UK Government data from the last financial year shows that, despite affirmative action, small businesses only supplied 27.1% of central government contracts by value (£12.1bn). Here, FSB Scotland spokesman Stuart Mackinnon tells BiP Solutions journalist Julie Shennan how this figure can be improved.
In financial year 2014/15, 27.1% of central government buying was with small businesses, either directly (10.9%) or through the supply chain (16.2%).
The figures, although low, exceeded the target set during the last Parliament, which aimed to see 25% of central government goods and services spent via small businesses by 2015.
To help meet this target, the UK Government got 33 strategic suppliers to sign the Prompt Payment Code. By signing the Code, these companies promised to pay their suppliers in good time, making business run more smoothly for small sub-contractors.
This was just one in a series of government measures taken to encourage small businesses to compete for public sector contracts; others included:
- Requiring the entire public sector supply chain to be paid within 30 days;
- Abolishing pre-qualification questionnaires for low-value public sector contracts;
- And requiring the public sector to publish its contracts on Contracts Finder.
While these measures have helped many small businesses, Stuart Mackinnon, a spokesman for the Federation of Small Businesses (FSB) in Scotland, argues that they do not go far enough to support small and micro businesses – which employ the majority of Scots.
He said: “This government data reveals that it is still difficult for smaller firms to win public work. However, this isn’t just a challenge for HM Government departments.
“Scottish Government figures reveal that the Scottish public sector spends less than 7% of its procurement budget with firms with fewer than ten employees. These enterprises, dubbed micro businesses, account for nine in every ten businesses north of the border.”
Mr Mackinnon added: “We’ve seen helpful efforts to reduce the bureaucracy associated with bidding for public contracts. However, the concerted drive to get better value for the public purse through aggregation makes it much more difficult for less established operators to win work.
“While it would be fair to highlight that many smaller firms will benefit through the procurement supply chain, many firms would argue that the primary contractor will take the lion’s share of the profit.
“Furthermore, primary contractors benefit from public sector prompt payment. Also, those currently winning public works can highlight this experience when bidding for more contracts in the future.”
He continued: “What can be done? Well, we can disaggregate contracts and make the case for proportionate terms and conditions – such as insurance requirements.
“Public sector leaders can also encourage purchasing professionals to build their systems and processes with smaller players in mind.
“Lastly, we need to see purchasers being encouraged to take a small amount of risk. New and smaller players will never get a bigger chunk of spend if those that have always won the work continue to do so.”
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