Nosheena Mobarik - M Computer Technologies
Despite the controversy over research and development, the recent report by the Enterprise and Culture Committee on Business Growth is to be welcomed as is the McClelland Report published last Wednesday on Public Procurement (15 March 2006).
It seems that Public Procurement is very much on the agenda but how do we move forward with it. The suggestion of creating a US-style criterion whereby a certain percentage of public sector contracts are awarded to SMEs is one that has been proposed in a number of forums and it is promising that this is now being seriously considered.
As I said at the Business in Parliament Conference last year, "if you want small Scottish companies to become global players then they need the opportunity that the buying power of government can provide. And it is that which will then give them the credibility and confidence to go and compete globally."
If we want to attract the best people to come and live and work in Scotland, entrepreneurs and those with a strong work ethic then they must have the opportunities. We have to demonstrate that Scotland is a great place to conduct business, - that people have the opportunity to grow their business, create employment and thus help grow the economy which then allows for better health care provision, a good education system and also allows us to protect the weak and vulnerable within our society.
So how can we make things happen. Well perhaps some training would be in order - I don't mean more seminars to train SMEs on how to bid for and secure public sector contracts although that is always useful but training for those that are awarding the contracts. Currently there is a mindset and culture within public sector that has to change if we want to see real progress. Those within the public sector that deal with procurement have to change their perception of and attitudes to SMEs. Smaller businesses can deliver a great service or product, they just need the opportunity to prove it.
Perhaps I can make one suggestion here. To really add value to public sector departments and organisations, it may be an idea to engage with small innovative companies much earlier in the procurement process. At a stage when functions and processes are still being defined allow these smart companies to come up with new and fresh solutions. This will encourage real innovation and provide employment.
With regards to the private investment funds proposed by the Enterprise and Culture Committee, to help business growth, I would say, although this is welcome, I don't believe that SMEs are looking for any special favours. They just simply want a fair stab at the business. That is what will really help them to become profitable and stable entities with the potential to grow their workforce.
What is promising is that there is a genuine willingness on the part of the Executive to address the issues around public procurement. It means that the best companies will think it worth their while to continue engaging with the Public sector instead of giving up and moving on. And some of the best companies do move on- they do no have the time to waste being passed from one person to another and between departments. Businesses cannot continuously invest time and money and effort in any sector without some result.
Following the last Business in Parliament Conference in 2005, some individuals who were in business 15-20 years ago approached me and commented on how they had faced the same obstacles all those years ago. We can't waste any more time. Some real and tangible results have to come from the various discussions and reports that have been going on around this issue recently, and a solution found. Every avenue for creating economic growth for Scotland has to be explored and acted upon.
Mairi McLellan - Graham Technology
Graham Technology provides contact centre solutions to blue-chip companies from Johannesburg to Jakarta, Milton-Keynes to Melbourne and is ranked within the top 5 Visionary CRM (customer relationship management) providers by independent analysts such as Gartner. Our contact centres are built upon a unique process platform, which is also ranked Top 3 worldwide by Butler Group analysts. We regularly compete and win against the largest players world-wide.
We have delivered CRM solutions for the public sector in South Africa, Australia and Indonesia but until very recently, we did not work with the public sector in Scotland. There are various reasons for this, which have been documented in the past. We have seen some changes to the criteria for SMEs wishing to bid (e.g. size), however there remain some very basic challenges. These include the procurement process itself, as well as the need for individual cultural change of those procuring.
Procurement Process & Qualification
An organisation cannot afford to bid for projects they don't think they can win. They must qualify hard to ensure they do not waste precious resource on jobs they have no chance of getting. This is particularly important for SMEs. Importantly, the reason for qualifying out is generally not because they don't think they have the best solution! Instead, qualifying out will be based on:
§ Lack of relationship with key decision makers
§ SME doesn't think the prospect understands their solution
§ SME thinks the tender may have been written by or for someone else
For example, we have seen many CRM tenders which have clearly been written for a packaged vendor. In these situations, the questions asked are often inappropriate for our process-based approach. There is a fundamental lack of understanding between both organisations and, with no access to speak to someone from the Public sector, we would qualify out. We have had to make this decision on many occasions and from our conversations in the industry, I know we are not alone.
Our suggestion would be to open communication channels between the Public sector and Scottish SMEs. There is a need for a level playing field where the public sector understands as much about their SMEs as they do about the large US-based firms they are used to dealing with. By opening communication channels and making an effort to get to know each other, whether this is inside or outside of a procurement process, the Public sector not only helps the SMEs compete, but in turn will help themselves by enabling the vendors to gain more understanding of the requirements and ultimately a fit-for-purpose solution.
Cultural Change
The next major issue we face is a need for a cultural change on an individual level. We have spoken over the last six months about the need for Scottish people to increase their confidence in the abilities or our own people and our SMEs. However, there are still many signs where this confidence is fundamentally lacking. Take for example the discussions around 'providing more opportunity to sub-contract for SMEs'. Yes, this is good news, but why are we talking about sub-contracting? Why do we automatically assume all that an SME can do is sub-contract?
In order to gain credibility on the international stage, an SME needs to be given the opportunity to prove their skills in their home market. In our case, we were fortunate to have a visionary customer such as ScottishPower in our home market. ScottishPower have awarded Graham Technology mission critical Prime Contractor projects since 1995! It is through this experience, referencability and credibility that we can take our company to the international market where we won Energex, Australia based on ScottishPower's success and in turn won Eskom, Africa based on Energex success. Globalisation based on credibility gained at home.
The SME market needs to be given the opportunity of a level playing field. The Public Sector needs to stop giving them the crumbs and instead should start having confidence in their SMEs rather than taking the classic 'perceived' risk-averse view which states that it is lower risk to go with a large US company. I think the Public sector would be pleasantly surprised by the innovation, quality and value for money they would get with more SME involvement.
A level playing field is called for. Open the communication channels and have confidence. Our procurement process must not simply catch up with the rest of the world; it must overtake it. The Scottish Executive can make this change a reality.
Gerry Docherty - Real Time Engineering
Real Time Engineering is Scotland's largest indigenous IT consultancy, established in 1988. We deal with multinational customers in very challenging industries - the aviation world, the oil & gas industry and the major utilities. In these tough commercial markets, we win and successfully deliver multi-million pound contracts for companies like BAA, Shell and BP. But until very recently, entirely through our own choice, we did not deal with the public sector in Scotland.
Our reasoning was pretty simple - for all the reasons that have been well-rehearsed by others in this discussion, the public sector presented too many barriers to entry. In brief, it was not what we would regard as a normal commercial market.
Then in late 2003, and during 2004, we were made aware of a series of frameworks, which gave us an opportunity to engage with the public sector for the first time on a normal commercial footing. First, NHS Scotland created a framework arrangement for IT development. Over the next year or so, the Scottish Executive procurement team created three frameworks (collectively known as the FITSS or Frameworks for Information Technology Services Scotland) covering IT development and consultancy of different types. We qualified for each of them.
The frameworks have been operating for 18 months to 2 years. Over that time, we have been successful in winning upwards of £5 million worth of contracts through the frameworks from a standing start. So that's encouraging, but why did we decide that the frameworks provided an acceptable commercial environment?
From the supplier point of view, the introduction of frameworks removed all those traditional barriers to entry. No longer were we excluded because we didn't have public sector experience, or excluded because we weren't a big name, or excluded because we didn't have an Edinburgh school tie - our very inclusion on the framework lists meant that we were operating on a level playing field, with an acceptable level of credibility, as we would in our normal commercial markets.
But the frameworks have other characteristics that make a difference. They have pre-agreed terms and conditions of contract. They have pre-agreed costs and pricing mechanisms. They have been managed and operated in a disciplined, open and clear-headed manner, with a controlled numbers of bidders, a reasonable cost of sale, timely decision-making, and good de-briefs for unsuccessful bidders. In brief, they are akin to the best procurement practice we find in our other markets.
So the frameworks have been great for us, and for some other companies, but I think they have also been great for the public sector. They have certainly introduced stronger competition, new thinking, and innovation - I think that some of the old traditional suppliers have found that they've had to up their game considerably. Because they have pre-agreed terms and conditions, and costing/pricing mechanisms, and a managed process, and a controlled number of bidders, and pre-defined Best Value selection criteria, they are a wonderfully efficient method of procurement. The public sector's reputation for successfully procuring IT services isn't high, but I'll bet that the success rate of projects let under these frameworks is better than anything achieved elsewhere in the public sector.
So in my view, here is an excellent example of good, thoughtful, best practice procurement processes in play. The frameworks have created an acceptable, competitive, commercial environment, and so have opened up the public sector to a number of companies who otherwise would not have been involved. The result is better value for the public sector. Let's do much more of this type of procurement.
Looking to the broader picture, I agree that it is incumbent on the public sector to open up the procurement process, make it more efficient, create more level playing fields, more transparent decision-making, and so on. The public sector in Scotland spends a very large amount of money on IT equipment and services, perhaps £700m or £800m per year, most of which goes straight out of the country. So it's important to be good at it, but we should be very clear about what we're trying to achieve.
Opening up the procurement processes in Scotland is not about being nice to small Scottish companies. It's about achieving Best Value for the public sector by engaging some great companies in a fair commercial environment.
If, as a Scottish organisation, we want to work for the public sector, then we should only be able to do so if we blow your socks off with a great proposition. We don't want you to give us contracts on the back of some moral argument, or a social argument, or a Scottishness argument, or a cultural argument. I'm embarrassed by the argument that runs "we're small, we're Scottish, we pay our taxes, you owe us a contract". I can't say to Shell "I buy your diesel every weekend, so you owe me a contract" - I need to demonstrate that the value of my offering is greater than anyone else's. And so it should be with the public sector.
By opening up the procurement processes, you'll be able to engage with a greater number of Scottish companies, and you'll find some very sparky, very competitive outfits out there. You'll find that their entry into the market will waken up some of the big, lazy monoliths, and get them to raise their game. All things being equal, your purchase costs will go down, and your quality of service will go up, particularly if you apply best practice procurement processes, like the frameworks, or the eProcurement Scotland initiative.
There's one last topic - and I think it's the toughest challenge of all.
The McClelland report rightly points out that smart procurement processes are key, and makes a clear case for the public sector to recruit, train and retain an increased number of highly-proficient procurement specialists.
I agree wholeheartedly, and I want to make a special additional plea with my IT hat on.
The successful procurement of IT is central to efficient government - in fact, it's central to almost every major business venture these days. But successful procurement of IT is a complex and specialist task, and it needs a real knowledge of IT. The best commercial organisations are what I call "wise buyers" of IT - what they do is ensure that their in-house procurement specialists work hand in hand with their in-house IT specialists to specify systems, review bids, assess potential suppliers and solutions, and achieve the best outcome.
This "wise buyer" idea presents a serious, long-term challenge for the public sector. To successfully procure IT, the public sector must be able to attract, and retain, the very highest quality of IT professionals, and it must provide a grading structure and career path that supports that aim. It's a very, very big challenge, but if the public sector is able to employ its own great IT folk, then the efficiency and effectiveness of IT procurement, and hence the efficiency and effectiveness of government, will be greatly enhanced.
In summary, there's a long way to go, but there are encouraging signs. The frameworks are positive for us, and great for the Executive. However, less than 1% of public sector IT spend goes through these frameworks, and so I hope you'll be able to make their use much more widespread in future.
Please stay focussed on strictly commercial drivers for smart procurement. If you do that, then level playing fields will be created, and small Scottish companies will be able to engage and contribute more often, to the benefit of all.
And lastly, please take up the serious challenge of attracting and retaining top-class IT professionals in the public sector. It would have the biggest impact of all if we could make the public sector in Scotland a "wise buyer" of IT.