The government is likely to miss its targets for allowing small businesses into public procurement contracts, according to the FSB

Lucy White
Triggering Article 50 - British Industry
Around 20 per cent of local government contracts currently go to SMEs (Source: Getty)

Small businesses are fighting an uphill battle to secure public sector contracts, according to a new report from the Federation of Small Businesses (FSB).

Blockages in the procurement process are “unfairly preventing” smaller firms from supplying the public sector, which spends more than £200bn buying goods and services from third parties, the FSB has found.

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It believes the government will be unlikely to meet its target for the amount it intends to spend with small and medium-sized enterprises (SMEs), which it set last year at 33 per cent of total procurement spending by 2020.

“Opening up the public service market is a win-win for everyone involved in the supply chain because when small businesses are used effectively, they are able to create jobs and growth,” said FSB national chairman Mike Cherry.

“By supporting local small businesses, we are helping to pay the wages of local people who then go and spend money in local businesses which helps the whole local economy. FSB research backs this, showing that for every £1 spent with a small or medium-sized business, 63 per cent is re-spent in the local area.”

According to Cherry, just 20 per cent of local government contracts currently go to SMEs. The FSB's report reveals that 23 per cent of SMEs worked for the public sector over the last twelve months – down two percentage points from 2014.

The number of smaller businesses which expressed an interest in competing for a public sector contract over the last year also dropped, to 10 per cent from 14.

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The FSB has made a number of suggestions to the government, including:

Require local authorities to publish all contracts over £10,000 on the digital database Contract Finder. This will force them to publish smaller contracts, and not just higher value contracts which are outside the reach of SMEs

Give the Mystery Shopper service, a complaints body, legal power to enforce its findings and to more effectively name and shame poor performers

Publish a government action plan concerning how the law will be better enforced where it compels local authorities to give detailed feedback on unsuccessful tenders

Encourage local authorities to recognise comparable accreditations, to reduce existing barriers to entry for small businesses

Replace framework agreements with dynamic purchasing systems, where possible, so small businesses are not locked out of lists of potential suppliers.

Cherry added:

In the next few years, we will see work begin on major infrastructure projects across the UK. These projects will bring with them a vast number of public contract opportunities.

Smaller firms need to be given the chance to secure these opportunities – it no longer acceptable that they continue to be effectively excluded from the process. For this to happen, it is vital that the government takes another look at reform to make procurement fairer, simpler and more transparent.

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