The construction industry relies heavily upon small and medium-sized enterprises – firms generally with fewer than 50 employees. Such firms enrich the local community they are an integral part of and help keep the UK economy going strong. SMEs, therefore, play a key role in the UK construction tendering process. In recent years, a slew of important statistics have emerged to support the central role that SMEs play throughout the sector.

The importance of SMEs shown in statistics

In 2016, it was reported that of the 5.5 million businesses in the UK, 99.5% qualified as SMEs, accounting for 60% of all private sector employment in the country. In January 2018, it was revealed that the number of SMEs operating in the construction sector had passed the one million mark for the first time. This means that construction SMEs now account for roughly one in five of all small businesses in the UK, compared to one in a hundred in the mining, quarrying and utility sectors. The data also established that these same SMEs are responsible for turning over around £185 billion per year. The statistics convincingly show that SMEs play a vitally important role in the procurement process in the UK, particularly for construction tenders.

SMEs are key drivers of today’s economy in the UK. They provide specialist thinking, innovative capabilities and agile ways of working – often demonstrating an openness and collaborative nature which larger organisations can sometimes lack. These qualities are essential in providing the more cost-effective, productive and environmentally conscious construction required for the future.

New measures to support SMEs and the supply chain

For SMEs to continue to thrive and drive greater value across the economy, both locally and nationally, appropriate procurement frameworks need to be in place to give them a fair opportunity to win business. In its SME Action Plan, launched in March 2019, the UK Government pledged to spend £1 in every £3 on small businesses by 2022. Small Business Minister Kelly Tolhurst also announced that the Department for Business, Energy and Industrial Strategy (BEIS) will spend an additional £35 million with SMEs to level the playing field for smaller companies bidding for government procurement contracts. Work is currently being undertaken to ensure these goals are met – meaning even greater, fairer opportunities to get a slice of the construction procurement action for SMEs seeking to grow their business.

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With the UK public sector spending £284 billion a year on procurement alone, we know that public spend is imperative to the future of procurement. This blog summarises the highlights of the key areas of total (procurement and non-procurement) public spending in 2018-19 and looks ahead to public sector spending in the coming years, with the recent Spending Round summary of 2019 announced by the Chancellor of the Exchequer earlier this month.

What’s been happening?

According to research, total UK public spending in 2019 by central government and local authorities was £821 billion. The prediction for 2020 is that this is set to increase to £847.6 billion.

Of total public spending, healthcare tops the list as the sector with the highest public spend at £162 billion. Pensions come a close second, at just over £161 billion, followed by the education and defence sectors.

A closer look at public sector healthcare spending

Since the UK recession in 2009-10, public sector healthcare spending has consistently increased, but at a lower rate than in the early 2000s, and much slower than the historic long-term trend.

In June 2018, it was announced that the NHS budget would increase by £20.5 billion a year by 2023-24. Plans for growth in the mental health service budget was also outlined, as well as an increase of funding in adult and children’s social care.

As the four countries that make up the UK have slightly different health systems, the NHS has separate operating bodies for each of them that all form together as the wider NHS. Because of this, and the immense spending across the NHS, total procurement spend can be difficult to trace. However, to give you an idea of how vast the NHS procurement market is, in July 2019 alone the total procurement spend was just over £1.6 bn. 663 contract notices were published and a further 535 contracts were awarded.

With NHS funding faring better than other public services, the opportunities for winning tenders in this huge market are real and more achievable than ever.

The defence procurement market is increasing

For the year ending March 2019, defence spending was £49.7 billion of which £21 billion was procurement spend. Considering that in 2000, total UK defence spending was less than £28 billion, the sector has seen a huge increase of nearly 50% in public spending in the last two decades.

In 2018, the Government announced a £1 billion investment in defence across 2018-19 and 2019-20, as well as £160 million for counter-terrorism policing in 2019-20. This was to ensure forces continue to be well equipped to keep citizens and communities safe from growing threats.

Looking ahead to public spending in 2020-21

Earlier this month the Chancellor of the Exchequer, Sajid Javid, announced his Spending Round to Parliament, detailing departmental spending plans for 2020 -2021. The plans set out how the Government intends to deliver on the public priorities, including health, education and security.

The Spending Round set out the fastest planned increase in day-to-day public spending for fifteen years, and has been described as ‘turning the page’ on austerity. Departments will get a £13.8 billion real terms increase in day-to-day spending compared to 2019-20.

Key highlights are in healthcare and education.  The Government has committed to more NHS funding with a cash increase of £33.9 billion a year by 2023-24 compared to the 2018-19 budgets. Nurses, midwives and other allied health professionals will receive £1,000 in personal development funding over a three-year period, in a bid to help to make the NHS more secure in future.

Schools will be provided with a cash boost to give every child a higher quality education. The increase in funding means every secondary school will be allocated a minimum of £5,000 per pupil by 2020-21, and every primary school £4,000 per pupil by 2021-22.

A public sector funding increase is good news for the future of public sector procurement, as public spending is essential to the procurement market. The increase in public spending will be felt across UK businesses, from SMEs to larger organisations, all of whom are looking to find and win contracts with the public sector.

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The public sector is a lucrative market. There is a lot to know and a lot to consider when trying to win public sector contracts, no matter what industry they lie in. Whether you are looking to work in healthcare, construction or defence, to name a few, there are contracts published every day in the OJEU which are there for the taking if you have the knowledge to win them.

Supply2Gov’s parent company, BiP Solutions, has over 35 years of experience helping organisations, both large and small, find their feet in public sector procurement. In this blog we will go over the process for OJEU tenders and the key definitions you are likely to come across in the tendering process.

First things first – what is the OJEU?

The OJEU stands for the Official Journal of the European Union. Simply put, it is an online journal that hosts all contract opportunities over a certain value published by a public sector organisation. Public sector contracts must be published here in accordance with EU legislation, which has become part of UK law through the Public Contracts Regulations (2015) and the Public Contracts (Scotland) Regulations (2015).

The OJEU can be viewed on several websites, including our sister product Tracker Intelligence, which collates all public sector contracts into one searchable database.

Let’s talk about thresholds

When we mentioned contracts over a certain value earlier, we are talking about contract thresholds. There are different thresholds in place depending on the type of contract being awarded, and the sector the contract is being advertised for. Trust us – it’s not as complex as it sounds.

You may have heard people differentiate public sector contracts into two categories.

Below OJEU

This is where contracts are less than the threshold for publishing in the OJEU. These contracts may also be termed ‘non-OJEU’ or ‘low value’. To give you an idea of value in money, it is currently just over £106,000 (or 144,000 Euros) for most supplies and service contracts from the central government.

OJEU

Contracts advertising higher-value procurements worth more than the OJEU threshold requirement. These contracts will be published in the OJEU and will follow an EU bidding process (or tendering procedure), depending on the type of contract that is being awarded.

What is a tendering procedure?

A Tendering procedure is the process organisations must go through to bid for and win a OJEU tender (all being well). The tendering procedure will appear in the contract notice, a document which explains all the important details of the contract.

In OJEU tendering, there are five commonly used tendering procedures.

The types of tendering procedures explained

Open procedure: The most frequently used tendering procedure, in an Open procedure anyone may submit a full tender. Pretty straightforward, it is the only procedure with a one-stage process, where organisations need to complete the selection questionnaire and the tender at the same time.

Restricted procedure: A two-stage tendering procedure, with the first stage being the Selection Stage or Selection Questionnaire. Any organisation can ask to participate by completing the SQ, and after the SQs are evaluated, only those selected by the buyer and invited to tender can actually go on to submit tenders.

Competitive dialogue: Like the restricted procedure, this is also a two-stage tendering procedure that can used by any contracting authority. After the SQ stage evaluation, there is a stage called ‘Invitation to Participate in Dialogue’, where buyers will discuss with those successful at the SQ stage. Once the dialogue has been exhausted and can go no further, buyers will come to a decision and award the contract.

Competitive procedure with negotiation: A procedure used for procurement in circumstances where a specification cannot be easily produced, or when negotiation with bidders is needed. Before an award decision is made, negotiation takes place with the selected tenderers.

Innovation partnership: A new tendering procedure for procurement designed to encourage innovation, Innovation Partnership mirrors the competitive procedure with negotiation. It allows the buyer to undertake research and development. Then, the buyer may contract with a single partner or several partners to complete the tender.

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