Two of Scotland’s foremost economists have launched a damning attack on Crawford Beveridge’s Independent Budget Review for failing in its duty to consider Scottish economic development.
Writing in today’s Sunday Herald, they also rejected the logic of the four-year-old McClelland Report, the proposals of which have helped to concentrate Scottish public procurement into larger single contracts.
Geoff Mawdsley, director of think-tank Reform Scotland, broadly agrees with the Cuthberts’ views that local services and facilities would be better served by more dedicated contractors.
“We would like to see the devolution of power to local authorities so that they can decide how they manage their services more generally. Procurement is part of that. We want to see things driven from the bottom up rather than trying to force centralised procurement or efficiency savings from the top down.
“I don’t think that procurement should be restricted to Scottish companies, but this would likely be a natural by-product of a more local focus because you would end up with more competition.
“We have tried to force a one-size-fits-all mentality, assuming there’s one right way to do things. We have gone for a uniform approach where we should be looking for diversity.”
David Watt, director of the Institute of Directors Scotland, has some sympathy with the Cuthberts’ arguments but said there is a danger of oversimplifying the complexity of achieving optimum procurement for the good of the country.
He believes that the McClelland Report “very sensibly” suggested that the country would get better value for money by centralising procurement, but agreed that this tends to disqualify Scottish companies because they don’t have the scale to cope with the size of the contracts.
He said: “The question is, are we as individuals and as businesses prepared to accept some poorer value for money in order to promote economic development in the longer term? I don’t know the answer to that question. The Cuthberts are arguing there’s a case for doing that, but the media would crucify the Scottish Government if it went down that road.”
It might be noted that, on the other end of the spectrum from the disaggregation of contracts in the above case, there is a similar argument as regards the "bundling" of contracts under US Federal procurements. This is an ongoing debate going back, formally, to the late 1990's at least. (See, for instance, this 2002 article, which describes the legislative and regulatory framework.) A recent rendition of the debate is illustrated by the following article:
DOD now required to report bundled contracts, sole-source awards
Acquisition officials in the Defense Department now must post notices about bundled contracts and their benefits, according to a new interim rule.
DOD’s contracting officers are required to publish a notification on FedBizOpps.gov or any similar site at least 30 days before releasing a solicitation for a bundled contract
Contract bundling occurs when an agency combines several smaller procurements into one larger purchase. If a defense agency expects to reap measurably substantial benefits because of bundling, the notification must include the brief description of those benefits, the rule states.
The rule is based on a provision in the fiscal 2010 National Defense Authorization Act, which became law in October.
The interim rule isn’t expected to have a significant effect on companies, particularly small businesses. On the other hand, small companies may benefit in the end.
MORE:
Defense agency seeks 10 percent price reduction from suppliers
the Defense Logistics Agency is looking to its suppliers to help cut costs.
"First, we will pursue price reductions by as much as 10 percent in selected areas by providing greater focus on price reasonableness, incorporating price reduction factors in strategic sourcing opportunities and establishing more long-term contracts," said Vice Adm. Alan Thompson, director of DLA.
"The payoff from our pressure on pricing should be realized near term," he said.
Additionally, the logistics agency will upgrade its enterprise business system to consolidate procurement of depot-level parts and supplies for all the military services into a single contracting instrument. "This will allow us to make larger buys, which will be targeted at reducing costs," Thompson said.
As DLA leverages its buying power by consolidating purchases across the agency, some of its small business contractors might have to build relationships with larger firms, where they can function as subcontractors, Thompson said.
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