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David and Goliath a year on

Martin Corbett, managing director of Derwent FM

In November 2011, Martin Corbett, managing director of Derwent FM, in the article ‘David and Goliath’, showed how his organisation had won a number of government contracts as an SME including a £1.65 million contract with HMRC in Nottingham. One year on, FMJ asked him to update us on his progress.

Our success means that Derwent can no longer be classed as an SME (an SME is classed as a company with a staff headcount of less than 250 FTE, or which has an annual turnover of less than €50m or an annual balance sheet of less than €43m). Nevertheless, Derwent is still pursuing innovative ways to team up with small and medium sized businesses under the group’s ‘not-for-profit’ status and strong balance sheet.

While government rhetoric is strongly in support of SMEs and the Big Society, in reality these are often in conflict with the need to achieve savings by leveraging the purchasing power of the government. The government appears to be putting out ever increasing tenders that SMEs can’t ever hope to resource so the difficulty of competing with larger players in the FM sector seems to be escalating.

In February 2010, Prime Minister David Cameron announced a broad package of reforms designed to significantly open up the public sector marketplace.

In June 2011, the Prime Minister’s statement was embellished by minister for the cabinet office, Sir Francis Maud, who claimed that the government was “determined” to create a more level playing field for SMEs so that they stood a better chance of competing with bigger companies for government contracts.

In March this year, Maud announced a new package of measures to try to achieve the ultimate aspiration of the government to deliver 25% of its central government procurement spend through SMEs by the end of this parliament.

While the government is trying, they cannot marry the ultimate conflict between economies of scale and business to SMEs alone. It is down to organisations like ours to use our social empathy to support SMEs in coming together to achieve scale in these difficult times.

Derwent FM has been instrumental in teaming up with their parent Derwent Living to assemble a consortium of SMEs to continue the fight against ‘Goliath’.

Collectively we have managed to successfully bid for two lots on the Government Procurement Services framework for on-site and off-site document storage and associated services, alongside Capita, TNT and Iron Mountain, worth up to £37.5m a year.

The Document Storage and Related Services framework has been let by the Government Procurement Service and is the first centralised Records Management Framework open to all central government and wider public sector organisations.

Derwent Living has partnered with a few SME sub-contractors including Crown Records Management, Stor-a-File and Box-it who will help the company provide a range of services.

We have demonstrated that by collaborative working, innovation and creativity we can compete at the highest level against these mighty competitors and win.

Finding SME’s who were aligned in their thinking and have an ambition to compete against their bigger competitors was key. And equally important was having the capacity and capability to complete extensive tender return information relating to the various lots on the framework in a relatively short period of time, which we facilitated using raw material from our SME partners.

In order to avoid multiple mark-ups across the partners, Derwent proposed a ‘project bank account’ arrangement where the client pays the SMEs directly. In addition, the use of standard ‘O’Neil’ software by all of the SMEs allowed Derwent to overlay a common supervisory system to allow unified reporting of management information and KPIs.

Derwent had to lobby for the project bank account via the Crown Representative for SMEs, Stephen Allott, and the Cabinet Office in order to facilitate a level playing field against its much larger competitors in respect to payment. This didn’t, however, dilute Derwent Living’s responsibility to ensure subcontractor capability and performance.

The umbrella model used by Derwent enabled the organisation to handle all TUPE transfers and take on board all client-owned storage facilities. Alongside this, the SMEs who own the box storage facilities are providing all the off-site storage.

Derwent initially searched the market to look for SMEs who provided storage solutions and document scanning. We then interviewed and checked out critical information relating to each SME’s financial stability, geographic coverage, attitude and customer focus.

The umbrella model provided a number of advantages over larger competitors. We have SME stores all over the country, which means that we can compete locally. If there is an area not covered by the current partners, then we can add other SME partners. Plus, our SMEs have strong local management and are a lot more customer-focused.

As Derwent is the umbrella organisation and doesn’t have any box storage facilities itself, this means, as an organisation, it has no vested interest in storing boxes so it can independently provide business cases for clients to use scanning solutions.

Its local SME stores enable it to provide solutions that are a lot more sustainable using local people and local transport. The organisation is not taking boxes huge distances to deep stores like some of our competitors who have excess capacity.

As well as benefiting SMEs, another advantage of this umbrella arrangement is that Derwent Living’s profits are fed back into local community and affordable housing schemes, an area where government funding has been significantly reduced.

The framework was awarded at the end of April 2012 and Derwent is in the process of tendering for a number of government and local authority contracts. I believe the model could be used across the FM sector to assist SMEs in these hard economic times. In order for it to succeed, there needs to be clarity of capability and strengths so that there are no conflicts of interest and everyone is working towards the common goal of winning.

We want to help reshape the Government Property Unit’s new FM frameworks to allow SMEs to compete in regional and value bands. The current Buying Solutions Facilities Management framework has no SMEs on it.

The organisation also focuses on the third sector to see if its can use its not-for-profit status to join forces with similar organisations to assist them in generating savings to the mutual benefit of all parties including local employment and local communities.

 

 

Extract FMJ October 2012

 

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