Do Public Sector providers pass early Gov’t payments through to their own suppliers?
For many reasons the pandemic has driven massive changes in the public sector procurement. While the immediate after-effects of the pandemic remain a focus, those in a wide variety of public sector bodies are increasingly mindful of its long-term implications on their procurement and supply chains.
Effects of the pandemic on public sector suppliers
The severity of the impact of the pandemic varied for each individual supplier to the public sector, however many had these in common:
- Critical delays in the supply chain
- Increased pressure to deliver new solutions and services
- Contracts extended past original date to accommodate government requirements
- Supplier relief measures introduced (including the requirement to pay faster)
One of the long-term effects of the pandemic includes the way the government approaches procurement post COVID-19. Including;
- Consideration for a supplier’s social value
- Evaluation of systems to ensure faster payments can be made
- Push for digitalisation in the bidding and appointment process
Ethical considerations of public sector procurement during and post COVID-19
Flexibility & Expectations
During the pandemic, many public sector suppliers were expected to stick to the terms of their contracts despite the exceptional circumstances they were facing. As we’ve moved through the pandemic some extensions and exceptions have been granted but with no consistency from one contract to the next.
The pressure these terms have put on businesses (and their employees) should be a concern for many – how ethical is it to demand the same service from suppliers under these circumstances? And how ethical has the process been to determine who is allowed an extension and for how long?
When circumstances change, an argument could be made for contractual changes however the government did very little of this besides their basic supplier relief measures. Moving forward, both the contracting authorities and the businesses themselves should take legal advice around exceptions and extensions – particularly in relation to high value contracts.
Increasing flexibility in contracts for unforeseen circumstances will be needed to help and support businesses in a wide variety of public sector supply chain.
Financial Stability & Accessibility
The delays in supply alongside other pandemic circumstances (e.g. social distancing, the pingdemic, and lockdown requirements) will cause significant financial difficulties for companies of all sizes. Those that were able to continuously provide a relatively normal service still struggled to get paid on time from others in their own supply chains.
This is not necessarily a new problem since companies have always faced issues with payment schedules, however with the government’s determination to pay their suppliers immediately during the pandemic they will need to ensure greater transparency is provided to ensure these payments flow through to everyone and provide better resources and policing of payments to ensure everyone in the whole supply chain is paid on time from the bigger public sector provide
While there was a lot of support for smaller businesses across the board from the government, they have to acknowledge that larger businesses would often have the financial security that allowed them to put their name down for public sector contracts that SMEs wouldn’t. The push for digital bidding and awarding systems is a step in the right direction to make everything more accessible, but it doesn’t remove the privileged position of bigger companies.
How can SME’s benefit from post Covid-19 public sector contracts?
There are misconceptions around public sector contracts only being awarded to large companies, as there has been a recent drive for the government to award contracts to SME’s. Contracts are awarded to the business that can offer the best value for money as well as demonstrating efficient payment processes and a positive impact on the local community.
SMEs are better equipped to be flexible and efficient without the bureaucracy often found in large corporate organisations and are often more engaged with their community through local networking and fundraising events.
We cannot change how public sector contacts were handled in the past but we can use those experiences to work towards more ethical procurement and supply chain contracts in the future. The government has started down a good path but needs to remember that the businesses and people behind those businesses need to survive. Some of measures introduced during the pandemic have significant benefits, particularly for small businesses, while others could likely have been handled better.Any public sector procurement contracts should be kept under close review as we recover from the pandemic and return to a ‘normal’ way of operating to ensure the terms reflect the needs of businesses in evolving circumstances.
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