Procurement · 8 April 2016

Exclusive: Two-thirds of UK local authorities have no idea how much is procured from SMEs

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Nearly 70 per cent of local authorities were unable to provide the proportion of procurement spending going to small businesses.

Business Advice can exclusively reveal that the majority of British councils are not monitoring the proportion of procurement contracts awarded to smaller businesses.

Since February 2015, when legislation on new public contracts came into effect, contracting authorities have been obliged to publish details of awarded contracts valued at more than £25,000.

For contracts with a greater value than this, but below the threshold at which public spending is governed by EU legislation (currently £164,000), local authorities must also record if the winning firm is a SME.

Despite these transparency measures, almost 70 per cent of the authorities Business Advice questioned in a recent study were unable to provide data on the percentage of formal procurement spending which goes to smaller businesses.

Six of the UK local authorities contacted by Business Advice were unsure what an SME was.

The Local Government Association’s 2014 procurement strategy suggests authorities record such information “as a way of identifying and reducing the barriers for smaller organisations in bidding for council contracts”.

Just 81 of the authorities contacted by Business Advice have at least a year’s data on SME spending – whilst another ten have recently begun asking for it but haven’t got enough to give a picture of how small firm-friendly their procurement process is.

All 421 UK local authorities were contacted and asked for information on spend with smaller firms under the Freedom of Information Act – with 243 responding by the end of the 20 working day deadline for doing so.

Information obtained from local authorities who were monitoring SME spend revealed that 39 per cent of said spending went to smaller firms – with £11bn of goods and services recorded as being provided in this way.

London boroughs are the most proactive authorities when it comes to local authority spend, with half of those who responded aware of how much was spent with SMEs. The UK’s county councils were the least likely to collect data.

A report by the Federation of Small Businesses (FSB) into local procurement in 2013 argued: “All authorities to have mechanisms in place to record and analyse where and with which businesses their money is spent. This should include measuring the size of enterprise.”

Business Advice be revealing some of the best – and worst – councils when it comes to buying from small firms next week, so be sure to check back to see how your local authority did.

Business Advice recently spoke with London mayoral candidate about his plan for the UK capital. Read our interview here.

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ABOUT THE EXPERT

Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

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