Tendering rules stop Scotland’s IT sector winning bigger contracts
“It’s as if everyone in Scotland plays by the rules, and everyone in Europe doesn’t.”
So says the refreshingly frank Stephen Park Brown, who has built Bellshill-based NVT into the biggest independent Scottish company in the IT support sector, and has fought a 10-year campaign to get a better deal for indigenous suppliers in public sector procurement.
He says some public bodies are “empire-building”, and takes a swipe at top law and accountancy firms for advocating IT outsourcing for their clients – while refusing to adopt it themselves. “We told one law firm it would save them £90,000 – they didn’t do it.”
Brown says his strong views reflect his dismay that so many of Scotland’s IT companies have lost their independence, and that the sector is punching well below its weight. “How many people are going to graduate in Scotland to do IT and where are the jobs for them?”
Brown created NVT 25 years ago but it was only last year, after seven years’ work, that it won the biggest IT outsourcing contract of its kind from the Scottish Government, and now maintains some 40,000 computers and other items in the public sector.
He explains: “One of the reasons you can’t tender for contracts worth over £1 million is there is a barrier to entry – you have to have five existing contracts over £1m. In the NHS, the rules have more or less precluded any indigenous privately-owned company from tendering. In Barcelona, you wouldn’t get a Catalonian company losing out even to a company from Madrid.”
Brown believes the barriers have been a big factor in the regular sale of medium-sized Scottish IT companies to foreign owners over the years.
“Once they get to a size to compete for public sector contracts, they have had no alternative if they want to compete for the bigger contracts.
“We were told by one local authority a couple of years ago we would not get the business because they wanted a global company – we said we are a local company paying the rates and employing 65 people.”
Brown says the NHS requires a contractor to be able to deliver a service all over the UK. “If Fife or Lanarkshire want a service, why does it matter that you haven’t got an office in Portsmouth?”
He says central government has recognised the problem and has been trying to split big contracts up into smaller parcels, to get better value. “But there is still a disconnect between what government ministers or civil servants want and what other agencies do …when we do a post-mortem we always find that somebody has opted for a large bottom to kick if something goes wrong.”
As long ago as 2000, Brown was arguing that smaller IT suppliers were being disqualified purely because the cost of new hardware was being included in the value of contracts – rather than being bought separately through a central procurement process which ought to reduce unit costs. Such a process is now available through the Scottish Government – yet many councils ignore it and duplicate their own procurement. Brown says: “Some agencies put two fingers up to the Scottish procurement process … it’s not mandatory, it should be.”
NVT now has a big vested interest in that process – but so does the taxpayer. The Bellshill company beat off the big boys to win the four-year framework contract with the Scottish Government, but the more agencies opt in to the network, the lower the cost to the public purse.
Hamilton-born Brown began his working life with Canon more than 30 years ago and was sales director and 10% shareholder at Novatech, a computer dealer, when the business failed. He formed NVT from the wreckage, and in 1992 reshaped the business into a service company with 50% partner Alfred Weir.
NVT has bided its time, and resisted the temptation to grow too fast. “We have been canny for years, but now our turnover is up 30% last year and another 37% this year,” Brown says.
“We didn’t saddle ourselves with debt when the banks were wanting to give us overdrafts and loans and businesses. What we do realise is we are paying for 80-odd mortgages, 60-odd cars and 70 kids, there are a lot of people being looked after.” Now he says NVT with a £10m-plus turnover could even consider a future flotation – though there is no pressure for an exit.
When the financial crisis hit, it found both public and private sectors more receptive than in the past to the benefits of outsourcing – with notable exceptions. “The SME businesses that are forward-thinking that we deal with have done the same as the Government, but accountants and lawyers are not doing it – even if you show them a saving.”
Brown says the top business advisory firms are taking £150m a year to advise the government on saving money through outsourcing “but not doing it themselves”.
Local authority work only opened up on the demise of the regional councils in 1996. Brown says: “The fear I have now is they may centralise everything again, go back to bigger entities, and we go full circle.”
NVT campaigned from 2003 to persuade the Scottish Government to open up procurement to smaller companies.
“It fell on deaf ears at first, we were not just campaigning for us but for every other IT business and every other indigenous Scottish company.”
The framework contract would be worth £6.8m if every possible agency opted in but is likely to be nearer half that value.
“It wasn’t going to make or break the business, but it did give us faith in the business,” Brown says.
“We have had really good support from customers who have been prepared to back us.” He says Jim McColl’s Clyde Union, Dumbarton-based high-flier Aggreko, whisky giant Chivas and patent business Murgatroyd are typical of Scottish companies prepared to put their faith in Scottish suppliers.
Brown says the big budget squeeze has helped concentrate minds in the public sector too.
“We do think there has been a sea-change, we do think people in the NHS and councils and central government are listening. It just needs to be quicker.”
Story by Simon Bain and publish in HeraldScotland