Scottish firms second-best in public sector contract awards

Scottish technology firms are giving up on public sector contracts due to the bias in favour of large multinationals, it has been claimed.


NVT, the Bellshill-based technology group, has reopened the debate on public procurement after becoming the only independent Scottish company to be listed in new frameworks for government IT services contracts.


The Lanarkshire group helped spark The Herald’s ‘SME-SOS’ campaign which last year highlighted the barriers facing Scottish SMEs in winning public contracts and the effect on local economies.


NVT’s operations director Hamish Fraser said he believed the smaller Scottish suppliers in the sector had given up on applying for the frameworks, and were settling for sub-contractor status. He said: “It is an approach quite a number of Scottish businesses have to take. But if the industry just views itself as downstream partners, that is not a sensible business model. If there is a problem or a change, the big guys will take the business back in-house again, it’s a dangerous place to be.”


In 2011 NVT and Bathgate-based Dacoll called on the First Minister to intervene in the tendering system they claimed was locking small Scottish suppliers out of a £1.3 billion market, following the introduction of an ‘IT Managed Services framework’.


While the companies had come out first and second in a government tender that used more traditional procurement methods in 2010, they were both excluded from the new framework.


Although the framework had a separate ‘Lot 2’ intended to attract SMEs, almost all were disqualified with the exception of Buckinghamshire-based Maindec. Most of the successful bidders were large multinationals who were already successful in ‘Lot 1’ and who then used smaller firms as subcontractors for the work in Lot 2.


After The Herald first highlighted the issues, Scottish Procurement published a letter from Maindec praising the process.


In the latest procurement round, a single Digital and Technology Services framework open to any size of company has admitted 15 suppliers, with NVT, which employs 80 at Bellshill, and Maindec, which has around 200 staff UK-wide and 12 in Scotland, the only SMEs.


A separate sole-company contract for server maintenance meanwhile was last week awarded to Maindec.


NVT’s managing director, Stephen Park Brown, said the firm was “honoured to be the only Scottish firm to be included in it amongst so many heavyweight overseas players”. He added: “This will allow us to maintain our commitment to training young people from our local community and giving them real skills to contribute to Scotland’s economic future.”


During our campaign, Mr Park Brown said the scoring mechanism for large-scale contracts four years ago had made it “virtually impossible for SMEs to compete”.


He also commented that Procurement Scotland was “about the biggest exporter of public sector cash” due to its awards to non-Scottish companies.


Mr Fraser added this week that NVT had been beaten for the server maintenance contract despite its bid being 24 per cent cheaper than the one chosen, for what was essentially a commodity service.


The Scottish Government said: “The server maintenance recommendation to award to an SME supplier, with a strong presence in Scotland, followed a robust procurement exercise under the procurement regulations. The tender was not only based on price but also on a pre-determined published award criteria which recognised that the service will support some high risk, business-critical server systems. Nevertheless substantial savings are set to be made on this framework which is one of a range of options available to the Scottish public sector.”


Iain Maclean, Maindec’s Scottish regional manager said: “This framework award will ensure that public bodies are able to access our high quality services for their critical IT systems at an affordable cost.”


He added: “We have enjoyed an extremely positive engagement with the Scottish Government over many years, and I would especially like to thank the team at Scottish Procurement for putting in place a strategy which enables SMEs like Maindec to compete on a real level playing field with the global giants and heavyweights of the IT industry.”


The Scottish Government spokesman said: “We welcome NVT’s involvement in the Digital and Technology Services framework. We are also pleased that the framework will be delivered by suppliers, including SMEs such as NVT, with a strong economic presence in Scotland and also a commitment to supporting economic growth through positive engagement with SME supply chain partners.”


He added: “The Scottish Government has a good track record of helping SMEs win business with 45per cent of public procurement spend going directly to SMEs. We are taking action to further improve SME access through the Procurement Reform (Scotland) Act 2014 and the new EU Procurement Directives.”

by Simon Bain, Business Correspondent/Personal Finance Editor