How Costly Bidding Prevents Local Councils from ‘Levelling Up’
The government has promised to 'level-up' struggling communities with £8bn of funding, but the tendering process has been criticised as costly and time-consuming. AI technology could revolutionise this process, allowing councils to quickly produce complex proposals without sacrificing resources, enabling them to focus on high-level problem solving.
At a time when struggling public services are a cause for consternation, Jennifer Williams’ recent article in the Financial Times points to the severity of budget cuts to local councils.
According to Clive Betts, chair of the Levelling Up, Housing and Communities Committee, local government has experienced “the biggest cuts of any part of the public sector” in the past 12 years. The Institute for Government reported that a third of libraries have closed and the bus network has been reduced by 14%, as local governments have seen budget cuts of £15bn in the period 2010-2020.
In response, the government has promised to ‘level-up’ struggling communities through a series of grants first introduced in 2019. Local councils must engage in the competitive tendering process to receive portions of this funding, required to draw up complex proposals which are assessed by bid-examiners. Despite totalling £8bn, the excess demand for these grants is overwhelming, as local councils seek to ameliorate the effects of a decade of low investment and cuts.
Giving evidence to the Levelling Up, Housing and Communities Committee in November 2022, Barnsley’s executive director of growth and sustainability, Matt O’Neill, described the competitive bidding process as “the poor competing with the poor”. This sentiment was echoed by other panelists, concerned that under-resourced local councils must spend valuable time and money applying for funding.
Interest in procurement has been heightened in the wake of Covid VIP lane scandals, resulting in greater scrutiny of procurement practices. This has been a core consideration for legislators in the Procurement Bill (currently at committee stage in the House of Commons), which promises to “shake up our outdated procurement system”.
The summary guide to the Bill’s provisions emphasises four main themes: value for money, public benefit, transparency, and integrity. As well as simplifying and modernising the rules governing procurement, the Bill introduces a new form of tendering - the competitive flexible procedure - giving contracting authorities the freedom to design bespoke tendering processes to suit the needs of their contract. Fundamentally, the aim is to ensure value for money in procurement, by encouraging negotiation and innovation between buyers and suppliers.
Though focusing on the scale of cuts to local councils, Williams touches upon the less-discussed topic of government tendering. The Cambridge Dictionary defines tendering as:
“the process of choosing the best or cheapest company to supply goods or do a job by asking several companies to make offers”.
One-third of government spending goes towards procurement. Thus, the tendering process is the basis for the distribution of one in three pounds of British tax-payers money. Competitive tendering was introduced as a means of maximising efficiency in the procurement sector. By mandating that companies provide detailed proposals, outlining their suitability and track record for delivering required services, the best-designed solution would win the contract. At least, this is how tendering should work in theory.
In practice, this system operates quite differently.
Tendering absorbs significant company resources, acting as a barrier to entry for SMEs, and consolidating the grip of a few select companies over the highest-value government contracts. While it is also true that only a few companies can fulfil the scope of these contracts, the tendering process is fundamentally undermined by the costs it imposes on potential suppliers.
Jennifer Williams echoes this sentiment in her article. Drawing upon testimonials from local councillors relying upon successful bids, the failures of the tendering process are laid bare.
A bid submitted by one northern council in 2021 for the levelling up fund was, in the words of one senior official, more like a “thesis”. Totaling 30,000 words, this highly detailed proposal required two months of hard work, only to be rejected in the end.
In fact, 30,000 words is two-and-a-half times as long as an undergraduate thesis. This revelation points to a system which is clearly unfit for purpose. Two months would have been better spent designing solutions to the problems facing local authorities. Such complex bidding practices not only disregard the costs imposed on cash-strapped councils but have a positively detrimental impact on service delivery.
This is indisputable given the financial implications of bidding for councils.
Research carried out by the Local Government Association (LGA) estimates that producing a competitive bid costs councils £30,000 on average. Bidding for every available grant would cost each local authority roughly £2.25 million a year.
If each of the 333 local authorities in England bid for only half of the available grants, this would amount to a cost of £374 million. This figure is comparable to the largest increases in service expenditure budgeted by the Department for Levelling Up for 2022-23, including Children's Social Care (+£348 million, +3.2%), Police Services (+£363 million, +2.6%), and Adult Social Care (+£351 million, +1.8%).
Competitive tendering imposes financial strains on local authorities, while diverting attention away from high-level problem solving. Martyn Cox, the leader of Bolton Council, has indicated the success of his regeneration department in securing funding for the most ambitious capital programme in the town’s recent history. Involving plans for a new medical school and leisure centre, Cox attributes this success to the department effectively becoming a “bidding team”. Despite the promise of these ambitious plans, the most basic of services are being neglected, Cox admitting “we can’t really cut the grass”.
Funding limitations aside, committing entire departments to bidding is clearly a short-term solution. The current process of tendering damages all parties involved. Expenditure on bidding means central government receives less value from grant allocations. The pressures imposed on local authorities means less time is spent designing the projects which require funding. Moreover, taxpayers are being short-changed as substantial sums are pilfered on a system no longer fit for purpose.
A new approach
By focusing on the essence of competitive tendering, the problem can be framed differently. Fundamentally, tendering is about communication.
It should not require local authorities to spend hundreds of thousands in justifying their need for funding. Across the country, local authorities are facing the same external pressures. These pressures are not invisible, but manifest themselves through the decline in public service quality being felt throughout the country. Providing adequate resources for the fulfilment of basic responsibilities should be the bare minimum, not a reward for participating in a senseless tendering program.
The introduction of the competitive flexible procedure in the Procurement Bill demonstrates a recognition that procurement must change. What has received less attention, despite showing ample promise, is the potential for AI to transform these procedures.
There has been a cross-industry realisation that automation is the way forward. Early adopters have largely been within the private sector (leading law firms and banks) but the potential upside in the public sector is significant. The recent explosion in generative AI will not be siloed. The algorithms underpinning Large Language Models can now generate human-like text at an inhuman speed. Just as calculators can perform sums instantaneously, computers can express complex ideas through writing similarly quickly.
Such technology is revolutionary. Under-resourced local councils, unable to produce complex 30,000-word proposals effectively, will be turbo-charged by this technology. Large Language Models can generate 30,000 words in seconds. Of course, this text will require moulding and shaping by solution experts, but working from a first draft, a whetstone for testing and exploring ideas, carries enormous potential benefits.
While the public sector is yet to seriously engage with the potential benefits of AI adoption, forward-thinking private companies are already streamlining their tendering processes using the latest technology. The Procurement Bill attests to a recognition among legislators that competitive tendering should be modernised to meet the challenges of today. While this is an encouraging step, there will inevitably be a time lag before the Bill’s provisions take effect. In the meantime, improved public procurement outcomes can be achieved by mirroring the private sector’s rapid integration of AI technologies.
Williams, J., English Councils: the budget cuts that are threatening ‘levelling up’, Financial Times, (23 January 2023)
Atkins, G., & Hoddinott, S., Neighbourhood services under strain: How a decade of cuts and rising demand for social care affected local services, (29 April 2022)
Oral evidence: Funding for Levelling Up, HC 744, Levelling Up, Housing and Communities Committee (28 November 2022)
Policy Paper, The Procurement Bill - a summary guide to the provisions (16 June 2022)
Local Government Association, Final Local Government Finance Settlement 2023/24, House of Commons (8 February 2023)
1 Revenue Expenditure and Financing, 2022-23 Budget, Statistical Release, Department for Levelling Up, Housing & Communities (21 July 2022)