Wanted: a better, fairer system of handing out Government contracts

There have been complaints about the criteria used to "score" companies that have submitted bids to be included in the framework – and complaints that basic mistakes have been made in assessing the scores.

Some companies that have been excluded from the latest framework have challenged the decision, with Freedom of Information requests and even legal threats, causing its publication to be delayed three times. It was initially scheduled to be finalised last September. The latest estimate is - anyone's guess.

Meanwhile, Scottish public-sector bodies which need billboard or TV advertising have been forced to buy in services from elsewhere.

So are those firms holding up the final publication of the framework guilty of sour grapes?

One agency chief challenging the decision said: "People say that – until they see the sheer number of mistakes in the Scottish Government [tender] responses. They made [the tender system] massively complex, which resulted in it being massively later than the original date in September. When we did get the results in February, it was full of basic arithmetical errors in the way the various responses were scored.

"Given the number of hours we had to put into these applications, we have a right to a bit of clarity, but their responses have become more vague the more we have enquired."

Another agency said: "Many of the questions you are forced to answer in the tender are about accuracy and timeliness of delivery. These are exactly the things the Scottish Government have got wrong themselves."

Merrill has declined to comment on the marketing framework situation for legal reasons, but elsewhere, the minister responsible, Deputy First Minister Nicola Sturgeon, has been pointedly talking up progress made elsewhere in the procurement system.

Although the Scottish Government cites satisfied businesses clients, no-one disputes the need to complete a reform process that has been rolling on since at least 2006. The Scottish Government's interpretation of European Union rules demands the completion of long "PQQs" (pre-qualification questionnaires) for companies even to be allowed to apply for government work, a process that does not guarantee that they will ever get any.

Much of this time-consuming work is now outsourced to specialist form-fillers, expert in the latest buzzwords. Project procurement can require an official to read 60 PQQs, each of them up to 30 pages long. Although there are 130 staff in the Scottish Procurement and Commercial Directorate (SPCD), this is 25% fewer than four years ago.

The Marketing Services Framework row is just the latest example of long-simmering resentment and mutual distrust between business people and officials. One of the critical areas is public construction work, where contracts worth £2.4 billion were up for procurement in 2010-11.

The end of the pre-crash building boom raised the stakes in that sector, enhancing perceptions of a common-sense-defying box-ticking system under which a good medium-sized local building firm cannot be awarded a contract to build, say, a school because it has only built two schools previously. Meanwhile, a giant firm from elsewhere in the UK that has built the five specified on a standardised PQQ gets the job.

Martyn Roe of Blythswood Consultancy, a Stirling-based expert in student accommodation development, describes how a recent bid for work at the University of the Highlands and Islands was rejected because he "did not provide a satisfactory description of your procedures for periodically reviewing, correcting and improving quality performance".

Roe said: "The inclusion of such criteria effectively defeats small businesses like mine. When you are a one-man-band you don't need to formulate elaborate paper procedures because you are in complete control of what you do, and the cost of obtaining ISO 9001 [certification that a firm has a quality management system] couldn't be justified off my turnover.

"The reality is that you stand zero chance of winning something like this and therefore as a rule firms with fewer than 10 people don't bother applying. I only went for this job because it was such an exact fit with what I do.

"The outcome will be that a big outfit with lots of processes in place will get the job, but it will be delivered by a non-experienced generalist rather than a specialist like myself with 15 years in the sector. But bureaucrats don't have a problem with such realities if their system looks good on paper."

Willie Watt of Nicoll Russell Studios is an architect who has publicly voiced the frustration of many in the building sector. He said: "Over the past decade, procurement in the construction sector has become increasingly fraught, and as a result of that more and more complex, which means more people are disgruntled; there are more legal challenges. It becomes like a whirlpool.

"It's got to the stage where the system has reacted by sticking one plaster on top of another. Fear of decisions being legally challenged has led to question after question being added to PQQs, which just ties the client up in knots. The fact that people have to compete for everything everywhere, and the fear of being accused of local favouritism, leads to a kind of reverse parochialism."

The reform programme has itself acquired an elaborate "landscape" of structures and frameworks, including a public procurement reform board, a public procurement advisory board and a public procurement delivery group. Its most tangible outcome is the 2008 online portal Public Contracts Scotland (PCS), which, along with sub-sites for the local government, health and universities sectors, has been credited with simplifying the interaction between business and the public sector – "addressing concerns expressed by business that the pre-qualification process is too time-consuming, bureaucratic and inconsistent", as Sturgeon puts it.

The claim that PCS has "placed Scotland as an international leader in public-sector procurement" largely rests on its part in increasing the percentage of public-sector contracts that go to Scottish SMEs, which rose to 68% in 2012 from 57% in 2010.

Where it has made less impact, however, is in increasing the percentage of the value of public contracts that go to Scottish firms. Figures not included in last month's progress report but later supplied to the Sunday Herald show that the 98.3% of Scottish businesses that are SMEs (those with up to 49 employees) were awarded only 13.5% of the total public spend in Scotland in 2010-11, and 14% in 2011-12.

These low proportions can be partly blamed on European procurement rules and the desire and the capability of Scottish firms – these days no home-grown civil engineering firm could deliver the new Forth crossing. Nevertheless, the Government admits it has no strategy or target to increase the proportion of that £9bn of overall contract value going to Scottish SMEs, except to knock down any remaining barriers in the way of good businesses. Officials also point out that a far larger proportion goes to SMEs in Scotland than it does in England, perhaps because there are more big businesses headquartered in the South.

One outcome of the rolling procurement reform process is the imminent enactment in the next few weeks of a Procurement Reform Bill, enshrining in law the rhetoric of a "transparent, streamlined, standardised, proportionate, fair and business-friendly" system. It is not always clear how those principles translate into an easier life for business.

The bill has already been criticised as "falling well short of what is required" by CBI Scotland, which has pointed to its failure to boost business by opening up large areas of the public sector to private and third-sector companies. The CBI said this fails to join up with the findings of the 2011 Christie Commission report on reforming public services, which argued: "Any provider who can demonstrate the capacity and wherewithal to deliver a service more effectively, innovatively, and for better value [than the public sector] is given the opportunity to do so."

The paradox of Scottish procurement is that all the hours of civil service time expended have not yet fashioned a system that is embraced by business and by those who administer it. No system that produces losers as well as winners is ever going to be universally loved, but the gap between the architects of the system and those whose daily bread depends on it seems notably wide.

If nothing else, the stand-off over the marketing framework may provoke discussion of how human realities interact with the theoretical beauty of the "Scottish model" of procurement, and lead to a system more widely upheld as an economy booster, and source of Scottish pride.