Historically, it has been a challenge for SMEs to secure work on UK government projects, with a few preferred larger competitors often getting in ahead of them.
Around a year ago, a Public Accounts Committee (PAC) report – which focused on the relationship between the government and its strategic suppliers following the collapse of facilities and construction services giant Carillion in January 2018 – suggested small firms were still not getting a fair opportunity to win public sector contracts.
In the 2017/18 financial year, for example, overall government spending (both direct and indirect) with SMEs stood at 23.7 per cent.
The cross-party group of MPs said in the report that the government “has allowed a culture to develop in which a small number of large companies believe that they are too big to fail pursued new business with little apparent consideration of their ability to deliver the right service at the right price”.
And despite noting that the government had committed to greater use of SMEs as direct contractors and announced measures to improve treatment of SMEs in the supply chain, the report said there had been “little evidence of action”.
In response to the report, Mike Cherry, the national chairman of the Federation of Small Businesses said the findings “reinforces the view that the public procurement process is broken, heavily favouring big firms that waste taxpayers' money”.
The PAC report emerged following a drop in central government spending with small businesses, and Cherry said the situation called for “immediate action to make the system fairer, simpler and more transparent”.
The report also addressed the issue of late payments to small suppliers from larger companies working on government contracts. “There is no excuse for small and medium supplier businesses not being paid on time,” it noted.
This was clearly a low point for small businesses working with the government, but things have improved since then, with an increasing effort by the government to provide small businesses with more opportunities.
The stated goal is for a third of all government spend on goods and services to go to SMEs (including voluntary, community and social enterprise sector organisations) by 2022, with the government committed to working with organisations that “generate social value”.
As part of this, the application process to become a government supplier through the Crown Commercial Service (CCS) has been simplified. The CCS offers various agreements through which central government departments and wider public sector organisations can purchase common goods and services.
In addition, there is a prompt payment policy, in which the government guarantees that valid invoices will be paid to small businesses in 30 days or less.
Individual government departments have also taken steps to attract more SME partners.
The Ministry of Defence (MoD), for example, announced its SME Action Plan 2019-2022 in March this year. The plan explains how the department will improve its procurement spend with SMEs over a four year period, as well as how it will work with its strategic suppliers to remove barriers to supply chain engagement.
The MoD’s aim is for 25 per cent of its procurement spend to go to SMEs by 2022. In 2017/18, this figure was just 16.5 per cent.
The Department of Health and Social Care published an updated version of its Small and Medium Enterprise Action Plan in July, which targets 23 per cent of spend going to SMEs by March 2022. However, this is a less ambitious target given the figure was already 22 per cent in 2017/18.
The government is clearly aiming to provide more opportunities to small businesses in the coming years. Combined with a simpler application process and steps to ensure prompt payments, the signs are positive.
It remains to be seen whether increased spending with small businesses can be achieved. But to give themselves a fighting chance of benefiting from these changes, small businesses must convince government procurement teams that they have the capabilities to deliver.