Daisy Hooper details the government's failings in allowing small firms to bid for government contracts. The will is there, but the execution leaves much to be desired
Daisy Hooper works for Aequitas Consulting, an innovative public policy and public sector innovation agency.
Small and start-up businesses are essential to Britain’s economic recovery. But in order to support economic growth SMEs need to win new business. And despite government promises, red tape still prevents them from accessing government published contracts.
David Cameron has lauded the benefits of British SMEs, praising them for doing ‘incredible things’ and pledging his support for new businesses through the Start Up Britain.
The prime minister has pledged to support small businesses to access government contracts and reverse institutional bias against them.
However, procurement practices are still preventing SMEs from applying for and winning government contracts.
As part of a consortium of SMEs, we recently applied to join the central government procurement framework – consultancyONE, which is for central government contracts worth over £100,000, and purportedly has specific SME-friendly application criteria.
Working in a consortium can be a good way for small businesses to pool resources: working innovatively in partnership, as the government has urged SMEs to do, improves eligibility against contract criteria which theoretically improves the chance of winning contracts.
In fact, this partnership restricted our eligibility.
Applications for new contracts could only cite previous consortium projects worth more than £100,000. The consortium can’t get these contracts because it doesn’t already have them (individual partners’ contracts of more than £100,000 don’t count, no matter how relevant they are).
In the end our consortium was forced to withdraw from the application process for consultancyONE because of the complexity of the procurement hurdles.
The strict criteria that preclude SMEs from applying for contracts are intended to limit the risk to the government and to cut costs.
Yet there is no evidence that giving contracts to small businesses is more risky than giving them to large businesses – or that in the long run it cuts costs. Just look at the big businesses that have failed: one colossal example being CSC’s failure to deliver the NHS IT database project, which cost billions in taxpayers’ money.
SMEs have to be innovative in their approach to get the biggest ‘bang for their buck’. They create products and services that are more efficient, because they are delivered through tighter budget constraints. They also have a greater local and regional economic impact by creating jobs throughout the UK, with a better geographical spread than big businesses who want to be based in London.
And compare the benefits of SMEs (which create local jobs and a better distribution of wealth) with larger companies that outsource their staff and bank abroad to avoid contributing their fair share to society.
The government keeps telling us that small private businesses are already efficient and innovative, creating jobs and rising to the current economic challenges.
Small businesses obviously have the capacity to drive economic growth and to take up the slack from the public sector. But as long as the application process is a barrier to them winning new work, the outcome is likely to be an inefficiently slow and frustrating process.
See also:
• Small businesses can play a vital role – but only if they get the finance they need – Tony Dolphin, February 2nd 2012
• Obama puts manufacturing top of the agenda – time for Cameron to do the same? – Tony Burke, January 27th 2012
• Mandelson weighs in behind National Investment Bank – Alex Hern, January 27th 2012
• Design agencies face a second year of talent exodus in 2012 – Rachel Fairley, January 3rd 2012
• Will quantitative easing work this time? – George Irvin, October 9th 2011
21 Responses to “Small firms still locked out of public contracts”
wowitsusual
Er… it sounds as if your “classic example” is actually made up. Any specification can be input based (specifying materials, effort, or other inputs) or output based (the shelf must be strong enough to take all my books etc.). You can mix and match, but typically a spec is one or the other in emphasis. Either way, if you are competent, you’d get round the hypothetical situation you describe.
I work in procurement (and subject to it) in both the public and private sectors and you can expect challenge with either, dependent on the individuals involved (sponsors, and procurement departments if the customer has one). The effectiveness of the procurement, or otherwise, is not driven by the size of the tender document, but more the adequacy of the document, the attention to detail of those engaged in the procurement and contract management, communication skills, etc. etc.
And finally, I agree with JC and indeed it is a fact, enduring without outrage, that many tenders are let with unintended consequences exactly as described. We regularly have to respond to questions regarding our gender and ethnic makeup, and also the sexual orientation of the Directors / Owners. Admitedly this is sometimes accompanied by statements that such information won’t be marked, but you do wonder if it’s important enough to ask whether acheivement of whatever targets involved might hold some sort of sway over the outcome.
My company is an SME, and I believe we can deliver to the highest standards alongside companies of any size, but I think the “SME agenda” is very often a confused conversation. What are the benefits of employing smaller companies over larger ones, all other things being equal? Is it a moral issue?
One thing I think we might all agree on is that often it’s not that procurements are complicated, it’s just that they are OVER complicated, and that’s a waste of time for everyone.