Local Government Procurement (Hansard, 9 July 2003)

§ Tony Baldry (Banbury)

I beg to move,

That leave be given to bring in a Bill to establish a national approved list of organisations that have the capability to perform local authority contracts under Best Value guidance; to make provision for companies to qualify for the approved list; to issue companies with a Certificate of Registration valid for every local authority if they meet the criteria set; to make provision to make the approved list of registered companies available to every local authority; and for connected purposes. The present system of local government procurement does not work well. It costs local councils more money than it should to tender contracts and local businesses more money than it should to pre-qualify for contracts. The Bill seeks to streamline the local government procurement process. It would reduce the regulatory burden and costs for small and medium-sized enterprises and introduce a national system of universally agreed criteria. It would also make it necessary for companies to complete the pre-qualification procurement process only once.

Under the current system, companies have to complete the pre-qualification process even when the same company has already done the same work for another local authority or even the same local authority in a previous year. That costs companies and councils unnecessary money. To understand that problem better, we must put it in the context of the burdens on business today. Last year, the Institute of Directors, after conducting a survey of its members, concluded: red tape is now completely out of hand and a major impediment to doing business and employing people particularly for small and medium sized enterprises". The British Chambers of Commerce believes that the 36,000 increase in the number of people out of work last month, which is, incidentally, the biggest monthly increase in 10 years, is due to higher taxes and increased red tape.

The Select Committee on Trade and Industry noted in a report published in September 1999—I was a member of the Committee at the time: It is becoming increasingly widely recognised that the burden of compliance with regulation of all kinds bears down disproportionately on small firms … the burden of regulation is quite rightly now a central part of the SME agenda and must remain there. The Committee's conclusion was reinforced in the report on SMEs by the Better Regulation Task Force published in April 2000: the cumulative burden on SMEs must be considered against an assessment of how much information it is reasonable to expect one person to assimilate and act upon". A survey carried out earlier this year by the British Chambers of Commerce found that the total cost of regulations on business introduced since 1998 is now more than £20 billion—£20 billion extra for businesses as a consequence of regulations introduced by this Government.

Other recent surveys suggest that the Government introduce some 3,000 new regulations every year. I have conducted my own survey. I asked almost all SMEs in north Oxfordshire before the 2002 Budget what they believed burdened their businesses the most, and top of 1198 the list was over-regulation. Red tape is a huge problem for business, but a particular one for SMEs. The annual survey of the Small Business Service recently recommended: regulations affect business by taking administration time and increasing running costs. 71 per cent think the government should take action to reduce the burden of regulation … Some of the suggestions included: make regulations simpler and more realistic; make exemptions for small businesses; try to improve co-ordination between local authorities". Improving co-ordination between local authorities is part of what the Bill seeks to achieve.

The Bill seeks to remove one unnecessary burden. It will tackle pre-qualification—the part of the tender where companies and councils are considering only who might be considered for a contract. In May this year, the Better Regulation Task Force published a report entitled "Government: Supporter and Customer". The report states in its recommendations on local government procurement: small businesses simply do not have the resources to put together all the pre-qualification and tendering information in the numerous ways in which it is asked for. We have seen requests for one pre-qualification information that run to over 30 pages … some run to over 200 pages … This represents a huge resource investment for a small business. There is scope to simplify and reduce the amount of paperwork the public sector requires at this stage in the procurement process … The public sector should develop a common core pre-qualification information document for lower value contracts so that forms do not have to put together the same information in different formats at the expression of interest stage … OGC and the ODPM working with the LGA should formulate together a standard template for core pre-qualification information—so there is a consistent format across both local and central government and the information requested is proportionate to the lower value contracts". I wholly agree. Furthermore, I point to concerns that the Federation of Small Businesses has raised about EC regulations on public sector contracts. It has asserted that "approved supplier lists" are widely used, although it states that

how a business gets on to these lists is shrouded in mystery". The Bill would make it clear that any company that complies with the criteria agreed by the ODPM, the LGA and the DTI will be put on an approved list of registered companies—a list that will be made widely available to every local authority.

I ask the House to consider the experience of one company in my constituency—Chiltern Invadex, in Bicester. The company manufactures products designed to enhance mobility and independence in order to improve the daily life of people with disabilities. It works with housing associations and NHS trusts, and a sizeable quantity of its products is purchased by local authorities throughout the country. To provide goods to a local authority, the company has to be on a local authority's approved list. That is where the problems start for Chiltern Invadex and for many other companies.

No one suggests that having some sort of approved list is not sensible. The problem is that every local authority has to have its own separate set of criteria and its own separate set of forms for its own separate approved list. Chiltern Invadex tells me that the 1199 documentation for a typical London borough is about 6in thick. Last week the company wrote to me, saying that the majority of local authorities administer their own lists. Some use the DTI approved list called Constructionline of which we are members … the cost to us for Constructionline is circa £550 per annum. We have recently tendered for some work in East Anglia and it looks as if we will be successful. The value is £30,000. The authority involved uses another provider called Sinclair. We asked them to accept Constructionline as appropriate evidence of our capabilities and bona fides. Alas, Constructionline is not acceptable to them. We now have to complete a further approved list for Sinclair, at a cost of £1000 and thereafter per annum, if we wish to continue membership of that list. Consequently, we have immediately incurred costs of £1000 out of the contract … or alternatively we could withdraw our tender. The latter is an anathema to us in the current climate. That is a crazy situation. If local authorities are unhappy with using the DTI approved list, why cannot the LGA agree with the ODPM on a national set of criteria to produce a national certificate of registration and a single national approved list? That would surely be preferable to the additional costs incurred for registering membership with different approved lists with different local authorities that often have the same criteria but on a different form. In response to my representations on the pre-qualification problems illustrated by Chiltern Invadex, Ministers at the ODPM said that they are currently developing a national strategy, but they have not yet given any details of exactly what that means.

A national approved list comprising universal criteria would more satisfactorily meet the Government's thinking on local government procurement. Indeed, when the Government abolished compulsory competitive tendering to introduce best value, they did so on the basis of their 1997 manifesto commitment, which stated that the basic framework, not every detail, of local service provision must be for local government". That is what the Bill would do. It would be for the LGA to decide with the ODPM and DTI what the national framework for the approved list should be at pre-qualification, leaving the detail and important decisions on service delivery with local authorities.

1200 The 1997 Labour party manifesto pledge stated: Costs count but so does quality". Costs do count to companies and councils that have to meet excessive and escalating costs. As more contracts are put out to tender, companies have to sift through doorstep-sized pre-tender forms at an unnecessarily early stage of the procurement process. Chiltern Invadex estimates that it costs it £20,000 every year to apply for 60 separate approved lists. By contrast, applying to just one approved list would cost it only £300 a year. It is not only small companies that incur the cost of such red tape: Chiltern Invadex observes that the likely cost to local and public authorities of maintaining their lists … by any conservative measure, it must run into millions of pounds per annum". I agree. The Government are wrong to suggest that cutting costs equals cutting quality. The cost of a fragmented approved list reduces quality and precludes the number of companies that can afford to enter the pre-qualification procurement process. The Bill would effectively extend an agreed approved list to all local authorities.

I hope that the Bill will be approved by the House, because it can only mean lower costs, lower council tax, more jobs and more services for local people, local companies and local authorities.