Coalition failing SMEs, says survey…

Small firms claim they are being excluded from government contracts. Michael Glackin reports

More than three quarters of small and medium-sized contractors insist they are being excluded from government contracts because of their size.

The findings emerged in a survey commissioned by Construction Manager, and call into question the coalition government’s much-touted commitment to increasing the number of small and medium-sized businesses involved in public sector contracts.

The survey, carried out for CM by Constructionline, canvassed the views of a cross-section of construction SMEs comprising consultants, general contractors and specialists. It also revealed that more than 86% of small firms believe the procurement policies of both central and local government create barriers to SMEs winning work. Almost 1,000 firms responded.

The stark findings underline industry complaints that the shift in public sector procurement to large aggregated contracts — which can only be carried out by large, usually multinational, contractors— has left an increasing number of construction SMEs squeezed out of the system.

The results come as the government began trials on three procurement models recommended by a task force looking at improving procurement. And north of the border, the Scottish parliament is revising its processes for public procurement to try to make it easier for SMEs to win work.

The CM/Constructionline survey found that 75.5% of SMEs think their size prevents them from winning public sector contracts. It also found 94% of contractors believe the government had failed to include SMEs in its procurement system.

The coalition has said it wants 25% of government contracts by value to be awarded to SMEs. But that target has not been met and the latest figures from the Department for Business, Innovation and Skills reveal a fall in the amount of money spent with SMEs at the start of this year.

A spokesperson from the department said: “We are on track to meet our 25% spending target with SMEs. We are already working to achieve economies of scale and at the same time increase procurement through SMEs by working with Research Council UK’s Shared Services Centre to purchase more through this facility.”

He added the fall in money spent on SMEs by government departments so far this year was “a slight drop caused by normal seasonal variations”.

Construction SMEs account for around 80% of construction jobs and more than 60% of the sector’s annual turnover.

But more than 86% of those polled said construction SMEs lacked a voice within government.

The Constructionline survey makes clear that SMEs believe their importance to construction’s economy is ignored by government and that departments have failed to take on board their concerns over barriers to the procurement process.

Suggestions for improving access included simplifying the procurement process by reducing the amount of red tape involved in applying for public sector contracts. PQQ’s emerged as a consistent bone of contention, with many complaining they require too many resources to complete and are biased towards large contractors because of their emphasis on sustainability and health and safety.

Many of those polled said government should also promote the use of regional companies in public sector procurement.

Alan McEwan, head of London-based consulting civil and structural engineers Alan McEwan Associates, said the government should abandon framework agreements altogether and establish a more flexible tendering process.

He said: “One large delivery partner means a client is putting his eggs in one basket and losing competitiveness. You keep prices down through competition, not monopolies that allow big contractors to swallow up all the work. I cannot see how the current system saves the government, or the taxpayer, money in the long run.”

Earlier this month David Pitchford, the head of the government’s Major Projects Authority, admitted that less than half of its biggest construction projects would finish within budget.

Capital projects have borne the brunt of government spending cuts, but the public sector remains construction’s largest client, spending more than £30bn across the UK last year.

Philip Prince, marketing director with Constructionline, said:  “You can argue that major contractors always win frameworks, but if you break it down there are a lot of smaller and regional contracts going to SMEs, both directly and through subcontracts with larger firms.”