Competitive bidding is a losing game, new report finds

 

A new report has shed more light on the controversial competitive bidding processes where local authorities fight for a share of central government funding pots, highlighting the barriers it presents to achieving best value for the taxpayer.

Senior local authority figures in groups such as local council directors' body ADEPT have bemoaned the bidding process for years.

”Local
 

Now a report by the Urban Transport Group (UTG) found that between 2016 and 2019 82% of the short-term funding made available by the Government required councils to bid competitively.

Since 2010 almost £6.8bn has been made available through competitive funding pots, with the Department for Transport (DfT) one of the most reliant on the controversial system.

The average pot size varies by department but can be very small, with only the DfT having an average pot of over £100m.

The costs and pressures this system has put on local government have been huge. According to surveys and interview conducted by the UTG:

  • The typical cost of bidding for a £5m project is between £35,000 and £94,000. This is between 0.7% and 1.9% of the cost of the project itself.
  • The typical cost of bidding for a £100m project is between £170,000 and £339,000. This is between 0.2% and 0.4% of the total amount of funding.
  • This means the cost of bidding for a £5m pot is three to five times less than bidding for a £100m fund, despite the reward of the latter being twenty times greater.

When the money lost on unsuccessful bids is factored in the waste can run to millions.

If an individual authority is bidding for ten £5m funds and two £100m funds in a year, it might typically spend up to £1,618,000 on bidding for these schemes.

Bridget Rosewell CBE, Commissioner at the National Infrastructure Commission, said: 'The shortcomings of our current system of funding are holding cities back from being able to address their long-term challenges head-on.

'The National Infrastructure Commission has recommended that government provide cities with greater investment, but also long-term, stable funding through five-year settlements.'

The report found:

  • The unpredictability and short-term nature of excessive reliance on competition funding can distort priorities with sub-optimal projects being brought forward on the basis they meet competition criteria
  • The constant and unpredictable churn of competition funding disrupts and distracts from the task of developing and implementing longer-term integrated planning and delivery
  • The number of small competitive pots has increased dramatically over recent years, increasing the burden on local authorities for relatively small gains
  • The need to respond quickly to ad hoc competitions leads to higher consultancy spend which takes funding away from supporting in-house staff.
  • More authorities are now reducing the number of competitions they bid for (or are considering doing so) due to lack of resources.

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