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All-Island Public Procurement: A competitiveness study

Published: October 2009

1 Executive Summary

1.1 Terms of Reference and Methodology

InterTradeIreland commissioned KPMG and Envision Management Consultants (hereafter 
referred to as Envision) to research and complete a policy paper to make recommendations for mutually beneficial cooperative initiatives to enhance the competitiveness of Small and Medium Enterprises (SMEs) to access public procurement opportunities on the island of Ireland.

The high-level objectives of this study are:

  • To provide InterTradeIreland with a more comprehensive understanding of the dynamics of the public procurement market on the island of Ireland.
  • To make recommendations for mutually beneficial cooperative actions in the following areas:
    • The provision of supports (by InterTradeIreland and other organisations, North and South) to build company capacity and capability;
    • The identification and removal of barriers preventing the operation of an open all-island public procurement market; and
    • The use of public procurement to drive innovation.

1.2 Context for the Study

The context for the study is provided by the following elements:

  1. EU and national legislation and policies: These are designed to open up public procurement markets for all economic operators, without distinction between SMEs and other types of economic operators. This is intended to create the conditions for maximum efficiency and 
    competitiveness within these markets.
  2. Provisions to provide access to public procurement markets by SMEs (or mainly by SMEs): These range from certain rules and supports to business in Member States [1] to the recently published 'European Code of Best Practices Facilitating Access by SMEs to Public Procurement Contracts (Code of Best Practices)' [2].
  3. Differences in the structural landscape of public procurement on the island of Ireland: Since the Review of Public Procurement in 2001, there has been a high degree of centralisation in public procurement in Northern Ireland, which is shaped around the Central Procurement Directorate (CPD). By contrast, the public sector procurement market in Ireland has always been more fragmented and decentralised, with each public body performing procurement functions independently within the framework of EU/ national laws and national guidelines. However, the increasing complexity and importance of purchasing decisions by public bodies is leading to gathering momentum for the centralisation of public procurement.
  4. Impacts of the economic downturn and associated budgetary pressures: It was evident throughout the research, that there was an increased focus and interest in learning from practice ‘in the other jurisdiction’ to expedite actions to enhance public procurement practice and avoid ‘re-inventing the wheel’. Allied to this, actions to improve North/South collaboration between buyers were viewed to be critical in the efficient and effective delivery of public services, with associated scope for cost savings, on an all-island basis. A case study of this principle in action is set out in the main body of the report. 

1.3 Scale, Dynamics and Characteristics

The research with buyers suggests that the public procurement market on the island of 
Ireland is worth circa €19bn (£15.2bn). This figure comprises an indicative annual spend of €2.8bn (£2.24 bn) [3] in Northern Ireland (based on 2008-2009 data) and in the region of €17bn (£13.6bn) in Ireland (based on 2007-2008 data). These figures, if combined [4], would represent a sizable proportion of the economic activity on the island of Ireland, equating to circa 10.3 per cent of the current Gross Domestic Product (GDP) (circa €184bn in 2008-2009) of the island of Ireland [5].

Recent figures from the CPD [6] suggest that public procurement expenditure (which falls under the responsibility of the CoPEs) has increased over recent years, from circa £1.6bn in 2002-2003 to circa £2.2bn in 2007-2008. Indeed, discussions with all of the CoPEs and other buyers in Northern Ireland suggest that the procurement spend is forecast to remain steady in the short-term. In some instances there was even projected increases in expenditure reported by some buyers (e.g. Roads Service) linked to the timetabling of major infrastructure projects.

Discussions with buyers from Ireland suggested that the public procurement market 'peaked' around 2006-2007. By contrast with Northern Ireland and in line with the recent public sector budget cuts, the general message in Ireland, going forward, was one of projected contraction 
in procurement expenditure.

The research with buyers in both jurisdictions provided evidence of an upsurge in interest in public procurement opportunities in recent months, which was viewed to be driven in part by 
the current economic downturn, where in relative terms, the public sector was often viewed as a more ‘stable’ source of potential income. As such, there were constant references throughout the study to an increasingly ‘hungry and competitive’ market.

The buyers interviewed within the research programme for the study, in the main indicated very low levels of tendering activity from the 'other jurisdiction'. Within this, there are more examples of Northern Ireland SMEs winning contracts with buyers from Ireland, than the reverse. This is consistent with the fairly high levels of use of eTenders by suppliers from Northern Ireland and the findings of the SME survey (detailed in Section 5 of the main report). In effect, there was multiple evidence sources within the research suggesting that cross-border tendering activity is 
extensively dominated by North to South ‘traffic’ rather than the reverse.

The statistics provided by CPD on the activity levels of suppliers from North and South within their eSourcing system from 6th May to 31st October 2008 (in Table 1.1), also provide testimony to the market failure in relation to cross-border procurement, particularly in terms of South to North ‘traffic’. Specifically, the limited numbers of Ireland-based suppliers registered with the system, follows through to an even poorer representation in terms of tender issue and submissions back to CPD.

Table 1.1 Activity Levels of Suppliers with CPD 
Jurisdiction Northern Ireland Northern Ireland % Ireland Ireland % Total
Companies Registered 1468 88.7% 187 11.3% 1655
Companies Active 904 89.1% 111 10.9% 1015
Active Companies % 61.6%   59.4%   61.3%
ITT Invites Issued 4164 95.4% 199 4.6% 4363
ITT Responses Received 780 96.8% 26 3.2% 806
Responses Received % 18.7%   13.1%   18.5%
'Over the period 6th May to 31st October 2008, 806 ITT responses were received by CPD from suppliers within the island of Ireland for Northern Ireland-based public procurement opportunities…………97% of these were from Northern-based suppliers and 3% from Southern-based suppliers' - CPD 

1.4 Summary of the Main Market Failures (with respect to Cross-Border Procurement)

The factors emerging from the research as contributors to cross-border market failure with respect to public procurement include:

  • A lack of visibility of tender opportunities in the opposite jurisdiction (particularly on the part of Ireland suppliers with respect to Northern Ireland tenders and for low-value/ sub threshold opportunities);
  • Procurement practices on the island of Ireland could be more ‘SME friendly’ (e.g. 'unbundling' of contracts, proportionate thresholds, and reduced bureaucracy). This issue applies primarily in a 'single jurisdiction' context, although it was viewed that North/South debate and policy exchange on the relevant issues between buyers could help to ease SME access, on the island of Ireland as a whole;
  • A lack of understanding amongst SMEs of how to pursue tender opportunities in the opposite jurisdiction and sufficient capacity and capability to carry out the research needed to identify and pursue these opportunities;
  • Capability in terms of 'intelligent' tender writing particularly for cross-border tenders, where the level of understanding of buyer needs may be more limited. Whereas, in the past, SMEs failed more on compliance issues. In recent years, the levels of compliance were reported to have improved substantially and SMEs are perceived to fail, more on 'a failure to answer the exam question';
  • A limited understanding of the concept of Sustainable Development and Sustainable Procurement (by both buyers and SMEs). Given the potential of the same to encourage 
    indigenous supply within the island of Ireland, this awareness is a relevant market failure that needs to be addressed;
  • Inconsistency and variable buyer practices within and across the two jurisdictions, which means that SMEs do not have a consistent view of how the market operates. This can increase the lead-in time for them to become more active and successful in winning public procurement contracts;
  • A 'mismatch' in the availability of centralised management information [7] between North and South. In practice, this means that it is difficult to establish any baseline at an 'all-island' level about SME penetration within the public procurement market;
  • A need to distinguish between procurement and tendering, where the former also encompasses the identification of the public sector ‘need’ and associated market sounding/dialogue in advance of the issue of the ITT. This is important given that this pre-commercial stage provides most scope for innovation, 'fit' with buyer needs and potential for 'lead markets' for new technologies. 
    Accordingly, the research strongly highlighted the need for more structured mechanisms (including on a cross-border basis) to facilitate a transparent process of engagement between buyers and SMEs at this pre-tender/pre-commercial stage; and
  • Both the research with buyers and SMEs found limited evidence of joint-working between SMEs on a cross-border basis (to access public procurement opportunities) and interventions to facilitate the same (which were solely focused on the public procurement market). Given that, having a partner ‘on the ground’ in the other jurisdiction (to boost capacity and capability) could be an 'easier' route for market entry. This is a key market failure to highlight. 

1.5 Summary of Key Findings & Recommendations

Before progressing to outline a series of recommendations, it is important to highlight that at an overall level the public procurement market presents a significant opportunity for SMEs with scope for new entrants, particularly on a cross-border basis.

The increasing importance of this market to SMEs is reinforced by the challenges of the current economic environment. Furthermore, the research has confirmed the potential for cross-border co-operation between buyers to enhance the effectiveness of public service delivery and create the potential for associated cost savings.

Outlined in Table 1.2 are a series of cross-border recommendations linked to the market failures set out in Section 1.4. It is important to emphasise that the study has identified recommendations and actions that will be required in a single jurisdiction context to maximise the opportunity for cross-border procurement (and SME access to same). In effect these are critical to creating a positive and reinforcing environment for the implementation of the cross-border recommendations. Furthermore, they could form some of the focus of debate within the all-island practitioner group suggested as one of the recommendations. However given the primary requirement in this study to highlight mutually co-operative actions that will have a cross-border  impact, the single jurisdiction recommendations have been separated out and included in Appendix 8 for reference. 

Table 1.2 Cross-Border Recommendation(s)

1 Consideration should be given to the implementation of a promotional campaign, perhaps through the relevant trade bodies, to encourage registration of Irish SMEs with the CPD eSourcing system.

2 The feasibility of a single 'all-island' system for consolidated access to lower-value public sector contracts should be explored, where the www.laquotes.ie model is viewed as a potential starting point. Clearly this would require engagement and debate with the evolving local government procurement group in Northern Ireland and the host local authority in Ireland (Kerry County Council). To facilitate maximum coverage, this should explore whether it is desirable to link this to eTenders and the CPD website/eSourcing system.

3 There should be encouragement for all Northern Ireland buyers to advertise open tenders on the eTenders system. It is understood that the practice is variable at this point in time. This would improve the visibility of Northern Ireland public procurement opportunities for SMEs in Ireland, given that, the 'traffic' in terms of South to North tendering is very limited.

4 The research has highlighted that there are shortcomings in the availability of centralised management information (e.g. with respect to tenders awarded by value, size of company and jurisdiction), although it is relatively better within Northern Ireland (e.g. the CPD Good and Services arena) than in Ireland. In the longer term, the development of a centralised eSourcing system in Ireland is a potential solution to this, which could arise through the progressive centralisation of activity that will happen through the proposed creation of a NOU in the OPW.

In this regard, it was suggested that a medium-term recommendation arising from this study could be the creation of an ‘all-island’ eSourcing system with common supplier registration database (perhaps based on an extension of the CPD eSourcing system).

A compromise position, could be, for the system in Ireland, to have a similar design specification to aid commonality of reporting on a North/South basis. However, in a tighter budgetary environment, there may be merit in considering the economies of scale that could be achieved through an 'all-island' approach. The creation of the NOU provides a 'window of opportunity' to consider the concept in the short-term. Any legislative obstacles to this should be explored based on the fact that aspects of the European Union (EU) procurement directives are transposed differently in Northern Ireland relative to Ireland.

5 As SMEs have cited the lack of resource (i.e. person power) as a barrier, it is recommended that InterTradeIreland could consider the provision of an experienced resource to assist inexperienced SMEs in submitting cross-border tenders. Such an approach could include dedicated time (3-5 days) of an external resource with the experience to assist the company rather than actually complete the tender. Practically, this could involve a call-off mentoring 
framework of suitable mentors, which would require flexible delivery at short notice. Such an intervention would be weighted towards developing expertise in the company, given that the onus should be on developing SMEs that are 'bid-ready'. This recommendation could be incorporated within the concept of the First Stop Shop being developed by InterTradeIreland.

6 In the short term, efforts should be made by InterTradeIreland to weight participation in Go-2 Tender from Ireland relative to Northern Ireland. This could help to increase ‘traffic’ in the public procurement market from South to North.

7 InterTradeIreland could consider building on the Go-2-Tender programme with more intensive/advanced follow up support intervention - particularly in terms of support for ‘intelligent tender writing’ and research/capability support to assist SMEs to develop a strategic approach to targeting their products/services to buyers in the other jurisdiction.

8 Some of the local authorities interviewed in Ireland for the study suggested hosting regional 'roadshows' for SMEs involving groups of local authorities, with the view that they would go through a mock case study of a tender process complete with sample winning tender submission. Given the potential that the local authority market offers SMEs, this could be worth pursuing. The local authority programmes that are offered tend to be specific to each Council, and a more collaborative approach could facilitate SMEs who are successful with their local Council to replicate the approach elsewhere, including on a cross-border basis. There could be a role for InterTradeIreland to facilitate a version of Go-2-Tender that was local authority specific, involving participation from local authority representatives on an all-island basis as speakers. The programme should target those who are already successful in tendering to local councils in their own jurisdiction.

9 Sustainable Development is an evaluation criterion that is going to become more common through public procurement. A structured approach is required to increase SMEs knowledge of how they can use this criterion to compete -as well as increasing economic, social and environmental innovation within the public procurement process. This could take the form of follow-up/supplementary training to the Go-2-Tender programme and would enable SMEs to enter new cross-border markets on a key competitive offering (e.g. particularly in the construction sector). More broadly, better understanding of the concept (amongst buyers and SMEs) could encourage more indigenous supply on the island of Ireland.

10 Establishment of an all-island senior practitioner network to pool knowledge and best practice in public procurement. This could draw on membership from the Public Procurement Practitioners Group (PPPG) in Northern Ireland and similar bodies in Ireland (e.g. the Government Construction Contracts Committee (GCCC)) pertaining to capital projects only, and should potentially have a local authority dimension. The suggestion was that it should meet quarterly.

11 The Procurement Exchange Programme, developed as a concept in Northern Ireland to facilitate secondments, mentoring, work-shadowing between CoPEs, could be piloted on a cross-border basis to act as a mechanism to expedite the development of more consistent procurement practice amongst buyers on an 'all-island' basis.

12 Consideration could be given to piloting a procurement process of staged tendering - allowing for an innovation phase in which SMEs on an 'all-island' basis can participate. This would be suitable for application within the science, technology and R&D fields and could be similar in nature to the good practice example cited within the Netherlands in Section 7, which is currently being considered for application in Northern Ireland (by DETI).

13 Consolidate and develop the current approach to events in which the buyer meets the suppliers (e.g. particularly Network and Getwork). This would involve an increase in buyer/supplier participation as well as ensuring concerns of both parties with regards to such events (outlined in the report and supporting appendices) are addressed. It is recommended that buyers could demonstrate their commitment to cross-border procurement by travelling to the opposite jurisdiction for events (e.g. sectoral Network and Getwork events) rather than reliance on a large group of SMEs travelling to the opposite jurisdiction. This would potentially result in a higher level of exposure of SMEs to buyers on a cross-border basis. It is understood that this is being actively considered by InterTradeIreland and various Chambers of Commerce at this point in time. Consideration could also be given to broadening the scope of cross-border events, to include a format (as per the French model ‘Met’ set out in Section 7) which enables a group of SMEs to present their innovative products or solutions to contracting authorities in a given technological field. This could involve approaching SMEs participating in programmes such as Innova, Seedcorn, Enterprise Innovation Networks (delivered by Enterprise Ireland) or Innovation Vouchers to attend such events.

14 The eTenders system currently records details of all parties who register an interest in a particular tender. The research detected interest on behalf of SMEs for the names of such parties to be disclosed (where they are willing) so that they could be contacted with a view to preparing joint bids and/or subcontracting arrangements. One possible solution to this might be to have a tick box whereby suppliers registering interest in a particular tender on eTenders could indicate whether they agree to have their details released to other parties for the purpose of preparing joint bids. This would be cross-border in nature given the high level of engagement of Northern Ireland suppliers with eTenders.

15 The research into the competitiveness of SMEs in accessing public sector contracts has clearly indicated that lack of critical mass / size is one of the significant barriers to SMEs consistently and successfully securing public sector contracts. This has already been recognised, specifically in the construction sector. The Supplier Model is a ‘supply chain’ model that provides capability support to SMEs in the construction sector - to potentially gain access to work packages as part of larger construction projects - it’s success is based on the specific ‘sequential’ nature of the construction tendering process, where lead contractors are appointed initially, and then components of the overall contract are tendered to sub-contractors, and in turn sub-contractors may further sub-contract smaller work packages to other companies. However, at this point in time it is not available on a cross-border basis and there could be scope to consider re-introducing it as a cross-border programme -offering support to SMEs either side of the border to potentially access work within large construction projects on the island of Ireland.

16 It is suggested that in sectors other than construction, a different approach to facilitate joint working may be required. The rationale for this is set out in more detail in Appendix 7. Accordingly, consideration could be given to providing SMEs on the island of Ireland with support in relation to the formation of joint ventures / consortia for public sector tendering. It is recommended that this support could consist of a combination of:

  • Workshops - designed to change the mindsets of many Irish companies in relation to the formation of joint ventures / consortia; and
  • Mentoring - to provide companies with the practical assistance required to take SMEs through the steps involved in researching, identifying and establishing joint venture partnerships.

17 The support (workshops and mentoring) to be provided needs to address the following issues:

  • The cultural and commercial challenges (and advantages) of establishing joint ventures/consortia;
  • Establishing clear criteria for the screening and selection of joint venture/consortia partners;
  • Understanding how to go about researching and identifying potential joint venture partners;
  • Understanding the different forms of joint venture partnership – the pros, cons, and practical steps involved in establishing and operating them;
  • Legal advice/input on the various forms of joint venture partnerships;
  • Good practice in relation to joint venture/consortia agreements; and
  • Best practice in relation to sustaining joint ventures – and making them work for the participant businesses.

SMEs could effectively use any consortia developed to tender for specific public sector opportunities (that they would not otherwise be able to secure), to develop new skills and capabilities, to enter new market sectors, and to grow their businesses. In time, this approach could enable SMEs to develop the critical mass to target larger public sector opportunities on their own, or indeed to develop further larger joint venture partnerships / consortia. This approach could be piloted on a cross-border basis.

A programme based on the above could be piloted by InterTradeIreland centred on one or two public procurement areas which could lend themselves to joint working/networking (e.g. facilities management and ICT contracts).


[1] For example, Accelerating the SME Economic Engine: throughout transparent, simple and strategic procurement [in the UK] (November 2008); Equality Commission for Northern Ireland / CPD, Equality of Opportunity and Sustainable Development in Public Procurement (May 2008); Procurement Innovation Group (Ireland), Using Public Procurement to stimulate innovation and SME access to public contracts (July 2009).

[2] The Code of Practice aims to provide contracting authorities in Member States’ with general guidance on how they may apply the EU legal framework in a way which enables 
SMEs to participate in contract award procedures and highlights a number of national rules and support programmes that facilitate access to public contracts by SMEs.

[3] €1 = £0.80 (2008 average taken from European Central Bank, accessed August 2009).

[4] Albeit that they are based on different financial years – full information for 2008/ 2009 for Ireland is not available on a centralised basis – the only centralised information that could be sourced related to capital expenditure.

[5] It is also comparable to the 13 per cent figure quoted in this regard in the ‘Glover’ report for the UK (Accelerating the SME Economic Engine). It should be noted, that these figures are high-level estimates, given that there is limited means to access centralised contract award data.

[6] Provided at the CBI Public Procurement Conference, Belfast, 5th March 2009

[7] This includes information on tenders awarded by value, size of company and jurisdiction. The position is relatively better within Northern Ireland (e.g. the CPD Good and Services arena) than in Ireland, although the creation of the NOU in OPW should bring increased potential for greater levels of centralised management information in due course.


Click here to download the full report: All-Island Public Procurement: A competitiveness study.

You can find out more about A Cross-Border Guide to Public Procurement on the InterTradeIreland Cross-Border Trade Hub.