Can SME'S compete effectively for Government contracts?

6 July 2012

Chris Smith

Chris Smith

Former Head of Digital Transformation

When the coalition government came to power two years, there was much trumpeting around how they were going to overhaul the procurement process and make it easier for SME's to compete. The Efficiency and Reform Group (ERG) under Francis Maude was established with the remit of challenging the established ways of purchasing. Working for a UK SME, I've been reflecting and wondering whether anything materially has changed over the last two years.

The UK public sector spends £22bn annually on goods and services, which represents about 15% of the UK economy, whilst costing us twice as much as it does the French to run a procurement exercise!! Why is that?

Another interesting statistic I recently came across was that it is estimated that every £4 in £5 in government spending goes to just 14 companies, the equivalent of £21bn. Whereas UK SME's account for 50% of the UK economy by value and most economists also agree SME's are more innovative and job creating than large enterprises.

One of the key planks of the ERG strategy is to raise the share of government spending with SME's to 25%.

The rationale for this has been described as...

  • Enables rapid growth for existing businesses
  • Provides opportunities for new technology start ups
  • Supports the strategy of creating the UK as a technology hub.

And the benefits to the government are...

  • Encourages more competition
  • Delivers better value to the UK tax payer.

It sounds positive, so why hasn't it happened?

What are the barriers to allowing SME's to effectively compete for government contracts?

My view is that they can be summarised as;

  • The majority of SME's are incapable of taking on some of the risks that have historically been negotiated with large multi-national suppliers
  • The costs to compete are prohibitive, the lengthy filling in of PQQ's, ITT's, RFQ's, RFP's, etc
  • The sometimes sheer complexity of the tendering process, having to complete 30/50 pages of tender forms
  • The financial securities that some government contracts demand
  • The effort required to be compliant with the sometimes onerous terms and condition.

Has the ERG failed to deliver?

Am I disheartened and despondent, and thinking that like many other government initiatives the ERG has failed to deliver? Well actually not and for two reasons;

  1. The government has launched a new tool this week; Solutions Exchange inviting suppliers to respond to government challenges. It looks exciting and might provide a innovative way for companies like Bluefin Solutions to engage with Whitehall
  2. I attended a recent supplier briefing given by DEFRA and they made it very clear they want to maximise the involvement of SME's in their Future Options Programme.

It's all positive news and further encouragement for organisations like Bluefin Solutions that we will be able to engage with the public sector effectively.

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