Cabinet Office revises PQQ core questions to help SMEs compete for government contracts

The Cabinet Office has issued revised standard Pre-Qualification Questionnaire core questions as part of its drive to help SMEs compete for public sector contracts.

In a policy note issued earlier this month, the Cabinet Office said all central government departments, their executive agencies and non-departmental bodies should adopt “forthwith” the questions in procurements where a PQQ is deemed appropriate.

The policy note is also intended to provide clarity on when the use of PQQ is not permitted, and on the use of performance bonds in framework agreements.

Publication of the policy note comes after the Prime Minister, David Cameron, and the Cabinet Office Minister, Francis Maude, announced measures in February 2011 aimed at ensuring a level playing field for SMEs.

These measures included the elimination of the use of PQQs for all central government procurements under the EU threshold, and the standardisation of the PQQ, “with the objective of ensuring cross-Government adoption of a shortened/less onerous PQQ template”.

In relation to the elimination of the use of PQQs under the EU threshold, the Cabinet Office said contracting authorities could still apply the ‘pass/fail’ mandatory and discretionary criteria as set out in clause 23 of the Public Contracts Regulations as part of their Invitation to Tender.

“The award decision should be solely based on a supplier’s response to the contracting authority’s ITT,” the policy note said. “Where the capability of an individual is essential to the delivery of the contract, for example, the provision of consultancy, CVs may be requested to assure the credibility of delivery as part of assessing quality at the award/ITT stage.”

However, it warned that contracting authorities should not impose arbitrary minimum requirements which may have the unintended effect of barring new business from bidding.

The Cabinet Office said contracting authorities might wish, but were not required, to undertake a financial check as part of the supplier evaluation process. However, it said that “in the spirit of encouraging supplier growth, [they] should not rule out a supplier unless there is clear evidence that the supplier’s financial position places public money or services at unacceptable risk”.

On the revised standard PQQ for above EU threshold requirements, the policy note said “the mandatory and discretionary sections of the PQQ, forms B to C, must always be applied”. All other selection criteria are discretionary.

“It is important to note that that it is a legal requirement that any minimum levels of economic and financial standing, or technical and/or professional ability levels set by contracting authorities must be related and proportionate to the subject matter of the contract,” the Cabinet Office said.

The policy note said contracting authorities must therefore avoid setting unnecessarily high requirements. “Use of over-restrictive criteria may come about unintentionally from a practice of treating criteria and capacity levels in a standard way (e.g. “cutting and pasting” requirements from other tender documents),” it warned.

The Cabinet Office also called on contracting authorities to avoid using a mechanistic approach to financial appraisal, such as applying arbitrary turnover limits, “which may either rule out SMEs who are financially sound, or not provide SMEs with the opportunity to grow their business on the back of Government contracts”.

The policy note revealed that SMEs had brought to the Cabinet Office’s attention the high cost associated with being required to obtain a bank performance bond as a condition of being awarded a framework agreement (even though such an agreement does not guarantee any business).

“Where in exceptional circumstances the financial risks are such that a contracting authority requires a performance bond, bonds should be a condition of the award of the first contract under the framework agreement and not a condition of being awarded the framework agreement,” it said.

The Cabinet Office revealed that its ‘Mystery Shopper’ exercise had found that the pre-qualification process remained the biggest single issue preventing SMEs from competing for public sector. These accounted for 49% of all the scheme’s cases. In addition:

• Over 80% of pre-qualification complaints related to the wider public sector;
• 60% of pre-qualification cases related to “inappropriate financial standing requirements of which the majority related to contracting authorities seeking unnecessarily high financial turnover requirements”.

“This analysis highlights that contracting authorities need to ensure that, where pre qualification is permitted in accordance with current policy and applied, pre qualification requirements are appropriate to the nature of the requirement and do not create unnecessary barriers which prevent SMEs from competing for public sector business,” the Cabinet Office said.

The policy note can be viewed here.