Small businesses missing out on public sector contracts

Each year the UK public sector spends around £200bn on the procurement of goods and services from third parties, but not enough of this is with small firms (SMEs).

The latest figures from the FSB reveal a fall in SME marketshare to 23% (down 2% on 2014), far short of the Government's target to ensure small companies win a third of these contracts.

Based on live contract tenders, data from the Tussell Index of Public Procurement shows that over the last 12 months, small and medium sized firms won 19% of directly awarded public sector contracts by value which is roughly equivalent to £38bn of total contracts.

The FSB is calling on the Government and public sector to step up efforts to remove obstacles which are preventing smaller firms from supplying services to the public sector, including forcing local authorities to publish all contracts over £10,000 on Contracts Finder, as central Government does.

There is the suggestion, put forward by FSB, that local authorities avoid putting smaller contracts on the digital platform as they tend to only publish higher value thresholds, which are outside the reach of smaller businesses.

Other proposals are that an action plan should be published by the Government about how it will better enforce the law requiring detailed feedback from local authorities to unsuccessful tenderers and that the Mystery Shopper Service (MSS) should be given legal power to enforce its findings.

The FSB is also keen for replacement framework agreements with Dynamic Purchasing Systems (DPS) to be actioned, where possible, so small businesses are not locked out from lists of potential suppliers to local authorities

FSB National Chairman, Mike Cherry, said: “Despite Government efforts to reform public procurement practices, most small businesses still face a fixed system which is preventing them from getting a fair share of public contracts.

“Our report shines a light on how local authorities are getting around their obligations to clearly and fairly advertise contracts which could go to local smaller firms. It is scandalous that only 20% of all local government contracts go to small businesses.

“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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Last updated: 29th August 2017