SMEs and the public sector – setting five misconceptions right

29 October 2013

Chris Smith

Chris Smith

Former Head of Digital Transformation

A report issued by the Cabinet Office on the 19th of September entitled, “Making government business more accessible to SMEs,” offered encouraging news years on that the UK government increased its direct spend with SMEs from 6.5% in 2009-10 to10.5% in 2012-13. Yet it looks likely that it will miss its own target of awarding 25% of all contracts to SMEs by 2015.

Commenting on the report, Chloe Smith MP, minister for political and constitutional reform, said: “These figures are encouraging, but clearly more needs to be done to reach our 25% aspiration. We are clearer about the task ahead; we have much better data than in the past and, through our ongoing engagement with SMEs, a better idea of the remaining ‘roadblocks’ that we need to tackle.”

Some look askance at these targets, arguing that SMEs suffer from inherent problems when it comes to the delivery of large scale innovation within the public sector. This is a blinkered view born of misconceptions. Here we outline five of the most common misconceptions around SMEs and the public sector.

Misconception 1: SMEs don’t understand the large-scale legacy
systems on which the public sector relies

This is simply wrong. Go and speak to anyone in a technology SME. Ask them about their careers. A large proportion of them will tell you about the years they spent working for those large legacy software providers. Many of them will go on to tell you about the frustrations they experienced trying to deliver value to the public sector from such a large, inflexible organisation, and how it was this that led them to found or join an SME.

Misconception 2: SMEs are expensive

Day rates might look expensive when you compare them to those from larger companies and certainly against the rates quoted by offshore providers. But does that tell the entire story? If a junior member of staff at that large company takes three times as long to complete a project is their half-price day rate such good value? If the offshore provider sends you a lower bill, but delivers a substandard solution that requires frequent repairs, is it such good value?

Misconception 3: SMEs lack capacity to deliver large-scale public
sector contracts

SMEs tend to have a culture of collaboration and so can work together with each other to form a network of experts. This can often produce a team that is much more closely tailored to the specific needs of a project than a team emerges from a large provider where the personnel are determined before the scope of the project.

Misconception 4: SMEs are too small to take on the contractual and
legal liability of a public sector contract

In the past this has been an issue, but the Government has been doing good work to reduce unnecessary requirements in this area, and the recent report from the Cabinet Office indicates further developments are afoot.

Misconception 5: If we stop the project it will put the SME supplier out
of business

SMEs are on the whole much more resilient than that. They can withstand commercial setbacks, but they do need public sector buyers to recognise what they can bring to their projects, and to entrust them with those contracts in the first place. Doing so will produce benefits not only for those SMEs and their public sector clients but also for UK taxpayers and public service users.

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