Procurement in a Nutshell: Public Procurement in the National Interest

The report’s purpose is to make recommendations to the government which the CMA believe would better support the UK’s economic success as well as deliver better value for taxpayers. This nutshell sets out the issues raised by the report and the accompanying recommendations.

You can read the report here.

The five main issues uncovered by the report

1. Objectives and trade-offs

The report highlights that public procurement is expected to deliver a wider range of objectives than ever before. It is not just about value for money, but innovation, growth, resilience, national security, domestic jobs, skills and social value.

Due to this wide range of objectives, things like minimising costs may come at the expense of long-term value through greater competition and market dynamism. Essentially, what becomes a priority may be at the detriment of another objective.

2. Coordination and fragmentation

The CMA’s work identified different parts of the public sector buying from the same suppliers and supply chains with limited coordination of demand etc. The report highlights this was particularly evident in civil engineering where an overly fragmented approach to procurement illustrated a risk of the public sector’s ability to shape markets for the long-term.

3. Capacity and incentives

Across the CMA’s work on public procurement, they see government procurement teams sometimes lack the capacity to focus on the long-term strategic outcomes of public procurement decisions. The result can be a system that rewards process more than outcomes.

4. Entry and expansion

The CMA report highlights that barriers to entry remain too high. What is meant by this is that the CMA are consistently told that public procurement can be too costly, complex and uncertain for innovative firms.

Instead, the CMA propose that by encouraging entry and enabling new entrants to expand, public procurement practices can play a significant role in spurring business dynamism and supporting the development of scaled UK suppliers.

5. Procuring innovation

According to the CMA report, public procurement is not making full use of procurement as a tool for innovation.

The government have huge purchasing power and when used strategically, it could support demand, real world testing, accelerate commercialisation and help innovative firms scale.

The report also states that if the government wants a public procurement to support innovation, it needs to widely endorse a mindset and approaches that support experimentation, staged development and managed risk. The challenge should not be procuring today’s solutions, but creating markets that support tomorrow.

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Recommendations made in the Public Procurement in the National Interest report

Based on the five issues the report outlines, five corresponding recommendations have been made.

1. Stronger system leadership and clear prioritisation

Public authorities should have clearer direction on how and where public procurement should serve wider strategic objectives. Taking a more strategic approach means narrowing down priorities to a meaningful number, as well as being more explicit that trade-offs exist, and empowering public authorities to recognise, prioritise and manage them.

2. Informed devolution

Different parts of the public sector are often buying from the same markets and supply chains. Effective market management will involve choices on where purchasing decisions are taken, and how they are coordinated. Stronger system leadership can play an important role in deciding when purchasing should be aggregated for strategic reasons, and where local purchasing can be empowered by better coordination and clearer strategic direction.

3. Build data infrastructure as an enabler for a more strategic approach to public procurement

Using public procurement as a more deliberate lever of economic policy will depend on procuring authorities having the capability, confidence and incentives to embed market-shaping objectives into their purchasing decisions. A data-driven approach can help translate ambitions for public procurement to foster healthier market structures into measurable outcomes, which can influence day-to-day purchasing decisions.

4. Tackle the barriers to entry and expansion

Burdensome requirements to bid can raise the ‘fixed costs’ of participating in tenders, creating a relatively stronger disincentive to participate for smaller firms versus larger firms. Government should systematically review major procurement requirements and processes for their impact on entry, scale-up growth and competition – especially where requirements introduce higher fixed costs.

5. Create an innovation public procurement framework for frontier technologies

Government should review whether existing public procurement policies are well suited to the procurement of frontier and strategically important technologies. The objective should be to ensure public authorities can confidently use public procurement as a tool for innovation and capability building, while preserving competition and maintaining appropriate safeguards for public value.

For further information please contact Tim Care or Melanie Pears in our Public Sector team.