Headlines: October 24th, 2005

Thousands of jobs in smaller companies could be affected as local councils turn to e-Procurement of goods and services. Authorities have been warned that while the move to electronic systems will lead to savings it will also have an impact on local suppliers. The warning has come from Stephen Timms, a minister in the Department of Work and Pensions who wants small businesses to gear up to councils’ electronic trading requirements.Mr. Timms said local authorities spent 25 billion pounds a year with suppliers. The implementation of e-procurement systems would mean they could save at least eight percent in price reduction by better procurement and as much as 17 percent through e- Procurement technologies. “This is an important opportunity for improved cost efficiency, with big numbers attached, but it is also a challenge as it will have a big impact on suppliers and needs to be managed well, ” he said.

The Minister said he was concerned that with the e-procurement deadline looming, a worrying number of smaller businesses appeared to have ignored the need to get ready for the new, online trading environment. E-commerce technology and online trading would, he said, provide small companies with new opportunities to offer tailored services to ever-wider markets and offer larger organisations, including public sector agencies, with the means to streamline their procurement processes, which could exclude many of their smaller suppliers.

The potential consequences, he said, were significant. Small and medium sized enterprises could end up losing business to larger companies and this would have a heavy impact on local economies.

A comprehensive supplier and spend analysis pilot involving more than 50 local authorities across the country and including a London pilot involving 15 public sector organisations, has found that six percent of trade suppliers, on average, may be at risk as a result of the changes. In London 17 per cent of locally-based suppliers to councils are at risk if their public sector customers decide to stop using them.

Martin Scarfe, local e-gov National Projects Programme Director, said, Priority Service Outcomes were geared to ensuring excellent authorities worked with local suppliers and local authorities had a duty to ensure that modern procurement processes embraced local small and medium sized companies for the good of the authority, local business and the local community. “Councils must build targets for local business inclusion into their procurement and e-Procurement plans,” he said.