Business

Coalition plans for SMEs in public sector procurement will fail

By: The Leader
Published: Thursday, August 15, 2013 - 17:45 GMT Jump to Comments

The Government and Lord Young want SMEs to share in public sector procurement. To do this they will have to take on a monolithic, ranks-closing, street-fighting behemoth.

The government is trailing its intention to vigorously intervene so that “thousands” of micro-businesses (MBs) get a bite at the massive public sector pie. The government wants this because it hopes that this will kick-start MBs on the road to building successful small to medium sized enterprises (SMEs) and this in turn will benefit the economy.

This muscular assertiveness on the part of the government is a result of a report by David Young - Baron Young of Graffham, minister first for Trade and Industry and then for Employment under Mrs Thatcher - that says government efforts to help micro-businesses in the public sector procurement arena are woefully inadequate.

The government means well but unfortunately it hardly understands the problem, never mind having any idea of the solution.

The public sector, says the government, will be required to publish data on all procurement spending with small businesses and required to publish all contract opportunities on 'Contracts Finder', the central government database. Gosh!

Those micro-businesses that went to the (considerable) trouble and expense of getting listed on the government’s own G-cloud framework will have been somewhat taken aback by the discovery that most public sector bodies will simply not use the G-cloud framework because they have “their own rules on procurement”.

Micro-businesses cannot afford to tender for and negotiate contracts with the public sector when they don’t have dedicated bid and contract departments. The tender process is long and complex (even for modest projects) and assumes that staff can be dedicated to writing bids. Contracts themselves can run to hundreds of pages, not only requiring days just to read them, but also costing a significant percentage of the contract value to pay lawyers to make sure the business (unpracticed at this sort of thing) is not signing away its future with terms geared to its bigger competitors.

Framework administrators don’t want to work with small firms on small contracts because even though they take 2.5 per cent or more of the Micro Businesses earnings, they find that the fees are not big enough for them to bother getting out of bed.

The opportunity costs, the administrative costs, the disruption, the damage to confidence, the cost of scaling up, the uncertainty about payment schedules, the legal stuff, the feeling of powerlessness in the face of a mighty public sector organisation - all of this and more besides means that any Micro Business that tries once to get a piece of the public sector procurement pie never bothers to try again.

“My advice to both Micro Businesses and SMEs”, said the managing director of one SME that The Leader spoke to, “is don’t bother with the public sector if you want to stay in business.”

Health Minister Dan Poulter has said, “Transparency is an essential enabler in this regard.” No it isn’t Dan!

The real problem is not transparency or even (God help us) level playing fields but the existing system of procurement and the people running procurement in the public sector. It’s not that they are wicked or stupid, it’s that they apply what intelligence they have to their own agenda, and we should not be surprised about this.

They build empires, compete with each other, climb the ladder and go on leadership courses paid by our tax dollars to learn how to do all this. They couldn’t care a damn about SMEs or MBs and furthermore they have not the slightest idea what it means to work in or own an SME or even (for most of them) work in the private sector.

The bid and tender professionals that public sector procurement people currently encounter in the large companies know the system and how to work with it. Life is very, very, cosy. If the Government wants to have any effect whatsoever they will have to change the culture of a monolithic, self-regarding, ranks-closing, street-fighting behemoth and they won't do this by tinkering at the edges.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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