The Government wants 33% of all departmental procurement spend to be with small businesses by 2022.
To help that aim, it introduced, this April, a variety of new measures designed to “level the playing field” for smaller businesses to win Government contracts and exclude suppliers if they cannot demonstrate fair payment practices with subcontractors.
This followed the collapse of construction firm Carillion, in January, which ran around 450 contracts with the UK Government and had been slammed for late payments to suppliers.
The Federation of Small Businesses (FSB) believes that, although public sector spending totals around £200bn each year on the procurement of goods and services from third parties, the 33% target could have a dramatic impact on SME fortunes.
However, it says the Government has much work to do given that SMEs, as of 2017, hold only 10% of public sector work.
Mike Cherry, FSB’s National Chairman, slams a “fixed system” which is preventing smaller businesses from getting a fair share of public contracts. “We believe that smaller firms need to be given the chance to secure these opportunities. The Government can improve this by reforming the system to make it fairer, simpler and more transparent,” he says.
He believes one barrier is not knowing what contracts are available. “Central Government is required to publish all contracts worth more than £10,000 on its Contracts Finder website but local government does not,” he says. “The benefit of Contracts Finder is that winning firms must be named, as well as the contract value, so small firms can at least see how close they were.”
The FSB has reported members complaining about tender processes taking weeks to complete, an apparent bias towards larger companies, not being able to prove they are accredited to a particular trade body and having to produce detailed statements about modern slavery, carbon footprint reporting and guarantees about staff development.
Steve Hale, Managing Director of Engineering firm Crofton Design, which carries out 40% of its work in the public sector, says: “There is no consistency between procurement authorities, so you need to prepare bespoke bids for each contract. The requirements also seem to change with political fashion so, last year, the focus was on modern slavery and, this year, it is GDPR readiness. It is a lengthy and costly process with many hoops. We also find that the technical skills of the Government tender writers are lacking. There are too many questions that you just don’t need.”
Benefits for SMEs
Rob Prater, Public Procurement & Commercial Contracts Solicitor at VWV, empathises with SME concerns. “They don’t have the dedicated bid teams of their larger rivals who also tend to win more contracts because Government puts a big onus on financial stability,” he says. “But local authorities are looking to improve transparency and opportunities for SMEs. They understand the benefits of SME participation in the supply chain and how this can benefit the wider community. Public bodies can build social value considerations into the evaluation criteria, where this is relevant to the contract. One strategy for SMEs to win more work could be to target opportunities that include social value considerations.”
Prater believes the recent expansion of Contracts Finder, by the Government, to allow government contractors to advertise their sub-contract opportunities could lead to more “chunky work” for SMEs.
He adds that SMEs can also improve their bid chances by completing the European Single Procurement Document. “This can be re-used in any above threshold procurement process as evidence that you meet the shortlisting requirements. It should be helpful to reduce the administrative burden of providing bidder information and confirming the grounds for exclusion do not apply,” he explains.
SMEs can also collaborate in joint ventures to increase their chances.
“We’ve won work in the past working with larger rivals in a support role or as a JV,” says Hale. “But the key really is to be organised and target contracts you know you have the skills and finance for. It is about being a good, professional company having the right insurance, data integrity procedures, expertise and training schemes in place. If you have all this, then I don’t see any significant barriers to winning public sector work.”
Please note that where the opinions of third parties are expressed, they are not necessarily shared by St. James’s Place.