NAVCA Blog - posted in January 2012
The following blogs were posted in January 2012.
Cost of procurement
Do you calculate how much time, and what cost, it takes to complete tenders? A recent European Commission paper puts the figure at over £3,000 per tender, and over £4,500 for the public body to administer a tender process.
The figures are deep in the 207 page impact assessment of the European Commission’s proposed changes to EU wide procurement legislation. The proposals themselves offer some positive changes but they also reveal some interesting figures on the costs of tendering as spotted by eagled eyed tweeter @berneeclarke.
The document cites research putting the total cost of a typical (above threshold) procurement procedure to be nearly € 28,000. This figure is made up of costs to public bodies - € 5,500 per tender launched – and costs to bidders – around € 3,800 per offer submitted. They notice that “While larger contracts are generally associated with higher costs, there appears to be a substantial element of fixed costs”. Given the paperwork and processes used are often similar for smaller and larger contracts this will be no surprise.
The cost effectiveness of a burdensome procurement process for lower value contracts is questioned -
“For the low value contracts close to the threshold of €125,000 this means total costs can amount to between 18-29% of the contract value”.
Given the Commission’s focus on SME’s we hope this will lead to less burdensome processes for smaller value contracts, rather than an excuse to bundle contracts together.
These are the first substantive figures we’ve seen on the costs of tendering and could be useful for local discussions on improving procurement. The figures really emphasise the importance of using a proportionate process relative to the value and nature of the service being tendered.
The paper also notes that “Despite nearly 40 years of public procurement legislation one of the key objectives – the creation of a single market – has yet to be achieved”, putting the figures for cross border procurement at 1.6% of awards or roughly 3.5% of the total value of contract awards published in OJEU. The paper also reveals that “50% of contracts above EU thresholds are awarded within the distance of 100km”.
‘Cross-border interest’ is often cited as a reason why a tender needs to be advertised under the full regulations.
These figures question the reality of these arguments in practice, regardless of the Commission’s desire to make cross border trade easier.
Indeed the figures on cross-border awards relate to all types of contracts where some cross border interest might be expected. When it comes to the types of services NAVCA members and the wider voluntary sector delivers, we believe there is far less likelihood of cross border interest and the figures for cross border awards is likely be far lower than 1.6%.
This is why NAVCA generally supports the EC’s proposals to form a separate regime for certain social, health and education services. However, we will be lobbying to make sure the most appropriate services are included.
We will be publishing a briefing on the implications of these proposals soon and letting you know how you can get involved. Are these figures a surprise to you or do they sound too low?
