Procurement · 8 April 2016

To make the most of the country’s micro businesses, local authorities need to open up the black box

Micro businesses find it particularly hard to compete for public sector contracts

The cliché that you can’t manage what you don’t measure comes into its own where local authority procurement from SMEs is concerned.

Time and time again, research has shown that the owners of Britain’s smallest firms shy away from tendering for public sector contracts because owners fear it will be a waste of their time going head-to-head with bigger firms’ sophisticated tendering departments.

In his 2013 Growing Your Business Report, our 2016 Small Business Decision Maker Lord Young highlighted how important certainty about the likely success of a tender is to small firms considering going for such opportunities.

The abolition of burdensome pre-qualification questionnaires (PPQs) has been a step in the right direction, bidding for public sector work is still time consuming enough to be off-putting when you have no idea if a firm of your size has any chance of success.

But new research carried out by Business Advice recently revealed that the majority of local authorities have no idea what proportion of their tendered contracts are awarded to smaller businesses – something which is hardly reassuring for small business owners keen to find out if they have a realistic chance of success.

Though in the minority, the standout examples of the councils we spoke to knew exactly how much spend comes from medium, small, and micro firms, and more local government organisations now need to follow this lead.

Opening up public sector procurement to micro firms doesn’t just benefit the owners and employees of such enterprises – decades of economic studies have showed having a greater number of smaller companies competing to provide goods and services means buyers are rewarded by higher quality and lower costs.

At a speech during the Public Sector Show in 2014, trade and investment minister Francis Maude went further than this, arguing: “Publishing open data can also stimulate economic growth in exciting new ways”.  Not only does transparent information encourage existing small firms to bid for public work, it has the power to encourage would-be entrepreneurs in less thriving parts of the UK, where local authorities often reflect a hefty chunk of buying power, to work on innovative new products and services.

Until then, without serious attempts to remedy the situation by public sector buyers large and small, taxpayers and end-users are missing out too.

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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.