SMEs discouraged from bidding for valuable public sector contracts

SMEs still need help according to report by House of Commons All Party Parliamentary Small Business Group

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SMEs still need help according to report by House of Commons All Party Parliamentary Small Business Group Complex, costly and outdated tender process disadvantages SME sector, finds new report

Valuable public sector contracts are still proving hard to win for Small and Medium Sized enterprises (SMEs), despite Government policies and interventions, reveals a new report from the House of Commons All Party Parliamentary Small Business Group (APPSBG), published today.

The APPSBG report – supported by ACCA (the Association of Chartered Certified Accountants) – recommends that barriers still need to be removed to help SMEs win public sector contracts, which are often seen as complex and costly, despite recommendations made in the Glover Review. Announced in November 2008, the Glover Review (2.39Mb PDF) advised the Government on how to help small firms, which account for 99.9 per cent of all UK enterprises, win a greater and more representative share of public procurement contracts.

Andy Love MP and chair of the APPSBG says:

“The Glover Review suggested some useful recommendations which the Government has since endorsed, but the Review could have gone further. More still needs to be done help SMEs access public procurement contracts, especially as they are so vital to the UK’s economic recovery.”

Professor Robin Jarvis, head of ACCA’s small business unit, adds:

“The procedures and practices used in many tenders disadvantage SMEs over larger companies. Many small businesses and contractors believe that days spent preparing tenders with a low probability of success are better spent earning, and therefore do not bid for public work all. They cannot afford dedicated teams to focus on what the Glover Report recognises are often complicated, costly and time-consuming tender processes. SMEs also believe the public sector views them as unreliable and constrained in their resources.”

The inquiry received evidence from a range of people and organisations, including Rachel Elnaugh, one time Dragon’s Den judge, the Confederation of British Industry (CBI) and British Chambers of Commerce (BCC) and GovData. They all agreed that the procurement process is opaque and there are basic difficulties in finding information about tenders.

Four of the APPSBG’s 16 recommendations are listed below:

  • SMEs must not be seen as one group. Micro entities face very different challenges to medium sized companies, such as a lack of staff and resources, and tighter credit restrictions. This partly explains why medium sized enterprises are performing much better in bidding for and winning public procurement contracts than smaller rivals. Specific proposals should be developed and aimed at the micro enterprise sector.
  • Public authorities should set individual targets for public sector procurement contracts to be awarded to SMEs, with a specific focus on micro enterprises. These targets should not be binding, but should give public authorities an ambitious basic figure to aim for.
  • Bureaucracy affects SMEs disproportionately and needs to be reduced to ensure a level playing field exists in public sector procurement. Efforts to reduce the bureaucracy for SMEs should consider time spent to collate the information required for bids and the level of contractual compliance required by procurers.
  • The procurement process should be made more transparent and selection should be on the basis of value for money.

Andy Love MP concludes:

“Tightening credit conditions, escalating inflation and long term economic gloom leave many SMEs struggling to manage their overheads. The downturn will hit them the hardest, and the Government needs to ensure that micro firms in particular can continue to contribute to the UK economy. Enabling SMEs to participate in the bidding process and improving their ability to compete with larger firms should be addressed in the upcoming Budget.”

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