Competing for public sector contracts is notoriously tough for SMEs.
Larger, national suppliers have the credentials, the tender machines and the cash flow to help them successfully bid for work, year after year.
The problem is that many buyers don’t know how to make tender opportunities attractive to SMEs and as a result, traditional providers continue to dominate public sector supply chains.
So, how to change this status quo? The financial and societal benefits of buying from smaller organisations are well documented. SMEs often offer greater agility, increased innovation and good value for money. By ‘baking’ social value into procurement, public bodies can create local jobs and training, support regional economic growth and improve people’s quality of life. Yet, despite this, micro suppliers or operators offering social benefits often struggle to gain access.
There are, however, a number of practical steps that public sector organisations can take to give SME suppliers a chance:
1. Housing associations, councils, hospitals and emergency services must act as ‘anchor’ bodies, proactively creating an equal playing field to allow smaller firms in. Purely attaching some SME-orientated social value KPIs to a contract isn’t enough. Instead, anchor bodies must develop longer-term, well-planned contracting opportunities with SME bidders in mind, right from the start of the procurement process.
2. This might include pre-market engagement such as open days and meetings targeting a diverse range of prospective bidders, including SMEs. A common stumbling block for small firms is confidence and anchor bodies could tackle this by explaining how local companies may have an advantage over national firms, for example knowing an area’s geography, environmental conditions, labour pools or social needs.
3. Supplier development training is another way to help social enterprises and SMEs win contracts and grow their business. These sessions might involve guidance around bid-writing or briefings on regulations or technical issues. They should be organised well in advance of a tender launch.
4. Some small, independent suppliers are represented by national groups that bid for big contracts on their behalf. By working with this type of buying consortia, public organisations can help smaller suppliers break into the supply chain, at the same time as accessing a wide range of vetted operators.
5. Cash flow problems and a lack of investment are two issues that regularly hold smaller suppliers back. Anchor bodies could offer advice on how to access funding as well as putting contract measures in place – for instance around payment terms or extended, higher value opportunities - so SMEs have the means available to grow and become fully sustainable.
The underperformance of SMEs in public procurement is at odds with their overall weight in the UK economy. Social landlords, local authorities and other public buyers have the spending power to change this but there’s hard work ahead to engineer a more varied supply chain. Meaningfully engaging SMEs and decoding what many see as a complex and time-consuming procurement process is the first step on what will be a long but worthwhile road.
☛ Steve Malone is MD of Procurement for Housing