SMEs are the lifeblood of our economy – they should be at the heart of public sector, argues Clive Feeney.
The general election is almost upon us and whichever administration gets in, there is an important task ahead – to improve the chances of SMEs winning work in the public sector.
The scale of the problem was highlighted in a British Chamber of Commerce report. It revealed that while the value of published public sector procurement spending with small and medium-sized enterprises has increased, the proportion of total government money awarded directly to SMEs has not grown over the past five years.
Just over one in every five pounds spent by the government on public sector procurement in 2021 was awarded to SMEs. That’s 21%.
Why does this matter? Well, as of the start of 2023, there were approximately 5.5 million SMEs in the UK, accounting for 99.9% of the total business population. That’s a lot of potential to grow our economy.
Closed shop
With construction predominantly made up of SMEs, you would expect the sector to be ahead. But in reality, many SMEs feel it’s a closed shop when it comes to public sector contracts – hard to bid for, and hard to secure.
That’s where frameworks can be used as a lever to drive better engagement and opportunities. At LHC, we’ve shown that it can be done. Over the last decade, we have appointed 1,266 suppliers to our frameworks and 1,048 of these suppliers were SMEs. That’s 82.7%.
Looking at April 2023 to March 2024, we awarded 1,356 projects and 956 of those were to SMEs. That is 70.5%. So how does this translate when it comes to income gained by SMEs? Well, here the figures are equally interesting.
Last year project values at LHC surpassed half a billion pounds for the first time in our history. Of that, £245m was awarded to SME firms. The key to framework providers engaging SMEs is to work hard to attract underrepresented groups during the tender engagement process, take extra care in framework design to ensure no barriers that might dissuade smaller firms from applying (such as unattainable PI levels), and be specific on social value and technical outcomes desired rather than just looking at what has gone before.
Perception of risk
They should also discuss with clients and end users what their perception of ‘risk’ is when it comes to engaging with an SME: is it real or is it just a set of rules they have followed for a long time?
It’s something that was covered in the recommendations in Constructing the Gold Standard, designed to improve consistency and quality within frameworks. There too, the need to increase engagement and collaboration was highlighted, as well as greater transparency around pipeline and framework values, to attract SMEs into the process.
SMEs are the lifeblood of our economy and it’s essential we all play a part in driving opportunities for them in public sector work, so that they can help us to deliver the next wave of projects in sectors like housing, healthcare and education.
Clive Feeney is group managing director of LHC Procurement Group, a not-for-profit construction framework provider delivering exclusively to the public sector.
