29 April 2004 | Mark Whitehead
A senior economic adviser to the UK government has rejected claims that small and medium-sized companies are often badly run and said the government will continue encouraging them to bid for public-sector contracts.
Martin Sykes, executive director at the Office of Government Commerce, said there was no evidence in two pilot projects that SMEs were poorly audited.
He also rejected criticism that some SMEs falsely claimed to be run by women in order to win favour with local authorities and government agencies.
Sykes told 170 academics and purchasing professionals at the annual conference of the International Purchasing and Supply Educational and Research Association in Catania, Sicily, that SMEs employing up to 250 people accounted for 99 per cent of businesses in the UK and more than half of the country's turnover.
Speaking in a roundtable debate on public-sector procurement, Simon Croom, head of the supply strategy research unit at Warwick Business School, said SMEs were often difficult to audit and sometimes wrongly claimed to be run by women.
"Buying from SMEs requires far more diligence than buying from bigger companies," he said. "They are not necessarily efficient or effective. I've seen plenty of examples of badly run and poorly audited SMEs.
"And I've seen examples of SMEs that pretend they are run by women in order to take advantage of equal opportunities policies, when they are not. These are major concerns for purchasers."
But Sykes replied: "I have no evidence that the companies we work with are badly run, or that they are fronting up as businesses being run by women."
He said the need for SMEs to produce three years of audited accounts had been relaxed to help them meet tendering requirements. Only contracts of limited value were being awarded to SMEs to help reduce the risk involved to clients, and pre-tender questionnaires had been reduced to 30 questions.
"This is about lowering the barriers for entry," said Sykes. "If you spend £100,000 or less, the need for robust management procedures is less crucial because there is a limit to the risk you take.
"Over half of the people employed in the private sector work for SMEs.
"If you don't employ them, you are marginalising smaller companies and communities."
He said SMEs could be more flexible and responsive because they did not have huge overheads.