Opportunities are still
flourishing in the public sector, although lessors must work
harder, as
Fred Crawley and Jason T Hesse discover.
The withdrawal of Bank of Scotland
from public sector leasing, in addition to cutbacks from other
players, has left a considerable amount of local authority tender
business open for those with the ambition to pursue it – even
smaller finance houses.
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There is little doubt that local
authority business – which forms the majority of public sector
business in the UK – has shrunk somewhat as a result of the
introduction of the Prudential Code in 2004/2005, which gave local
authorities higher autonomy on spending decisions.
Nevertheless, there is still a lot of
low-risk business available. Although deals of €120,000 or more
were down in the UK by 51 percent year-on-year in the year leading
up to 31 March 2009, totalling £34.4 million (€39.7 million),
smaller deals (which do not have to be reported in the OJEU, the
Official Journal) are understood to be growing, in sectors such as
education and waste management.
Also worth mentioning are the 2012
Olympics in London, which are already generating a flood of
construction tenders, and will provide solid public business for
the next three years.
The great obstacle for lessors looking
to break into the public sector, however, is the tendering process.
Even HSBC Equipment Finance, which is well capitalised and open to
growing its business, is reluctant to take on public sector
business in the immediate future due to the extra resources
required to tender.
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By GlobalDataBut bidding for local authority
contracts is not necessarily a great burden for funders to take on
said Stephen Ashcroft of procurement consultancy Brian Farrington
Ltd, a firm that has worked extensively with entities on both sides
of the tender process, and which has won clients some £26 million
of public business so far this year.
“Tendering is a superb forum for
professional companies to promote themselves on a level playing
field,” said Ashcroft. “However, smaller finance houses may find
they lack adequate systems and procedures to demonstrate their
ability to deliver quality. They may be technically competent, but
lacking in resources in areas such as price and cost modelling –
for many businesses, successful tendering is about being able to
interpret what is being asked of them.”
External support, such as that
provided by Brian Farrington, is one way to break into the business
of bidding for public tenders – after all, the first step is always
the hardest when entering a new market.
For lessors that are well-established
in the market, public sector deals are simply another part of the
business, however, in which is it no less easy or difficult to get
deals written.
“There has been a delay in the
decision making process this year, versus other years. We’re having
to work harder and wait longer for decisions – there seems to be a
little bit of tightening control from a governor’s perspective,”
said David Mitten, sales and marketing director at Syscap, which is
a leading player in the education market.
At technology finance group
CHG-Meridian, the trend has not so much been delays, but smaller
deals.
“We’ve been busy with a lot of deals
coming through, but they are smaller than they might have been in
the past,” said Philip Sawyer, public sector sales manager at
CHG-Meridian in the UK.
“The number of deals is making up for
the size of the transactions,” he added.
But ultimately, Syscap’s Mitten said
that he believes that getting deals signed off is about
relationships.
“You absolutely have to build
long-term relationships,” Mitten said. “Where governors are
involved, then we tend to be competing with other players in the
market. But where the decision is made at head level, then we
maintain that relationship and it tends to less frequently go into
a tender.”
