Procurement · 23 August 2017

Small firms continue to fight losing battle to win public procurement contracts  

Business contract details
Only a small proportion of public sector contracts are awarded to small UK firms

Small businesses continue to face an uphill struggle to win public sector contracts, meaning that government targets for SME public procurement are unlikely to be met, according to the latest report from the Federation of Small Businesses (FSB).

The FSB’s “Unstacking the Deck: Balancing the Public Procurement Odds” report found that in the last year, just 23 per cent of small UK firms had worked for the public sector – down two per cent on the figure from 2014.

The report also shows that small businesses are less likely to compete for public sector contracts than they were two years ago. The proportion of SME owners expressing an interest in competing for a public contract had fallen to 10 per cent in the last 12 months – down four per cent since 2014.

The findings show that the government has a lot of work still to do to achieve its stated aim of increasing public procurement spending with smaller firms to 33 per cent by 2020.

That pledge was made in August 2015, but the FSB’s latest report highlights that the imbalance between small firms and larger counterparts when it comes to securing public sector contracts has actually grown since then.

The FSB has urged the government to double its efforts to remove unnecessary hurdles which prevent smaller companies from competing for contracts and supplying the public sector.

The body’s national chairman, Mike Cherry, said in a statement: “Opening up the public service market is a win-win for everyone involved in the supply chain because when small businesses are used effectively, they are able to create jobs and growth.”

The report outlines that each year, the UK’s public sector spends in excess of £200bn on the procurement of goods and services from third party contractors, but a small proportion of these are spent with SMEs and micro firms.

It proposes a number of measures the government could introduce to rebalance UK public procurement in favour of small firms. It could be made obligatory, for example, for local authorities to publish all contracts valued at more than £10,000 on Contract Finder (as central government does), thereby halting the common practice of local government only publishing higher value contract thresholds that are outside the reach of smaller businesses.

Cherry went on to say: “[Small businesses] are overwhelmingly the route that people take to get out of unemployment, while also creating greater competition leading to better value for money for government.

“By supporting local small businesses, we are helping to pay the wages of local people who then go and spend money in local businesses which helps the whole local economy.

“FSB research backs this showing that every £1 spent with a small business, 63 per cent is re-spent in the local area. It is crucial that these local firms are given a fair chance to compete.”

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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