Public sector procurement sets the tone for navigating the post-COVID world

While private sector organisations must reevaluate their frameworks for durability, the public sector is much better placed to make the necessary changes for a world post-COVID, argues Proxima's Simon Payne
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By Proxima

27 Jul 2020

In the context of procurement, there is an unspoken assumption that the private sector outperforms the public sector in its delivery of best practice strategies and results. Yet, in a post-COVID world in which consumers are being increasingly selective with the companies they do business with; the Commercial Functions within the public sector have arguably been ahead of the game.

The current precedence for procurement departments is re-evaluating supply chains to ensure they are diversified, resilient and innovative. The past few months have been a wake-up call for the industry to assess their networks for durability in the rebuilt world post-COVID. In many cases in the private sector, a total overhaul is required.  But the public sector has had their ears to the ground for a while now and has the framework in place to make these necessary changes - private companies should look to them for guidance and anticipate their next steps.

Aggressive targets for SME participation

The SME agenda is at the forefront of many programmes for reconstructing the economy as we look to the future of business post-COVID, but public sector procurement has held the importance of SME participation in high regard long before the pandemic.

Large government departments are actively disaggregating monolithic contracts to encourage diversity and support for small businesses, ensuring public sector policies and procurement practices are specifically engineered not to discriminate against SMEs.

Importantly, the public sector sets hard financial metrics to measure their progress in fostering SME growth. Working towards an aspiration of spending £1 in every £3 with SMEs by 2022[1], the Government was serious about its commitment to small businesses, long before the need for their recovery post-COVID. Not only is the public sector geared towards directly aiding the small business audience, SMEs are also considered in the wider Government supply chain. Under the Government Prompt Payment Code, government must pay 90% of SME invoices within 5 days. The Code also states that 100% of SME invoices - whether these are between government and supplier or, further down the supply chain, supplier/supplier payments - must be paid within 30 days [2].  In this way, the Code keeps large corporates from holding onto cash at the expense of smaller counterparts.

The public sector is leading best practice in SME support, encouraging participation while facilitating a strong financial position through the payment process to ensure they are sustainable in the long term. Assertive targets both define the commitment and provide an evaluation platform - the private sector should take the time to understand what’s happening and where appropriate follow suit.

Observing social value benchmarks now and in a post Brexit world

Traditionally, the public sector has looked at social value as small evaluation criteria for contracts, often overlooked as a degree of any genuine commitment. The green movement of the last decade, bolstered by more recent calls for a sustainable recovery post-COVID means things are changing - social responsibility now has a real seat at the table and the public sector is listening.

Social responsibility now has a real seat at the table and the public sector is listening

Social value is now a significant element of the evaluation process and is increasingly measured and assessed through delivery throughout the supply chain. The Government knows that consumers are increasingly aware of their impact on the environment and the importance of sustainable initiatives, so CSR is increasingly baked into contracts and measured at every stage of the procurement and supply chain process. Social value impact could also play an increasingly important role in a post Brexit world, free of previously restrictive EU regulations.  Again, there’s a lesson to be learned for privately-held businesses who are prone to poorly defining the role of social value in their practices - implementing a standardised social responsibility metric goes a long way to delivering sustainable and successful business models.

Leading the way

For years, the public sector and central Government Commercial functions have  been striving to improve its relationship with SMEs and enhance its social value considerations - goals that have never been more relevant than in today’s world. Private sector procurement departments looking to renovate and innovate should look to best practice guidance and follow the lead of Government to navigate the post-COVID world.

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