6 Reasons Why You Should Consider Bidding to the Public Sector
The private sector has experienced a marked decline in the release of contracts and initiation of projects due to the uncertainty caused by the Covid-19 pandemic. Contractors feeling these effects must identify more consistent and guaranteed sources of revenue if they are to operate and grow in the Covid-19 era. Pivoting to deliver public sector contracts will support organisations of all sizes and kickstart the growth of the UK economy.
In this article, we will briefly outline 6 key benefits that winning and delivering public sector contracts can bring to organisations and why these benefits matter more than ever in the Covid-19 era.
1. Winning a public sector contract guarantees work – On average, there are 10,000 contracts released per month ranging in sector, service, duration and value. These public sector contracts equate to guaranteed work for the winning bidder and there are often clauses that prohibit the buyer from terminating the contract without just cause. These contracts realise work for the duration of the contract and range in length, for example, 5 years split between 3 years and a 2-year extension. This ensures the longevity of whatever contract is being delivered and guarantees revenues for the contractor or supplier. Throughout lockdown, some contractors and suppliers paused the delivery of contracts to meet with social distancing regulations. In the ‘new normal’ site work was one of the first things to open across the UK showing the centrality of such contracts to our recovery.
2. There is no risk of the buyer going bust – One of the biggest benefits for contractors is that a public sector organisation such as a Local Authority, Housing Association (they use public sector procurement processes) or NHS Trust will not close down owing a supplier money – unlike the private sector. Carillion owed around £800 million to smaller suppliers and contractors when it went out of business at the start of 2018. This would never happen to a public sector organisation because the c.£280 billion annual budget for goods and services spent with external suppliers is allocated from the central Government on a year by year basis. The resulting relationship between public sector and supplier should minimise risk for both organisations and encourage contractors to bid for contracts which guarantee revenue. As we re-open and begin the journey to economic recovery, it will be important to build business development on firm foundations and it is likely that public sector budgets will increase to stimulate our recovery.
3. The public sector uses more favourable payment terms – From September 2019, the public sector has committed to prompt payments of contractors and suppliers across the UK, particularly Scotland. The UK Government has made a commitment to pay 100% of payments within 30 days and requires Government departments to report their performance against payment targets on a quarterly basis. If you are a contractor bidding for Government contracts in excess of £5 million a year, you are required to pay 95% of your supply chain within 60 days. In Scotland, prompt payment makes up part of the Scottish Business Pledge which requires establishing internal arrangements to arrange payment within a maximum of 60 days but to aim for 30 days. These steps to achieving prompt payment support the contractor or supplier’s cashflow, business performance and productivity. Cash is king. It is no surprise that throughout the lockdown cashflow proved to be the most important strength for companies and those with paid invoices proved a lot more resilient.
4. Winning medium/long-term public sector contracts will grow your business – Winning a contract to deliver services or supplies to public sector buyers is a great way to increase your revenues, enhance your reputation and grow your business. The guaranteed annual revenue resulting from the contract can be invested in giving your company a more competitive edge as we remerge from lockdown through training, recruitment or embedding innovative technology. Public sector procurement teams will continue to be risk averse and winning that first contract may also act as a ‘foot in the door’ – making it easier to win additional public sector contracts due to your demonstrable track record of delivering to the public sector.
5. Delivering contracts makes it easier to attract and retain staff – Potential employees view contractors and suppliers that deliver public sector contracts favourably. These employees are also more likely to stay with contractors than purely private sector focussed companies. This is driven by a number of factors, primarily the guarantee, longevity and consistency of the work. There is a real opportunity to develop long term partnerships with public sector buyers who always require services or supplies. Conversely, the private sector may deliver more lucrative projects, but there is no guarantee that the work will always be there. Post-lockdown, many potential employees will view consistent and lengthy contracts with public sector organisations more importantly than ever.
6. Contracts are awarded using a transparent and published evaluation process – The public sector procurement and buying teams do not have the ability to award contracts to their favourite contractor or supplier after reading through all of the bids. Instead, they must adhere to fair procurement practices and follow published scoring criteria explained within the published Tender Notice. This fair process ensures that the more a contractor can meet the evaluation criteria, the stronger the bid will be and the more likely they are to win the bid. It is no longer about the name recognition of bidders. It is also the law for buyers to provide feedback to ensure that your bids can always get stronger should you choose to implement the feedback.