Engineering apprentice

SMEs good enough for government work but will they work for government

By: SA Mathieson
Published: Monday, June 30, 2014 - 17:58 GMT Jump to Comments

The state sector should be the ideal customer. It isn’t going to go broke. It is relatively unlikely to break the law. In an emergency, you know where its offices are.

Furthermore, public sector managers want to work with smaller businesses, as a result of government policy and in some cases through preference, such as GCHQ’s enthusiasm to capture the newest ideas (see last week’s Supplier Side The spy who procured from me: GCHQ seeks SMEs).

But most smaller businesses don’t appear to be interested. A survey by the Federation of Small Businesses last year found that 78 per cent of small and medium-sized enterprises had not even tried to sell to a public sector body, despite local authorities alone spending more than £144bn a year on services and capital projects.

Selling to the state sector often involves more paperwork than other sectors, certainly for larger deals that involve going through standard European processes: notices in the Official Journal of the European Union, set criteria, jargon. They should make the results less open to legal action – although this can still happen, such as BT’s challenge to NHS Scotland awarding its £325m Swan network deal to Capita. But many small firms say they simply can’t afford the bidding costs.

For smaller contracts the Cabinet Office has set up Contracts Finder, and some local authorities have established similar portals for their areas. Suppliers do have to apply for work, not wait for it to arrive – although any company that can rely on all its customers walking through the door is fortunate.

There is a decent chance of success for those firms willing to try. The FSB research found that 55 per cent of responding SMEs that bid for public sector contracts were successful, with 30 per cent winning more than one deal. Some local authorities have a formal preference for using local businesses built into their assessment criteria, as a way to support and develop local economies. The idea is popular in devolved administrations and in authorities with a strong focus on economic development.

National government too is trying to encourage SMEs. Cabinet Office minister Francis Maude, unimpressed by the performance of the big service firms used heavily by the last government, sees smaller businesses as a way to shake things up, and the government is aiming to award 25 per cent of its procurement to SMEs by 2015. It reckons 20 per cent is currently going to smaller firms – although about half via bigger suppliers – and some measures in last month’s Queen’s speech may help to increase this.

Aside from the red tape, there are cultural problems. It is relatively easy for people within suppliers to put themselves in the minds of individual consumers or other businesses. It is harder to get into the mind of a civil servant if you have never worked as one.

Yet such differences have been shrinking in recent years. This is partly because several years of austerity have pushed value for money up every civil servant’s agenda – and good ones have always worried about how they spend the public’s money.

Also, many suppliers have become more attuned to public sector values, through more activity by charities and community interest companies. If you aren’t one yourself, you may well be competing with them for your business.

Small suppliers with suitable products which have never bothered to try selling to the public sector are missing a trick. The fact that many don’t bother makes it an even better idea for others to give it a try.

The spy who procured from me: GCHQ seeks SMEs

BT resumes court battle over Swan contract (GovernmentComputing.com)

Federation of Small Businesses report on selling to local government (PDF, 2013)

Cabinet Office Contracts Finder (with links to equivalents in Scotland, Wales and Northern Ireland)

Her Majesty bags-up a little help for suppliers (Queen's speech)

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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