Public sector e-procurement bad news for small IT suppliers
1 April 2005 | 0
A new on-line booklet published by Enterprise Ireland, entitled ‘Public Sector eProcurement: Advice for Suppliers’, warns that businesses who fail to respond appropriately to the changes brought about by Government moves towards tendering more business online will risk losing business to other companies both in Ireland and
Enterprise Ireland acknowledges that one consequence for small suppliers of greater moves towards e-procurement will be a shift to a smaller number of larger orders, but advises that small companies can form collaborations with other firms to bid for contracts that they could not otherwise fulfil by themselves.
‘In some cases they can’t do anything about this, but sometimes smaller companies can get together to collaborate as a partnership of two or three,’ says Lorcan O’Sullivan, manager of the e-business unit at Enterprise Ireland. To this end, online collaboration tools would be useful technology for these companies to deploy.
However, Derek Kehoe, general manager of IB Solutions (formerly Torex Business Solutions), says that despite this promise to consider smaller supplier consortiums, government agencies will still prefer a prime contender. ‘Most organisations want one organisation to blame at the end of the day if things go wrong,’ he said.
Other factors weighing against small contractors are that they will often not have enough insurance, and that clients tend to pay a lot of attention to a company’s turnover. ‘If you were bidding for a €500k contract and your annual turnover was only €200k, there is a good chance your bid will not be treated seriously.’
‘The bigger players are more likely to win more of the contracts, while the smaller players, unless they are niche players, will suffer purely because of their size,’ said Kehoe.
However, Gavan McGirr, managing director of Purchasing Solutions, a consultancy that advises Government and public sector organisations on purchasing, said that smaller suppliers are unlikely to ‘cry foul’ over the changes. ‘They’ll always find ways doing it,’ he said, adding that the Government can’t be criticised for choosing to spend its budgets more wisely.
Enterprise Ireland’s new booklet contains useful insights into how e-procurement will affect suppliers in other ways and how they can adapt to the changes the moves to conducting more business online will bring.
O’Sullivan says that being seen to ensure the reliability and security of IT systems that suppliers depend on for their business will be crucial when agencies consider tender documents.
He said Enterprise Ireland had itself been through the experience of dealing with tender bidders who cannot deliver reports or tender bids because their servers have crashed.
‘They should know better,’ he said. ‘I’ve heard quite a few stories of people who can’t regenerate reports because of system crashes, which often means that they’re not robust or secure.’
In its more recent tender notices, the agency specified to bidders that they must list the procedures they follow to keep their systems secure and reliable.
O’Sullivan also spoke of one city council that was moving rapidly to doing business communications via e-mail, and which issued a tender for which bid documents had to be emailed by the end of the following day. It transpired that some of its existing suppliers did not have even computers, never mind an Internet connection.
Reality is that every firm faces business risks because of IT weaknesses because their IT infrastructure is not robust or secure and have no means to back up data, O’Sullivan said.
‘More small firms are depending on IT to run their business but find that they crash if not secure. If you’re using computers to run your business then it’s important to ensure that they run properly.’
One obvious benefit of the move to e-procurement, says Kehoe of IB Solutions, will be the huge savings obtained from eventually being able to submit tender documents electronically. By way of example, a typical contract requiring the submission of between six and eight printed tender documents requires an outlay of some €4,000-5,000 to
cover the costs of printing, administration and physical delivery.
‘There’s been a huge increase in the volume of responses to tenders as a result of tendering notices online,’ says Kehoe. IB Solutions, like a growing number of suppliers, are subscribing to tender alert services, such as TED (Tenders Electronic Daily), in order that opportunities are not missed for the sake of forgetting to look up a tenders notice in a
newspaper or a Web site. The information obtained by such services is often sent in advance of the same information popping up on Irish tender sites.
Another impetus for the publication of the EI advice booklet on e-procurement is to prepare Irish firms for foreign competition for public sector contracts here. ‘A lot of people think they’re very efficient but when they start to meet foreign competition they might be in for a shock,’ said O’Sullivan.
Enterprise Ireland now advertises many supply tenders for standard, commodity goods for three year durations these days, something that does not infringe on public tendering rules. For other more specialised stuff, including work that involves consultancy firms, will remain as one-year contracts, O’Sullivan confirmed.
He added that increased competition brought about by e-procurement would drive down prices by 10 per cent in some cases. ‘A lot of people think they’re very efficient but when they start to meet foreign competition they might be in for a shock.’