Business

Nigel Birney: New approach to public sector procurement vital for new Executive

Before the collapse of the Executive, First Minister Paul Givan and deputy First Minister Michelle O’Neill visited Derry to launch the new draft investment strategy for Northern Ireland. Picture: Kelvin Boyes/Press Eye
Nigel Birney

THE Stormont Executive’s recently published draft investment strategy lays out the framework for the approach to multi-billion-pound investment for infrastructure projects in Northern Ireland including new roads, schools, hospitals, social housing, and public transport.

During the decade between 2011 and 2021, nearly £15 billion was invested in large scale capital build projects, a huge boost to our wider economy, and the new strategy promises to be bigger again.

As the new strategy is launched, local construction companies, builders, manufacturers, engineers, and other vital parts of the construction supply chain will be licking their lips at the proposed levels of public sector investment which will be flowing into our economy over the coming years – as long as there’s a new Executive in place to sign it off, of course.

This will be a real shot in the arm for firms here as we exit the pandemic and look to rebuild and recover after the impact of the past two years. Northern Ireland is filled with talented and innovative companies which are capable and willing to undertake these large and very valuable public sector contracts.

It emerged recently that officials from the Department of Finance are liaising with counterparts in the Cabinet Office regarding a Procurement Reform Bill, aimed at ensuring greater transparency for Northern Ireland’s procurement system.

While the specific details of the bill are still unclear at this stage, it’s welcome to see moves being made to strengthen the procurement system and ensure greater value for money for taxpayers. But the bill should also give the public sector bodies and procurers more power to scrutinise further down the supply chain.

While, in the past, those lead contactors which government departments procure to provide goods and services may pass all necessary health checks, there is little or no scrutiny of those further down the supply chain where a financially weak key sub-contractor may be employed by the lead contractor in a major public construction project.

Verification of the financial integrity of all companies involved in such projects ought to be of the highest importance to procurement departments going forward in order to protect the many sub-contractors from financial ruin should they not get paid due to their contractual principal going bust.

Supply chains are always at risk of bad debt and a weak local economy puts businesses in further danger. Having a risk mitigation instrument such as trade credit insurance in place can act as a safety barrier between business or project failure.

As well as underwriting your trade receivables, the market intelligence available from credit insurance under-writers will keep you informed about the financial health of your customers and will flag when their credit worthiness deteriorates or improves which allows you to make safer and more informed business decisions.

Without wanting to dampen the optimism as we make our way out of the pandemic, it’s important to urge caution and remind businesses and procurers alike to remain guarded.

There are, undoubtedly, weaknesses in our economy right now like rising material costs, rising energy costs, rising labour costs, a labour shortage, and inflation. Some insolvency experts are also warning that we should brace for a wave of business failures in the coming months.

Ensuring your suppliers, customers, and clients are financially sound gives you and your business the confidence it needs to thrive. As large public contracts come to the market over the coming months, strong credit risk management policies will be vital in ensuring success.

:: Nigel Birney is head of trade credit in Belfast for Lockton

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