Throwing the PQQ out with the bath water

Bidding for work in the public sector has invariably required, for all but the smallest assignments, the completion of a Pre-Qualification Questionnaire (PQQ) at the outset.  But over recent years the PQQ has lost its original purpose –

to limit the organisations invited to submit a full tender response to those who meet basic compliance criteria and have the capacity to deliver.  Indeed, many PQQs have become overly bureaucratic, politically correct, risk averse and yet non-discriminating in terms of capability and capacity.

Recent experience in supporting a range of charities to bid for public sector work as part of the WCoMC pro-bono scheme has thrown up the following examples in PQQs:

• A wide range of questions about the supplier’s financial situation, including multiple categories of insurance cover.  No two clients ask the same questions.
• A requirement to have policies on data protection & security, environmental management, equal opportunities, health & safety, quality assurance and even whistle-blowing.
• One client asked for details of business continuity plans and disaster recovery.  This might be reasonable for a supplier delivering crucial frontline services, but this was for a staff training contract – probably the first activity one would suspend if there actually was a major incident.
• A procurement run by a public sector body invited expressions of interest for grants to support the development of employment skills among disadvantaged groups.  The charity that I was helping was pleased to learn that their PQQ was successful, but shocked to learn that over 500 organisations had been “shortlisted”.

There has been a huge increase in complaints about PQQs putting barriers in the way of SMEs seeking public sector business, see for example, Lord Young’s report: “Growing Your Business” , published in May 2013.  Nearly all of the charities that WCoMC supports are SMEs as well, so they also have suffered from the misuse of PQQs.

What is Government doing about it?

The Coalition Government has a strongly pro-SME agenda, and has a target to increase the value of public sector business awarded to SMEs to 25%.  It has already abolished PQQs for all central government procurements of less than c£100,000 and in its consultation document: “Making public sector procurement more accessible to SMEs” published in September 2013, it proposes to:

• Legislate to eliminate the use of PQQs by all other public sector bodies for contracts with a value less than £174,000 (the EU threshold)
• For larger contracts, use a standard PQQ with a core set of questions  across central government and potentially the whole public sector
• Consult on whether to adopt a “Supplier Passport” system, whereby suppliers submit PQQ information once only to a central body, updated on an annual basis
• Require that all contracts over £10,000 be listed on the Contracts Finder website, and hence freely accessible to all

Some of these changes are welcome, but are they all good news for SMEs and charities in particular?

An example from a charity that I supported via a pro-bono assignment earlier this year:

A Local Authority invited bids to provide therapeutic services to parents and young children across the County – a complex procurement which required significant effort to respond.  There was no separate PQQ stage, but all the “usual” questions from a PQQ formed the first part of the required tender response.  Moreover, the tender documents stated that, if an organisation failed to pass these pre-qualification questions, the client evaluation team would not assess the remainder of the response!  In consequence, several organisations wasted time and effort working on a detailed response which was not even considered.

What type of PQQ is appropriate?

The traditional PQQ has two elements: a Compliance element and a Capability element.  The Compliance element covers essentially what has been recommended for the Standardised PQQ. Whether it is appropriate to issue a PQQ with a “Capability Element” depends on the nature of the goods and services being procured, and the supplier market.  In my view, all procurements should consider:

• What is the likely supplier effort required to respond to a full invitation-to-tender in relation to the likely contract value?
• How many organisations are capable of bidding?

If the response effort is high, and the number of organisations likely to bid is also high, then it is in everyone’s interest to include some tender-specific questions in a PQQ so that the number of organisations who need to spend significant time and effort responding is kept to a reasonable number, perhaps 6-8 in total.  These questions would form the “Capability element” of a PQQ and help to narrow down the number of bidders to those who have the capability and track record to undertake the work.

The myth that “the more bidders the better”

I have heard experienced procurement staff express the view that best value-for-money for the public sector is obtained by maximising the number of bidders.  This may be the case when the cost of bidding is very low; for example, for supplies and services that merely require a price catalogue or a rate card for different types/grades of staff. 

But it most certainly is not the case when the cost of bidding is high relative to the contract value.  This is often the case both for management consultancy assignments and for the type of services that many of our charity clients provide to public sector bodies.  I have been involved in several procurements where high-quality bidders have declined to bid on the basis that there are just too many bidders involved to justify the bid costs.  I have also advised several of our charity clients not to proceed with a full bid because the probability of winning does not justify the cost of bidding.

So, a plea to the Cabinet Office:

“Please do not throw the PQQ baby out with the procurement bathwater, but use it in a selective manner to ensure best value for money from the supplier community.”  

Bob Harris

22 October 2013