Why Don’t SMEs Win More Government Work – Our Readers Comment

We reported here on the disappointing figures quietly released by the UK government recently that showed spend with smaller firms (SMEs) declining in 2015/16. While this was because of the “indirect” spend declining i.e. spend with SMEs made by government’s larger first-tier suppliers, and we don’t think that  means very much at all, even the direct spend seems pretty much stuck at around 11% of the total.

Anyway, we had a couple of interesting comments on our last article, which looked at why SMEs aren’t doing better. Thanks to those readers, and here are their contributions, along with our comments on those points as well.

From Daniel Bromley: Perhaps some SMEs have done so well, they are no longer SMEs? Not entirely a flippant remark – perhaps Kainos/Methods and others who look to have won a fair bit, looking at the Digital Marketplace transparency data, have made that jump up?

(SM says: yes indeed. It always struck us that the travel firm that was always held up as a great example of a successful SME as it won a very large government contract couldn’t possibly be an SME any longer! Let’s face it, Capita and Serco were SMEs not too many years ago. Indeed, you might even make an argument that the real measure of success would be how many SME suppliers do move out of that categorisation).

From RJ: There are at least three more factors that can also militate against SME spend:
(i) public sector procurement has to be completely transparent and objective in its award criteria. Whilst one of the award criteria might be an overt weighting in favour of SMEs, in most instances if a large organisation is simply better equipped to meet the requirement, then they should win the contract.  (SM says - True, although I would argue often the procurement process is biased against smaller firms – it is not a level playing field from that point of view. But I agree that we can’t – and probably shouldn’t - bias it in favour of those firms, and often they are not the best choice, as you say).

(ii) in some instances the mere award of a CCS contract can lift a supplier out of the SME threshold (albeit that SME status is maintained for a couple of years in such instances). (SM says; indeed, see our comment above) and

(iii) good SMEs are often acquired by larger organisations – I can think of one very significant example in this regard where a significant supplier has been taken out of our numbers this year. (SM says – yes, that is similar to the “getting bigger” argument, and is of course good news for many SMEs and their owners who sell at a good price. Capita for instance are well known for snapping up small firms who are doing well in public sector niche markets, or are challenging them in bigger markets - as they did in translation services quite recently).

Within the branch of central government in which I am working we are currently placing more emphasis on SME participation in bid processes than in the absolute volume/value of awards – this at least demonstrates that the supply market believes they will be given a fair shot at winning contracts. (SM says – I think this is key. I would rather see organisations spending more time doing the right things and spending less time worrying about / massaging the data. Sally Collier and I recommended that we shouldn’t have targets back in 2009 when we worked on this issue because we thought it would distract attention from organisations actually doing stuff to help SMEs. I stand by that).

Voices (2)

  1. Craig:

    Choice. The choice not to go for the work.

    Following our attendance at a Governmental engagement hub recently, it became clear that many of the SMEs there wouldn’t be taking their engagement any further. There were many conversations around the room but most felt that it was unrealistic for the department to be asking the things they were and that it’d be completely unviable for the majority. You could cut the atmosphere with a knife.

    I’m hopeful that the department in question learnt a lot about engagement with SMEs on that day.

  2. Ian Makgill:

    In truth we don’t know why because we aren’t gathering and analysing the data that would tell us why this isn’t happening. Most of us have suspicions about gold plated specs, burdensome bid requirements, uncompetitive tenders and cosy relationships with primes, but no one has done any meaningful analysis of tenders to find out. Is there any other part of the economy that is so uninquisitive about such a large amount of money?

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