a court procedure later on. While most claims will not be substantiated, the effect will be to create greater transparency and a more objective rationale for contract awards.

We would go further, and recommend that the Ombudsman should have the power to arbi-trate in disputes and ensure that both the spirit and the letter of the procurement guidelines are upheld (as is the case in Canada42). Its decisions should be binding!

There is an opportunity for an Irish procurement Ombudsman to take a lead in the EU by in-troducing a commercial mediation clause in its terms and conditions, binding on all competitors in the tender process43. Buyers could suspend the award process for a short period if there was a challenge and nominate an expert outside the jurisdiction to oversee mediation. All submis-sions would be made in writing with, say, one right of reply for each side only and a decision binding on parties, save a legal challenge.

An Ombudsman would also help in many of the situations in which public procurement finds itself in the dock.

We noted in our submission on the transposition of the new EU Public Procurement Direc-tives: Consultation Document that many suppliers working with TenderScout believe that con-tract awards are based on relationships that constitute conflicts of interest. Media allegations of such conflicts have recently implicated Irish Water44 and the new Eircode oversight contract45. In a small procurement market such as Ireland, it is not uncommon to have relationships between

buyers and suppliers; this only becomes a problem if competitions and awards are not carried out transparently – which unfortunately occurs every time an award notice goes unpublished or a debriefing letter is opaque.

There have been several cases before the courts that could have been avoided through third-party arbitration and greater transparency that an Ombudsman would bring. Despite the misgivings of suppliers, Ireland has, in fact, one of the lowest rates of procurement challenges in the EU.

Although the EU Remedies Directive is supposed to apply to all Irish tenders, historical EU policies safeguarding national interests mean that many types of service contracts (i.e. legal and health) fall outside the scope of procurement rules save for very minor procedural prerequi-sites. This ridiculous scenario denies competitors the right to challenge.

Companies spend copious human and financial resources on tenders and the least they deserve is transparency. A box-ticking culture has evolved, with standardised documentation, terms and conditions and award letters giving as little information as possible to tenderers; ef-fectively thwarting procurement challenges.

Time is also against suppliers. If they become aware of grounds for a challenge – even in mid-dle of the procurement process – they have just 30 days to bring a case. To makes things worse, if discovery is subsequently ordered by a High Court Judge, the contracting authority will argue that the challenger cannot use any information or documents discovered because they will be timed out if anything is outside of the 30-day limit.

As mentioned at the outset, public procurement is the single most important mechanism whereby government can demonstrate an inclusive policy towards all suppliers and a meaning-ful commitment to the recovery of the economy. By providing a public procurement framework that enables business to compete to the best of their ability, supported by an Ombudsman, government is not just supporting domestic growth, but is also providing a platform for Irish business to compete in global markets.


Next Chapter : ABOUT TENDERSCOUT / THE REPORT AND INDEX Next Chapter : ABOUT TENDERSCOUT / THE REPORT AND INDEX

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About TenderScout / The Report & Index

TenderScout has been helping suppliers to win competitive contracts since 2010. We are one of the most successful firms in this space in Ireland.

Our aim is to help clients compete more successfully for contracts, both public and private, transforming success rates and growing their businesses dramatically.

Our clients are mainly medium to large businesses in professional practices (particularly le-gal), ICT and healthcare sectors.

We believe that being successful is about far more than delivering an excellent proposal; that’s the minimum that your competitors will be doing. Success is about creating competitive differentiation through analysis of buyers, competitors and the evolving procurement market. It’s also about taking a strategic approach to procurement and building meaningful relation-ships that will help to grow your business.

TenderScout’s technology-led service gives suppliers the edge in a procurement process which time and time again has proven to be the difference between success and failure.

To find out more, visit www.tenderscout.com

Awards

About TenderScout

SECTION 5


Next Chapter : ABOUT TENDERSCOUT / THE REPORT AND INDEX

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Important notes with respect to the analysis of data:

• Data is sourced from public websites such as etenders.gov.ie and ted.europa.eu and from a comprehensive review of published literature.

• The interpretation and analysis of data has been carried out solely by TenderScout.

• Figures for 2014 have been calculated from Jan 1st 2014 to Dec 31st 2014.

• There are limitations to the availability of the data, most notably in respect of award notices and contract values. In these cases we have extrapolated based on histori-cal patterns and the data that is available.

• Information, figures and percentages provided within this report should not be considered absolute. Where possible, data has been cross-referenced with analysis from other sources.

• TenderScout has compiled this information with care and attention. This informa-tion is provided without any guarantees to its quality or accuracy. TenderScout makes no warranties as to its use.

About this Report - data points

Index & Key Referenceshttp://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2014101700011

http://reformplan.per.gov.ie/downloads/files/Reform%20Plan%202014.pdf

Circular 10/14: Initiatives to assist SMEs in Public Procurement, 16 April 2014, Department of Public Expenditure and Reform

http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/smes-ac-cess-and-aggregation-of-demand_en.pdf, pg96

http://www.limerickchamber.ie/wp-content/uploads/2012/11/ChambersIreland_AStrategic-PublicProcurementPolicyforIreland_Final2.pdf

http://www.sfa.ie/Sectors/SFA/SFA.nsf/vPages/News~submission-to-the-public-accounts-com-mittee-on-smes--and--public-procurement-07-04-2014/$file/PAC+re.+Public+Procurement.pdf

http://www.oireachtas.ie/parliament/media/committees/pac/PAC---Third-Interim-Report-on-the-procurement-of-legal-services-by-public-bodies---January-2011.pdf

http://www.intertradeireland.com/media/All-Island%20Procurement%20-%20A%20Competi-tiveness%20Report.pdf

http://www.achilles.com/files/buyerpdfs/EUServices/achillesbriefguidetopublicsectoreupro-curementlegislation.pdf

http://www.tca.ie/images/uploaded/documents/Consortium%20Bidding%20Guide.pdf

http://www.cso.ie/en/media/csoie/releasespublications/documents/multisectoral/2012/busi-nessinireland2012.pdf

Joint Committee on Jobs, Enterprise and Innovation by Dr Paul Davis, Oct 21st 2014

http://www.intertradeireland.com/media/g17/pdfs/public-procurement/CPD-presentation.pdf


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