Mystery Shopper procurement scheme saw 300+ investigations: Cabinet Office

More than 300 alleged cases of bad procurement practice have been investigated in the 18 months since the Cabinet Office launched its ‘Mystery Shopper’ initiative, it has emerged.

In a progress report on the operation of the scheme, the Cabinet Office said 81% of those cases raised issues with the procurement process. Cases also concerned contract management (7%), bureaucracy of the process (5%) and technology/systems (5%). In 2% of complaints, the case was not taken on.

The most frequent complaints from SMEs surrounded unachievable pre-qualification financial requirements and a lack of early market engagement.

In more than a third of cases (38%), SMEs highlighted lengthy and complex pre-qualification questionnaires that set too much emphasis on financial guarantees and requirements.

The Cabinet Office claimed that the Mystery Shopper, which was also extended to cover supply chain issues, had helped deliver “positive changes” in around four out of five cases. 

Cases highlighted in the report included:

  • A small construction firm raising concerns in a local authority procurement that smaller firms would be disadvantaged as more marks were given in the PQQ for firms with higher turnovers. The council altered its approach following the Cabinet Office’s intervention.
  • Employee mutuals struggling to satisfy financial requirements because they were asked for financial guarantees which were not easily available to them as start-up enterprises.
  • PQQs requiring bidders to have insurance in place at the point that they bid for work. Examples of this were in PQQs used by some NHS trusts. The Cabinet Office recommended that insurance be dealt with as a contract condition.
  • A tender specification being very different to what was originally advertised. In another case, a framework was advertised and then a notice cancelling the project was issued some months after the tender closing date with the justification that the structure of the contract was not in line with current market conditions. In both cases, the Cabinet Office recommended that in future pre-competition engagement should be undertaken.
  • Issues over the design of frameworks. Some SMEs said they had been required to sub-contract to larger suppliers who are a party to a framework agreement in order to continue to provide services, sometimes at more cost to the contracting authority.
  • Specifications being very tightly drawn and not allowing for equivalents.
  • Problems arising with the administration of e-procurement systems. In one case a local authority received documents from two companies with very similar names. It thought it had dealt with the complainant’s submission but it had not. Another case referred involved a local authority giving a supplier more time to complete a PQQ when he had experienced technical problems with the council’s e-procurement system.
  • Suppliers not having sufficient time to respond to lower value tenders below the EU thresholds. One small IT contract was placed on the Contracts Finder site by a central government agency with a deadline for response of less than a week.
  • Suppliers approaching the end of contracts not being told what will happen next in a timely manner. The Cabinet Office said incumbent suppliers should be told in good time – at a contract management meeting – what the next steps will be. Authorities should not just rely on alerts from e-procurement systems.
  • Payments not being made in accordance with the terms of the contract.
  • Charges being made for procurement documents and inclusion in catalogues. “We advise that charges should not be made to suppliers for procurement documents and that any charges made by contracting authorities in relation to the promotion of framework agreements and other catalogue type arrangements should be related to the value of business a supplier derives from those arrangements, rather than an upfront charge,” the report said.

The majority of the cases (66%) investigated by the Cabinet Office covered the wider public sector, which includes local authorities, NHS trusts and some other arms' length bodies. Just under a third (30%) related to central government.

Cabinet Office Parliamentary Secretary Chloe Smith said: “In the past the playing field was stacked against SMEs winning public sector contracts and public procurement seemed as if it was designed to serve the needs of procureaucrats not business.

“This Government is determined to change all that and to strip out unnecessary process from public procurement. We have made good progress already but there’s still a long way to go and in this global race our businesses need all the help they can get.”

She added: "Mystery Shopper gives SMEs a chance to have their voices heard anonymously and to raise concerns about the bureaucratic barriers which stand in their way. Stripping these out will make a difference to business, and to the growth of our economy.

"We want more businesses to use this service to raise complaints so we can name and shame the parts of the public sector still doing procurement in the clunky old-style."

A copy of the progress report can be viewed here.

Philip Hoult