The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government must promptly pay small business vendors and inform them of the qualification criteria/standards pre-bid, a well-known consultant has warned, otherwise they will be “in a worse state than before”.

While applauding the Government’s aim of ensuring that 20 per cent ‘of the total value’ of contracts it issues annually goes to Bahamian-owned small businesses, Mark Turnquest said its failure to pay vendors on time in the past has left those firms unable to meet the needs of other customers.

And he pointed out that small businesses had previously spent much time and money preparing to bid on government contracts, only to subsequently discover they did not meet the qualifying criteria or product standards.

Still, Mr Turnquest, who heads his own consulting firm, Mark A Turnquest Consulting, described the Government’s proposed procurement reforms and focus on small businesses with less than 25 employees as “an excellent approach”.

He added that he frequently recommended to small business clients that they try to generate “at least 25 per cent of their sales” via fixed commitments/contracts with either the Government or a large company.

Credit payments on these contracts boosted cash flow, but Mr Turnquest warned on payment terms: “Small businesses cannot afford more than 35 days maximum.

“You can’t have the Government pay late, cash customers come into the business and there is no stock to serve them with.”

In other words, late payments by the Government play havoc with business cash flows, resulting in knock-on impacts on ordering and inventory availability for other customers.

“Before they bid, organisations need to look at the opportunity, they need to look at the business model, and make sure they have an extra line of credit with their own vendors to meet the new opportunity,” Mr Turnquest told Tribune Business.

“If they have a traditional line of credit and the Government does not pay, they’re going to lose business and be in a worse state than they were before. The Government is not known for paying on time.”

Mr Turnquest said he had computer store and paper supplies clients who had to stop working for the Government, as late payments were making it impossible for them to do business with their regular customers.

“The banks and vendors, especially during the recession, were not giving small businesses extra credit,” he added. “During 2008-2012, they had to forego these opportunities, so it was not a benefit to them.

“What the Government needs to do is re-organise their payment structure and policies so that small business owners, before committing to do business with the Government, take those policies back to lenders and vendors and have an opportunity to increase sales.”

Calling for the Government’s procurement policies to be “totally transparent”, Mr Turnquest said small businesses needed to be given information on the quality/standards being sought before a contract went to bid.

“A lot of businesses might not know the procurement policies for the things they do,” he added. “Unless the small business owner knows, they cannot up their game, their skills and product line, to meet the standard.

“You don’t want to put a bid in to sell some product or service and then find out you don’t qualify.”

The Government is targeting savings of up to 20 per cent through its planned public procurement reforms.

Flagging plans to boost transparency and ‘level the playing field’ when it comes to bidding on government contracts, Michael Halkitis, minister of state for finance, last week said the public procurement reforms would bring the Bahamas into line with its Economic Partnership Agreement (EPA) commitments.

Kicking-off the 2013-2014 Budget debate, Mr Halkitis said the draft regulations envisaged creating a Public Procurement Board, which will replace the existing Tenders Board.

This will be supported by the creation of a Public Procurement Department within the Ministry of Finance, headed by a chief procurement officer, and aggrieved bidders will have the opportunity to appeal Board decisions to a Public Procurement Review Tribunal.

In addition, the proposed regulations will also prevent government ministries, departments or corporations “from executing contracts once Parliament has been dissolved” if they have not been executed, and/or not come into force.

This, on the face of it, is designed to prevent situations such as the alleged ‘Stop, Review and Cancel’ that occurred when the Ingraham administration took office in May 2007, and consistent claims of governing parties awarding millions of dollars in contracts just prior to a general election to help them retain office.

“This is a comprehensive and needed reform,” Mr Halkitis said. “The present system is 40 years-old and highly centralised with major gaps in coverage. For example, it does not cover public corporations which rely on tax revenues to cover their operations.”

The Minister said the Government was proposing to implement the public procurement reforms over a two-year period, once the Bill and regulations were passed into law.