SMEs ‘still miss out’ in public sector arena

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THE Government’s efforts to encourage councils to pool their requirements to achieve economies of scale block out small and medium sized enterprises from the public sector procurement arena, according to a Yorkshire businessman.

Paul Wright, chief executive of PAWA Consulting, who is backing the Yorkshire Post’s Buy Yorkshire campaign, said public sector procurement is “still very procedural and bureaucratic and off-putting for SMEs”. PAWA Consulting, based in Shipley, West Yorkshire, aims to help organisations get the most out of the money they spend by offering consultancy and training courses.

The Yorkshire Post is calling for a shake-up of public sector procurement rules to give SMEs a better chance of securing contracts with public sector organisations. The campaign is also encouraging Yorkshire businesses to “think local” whenever they need to buy goods and services to boost the local economy.

Dr Wright, who is also the co-author of Excellence in Public Sector Procurement, criticised the Government’s aspiration for 25 per cent of central government contracts by value to be awarded to SMEs, as he said it is not applicable to local government and other public bodies. He also said that central government contracts “by their nature are often big national contracts inappropriate for SMEs”.

He added: “The Government is saying it wants to have more small businesses involved but it’s also saying councils should put all their requirements together to make a bigger contract to achieve economies of scale, which blocks out SMEs. They may get a small discount by putting it all together but they have to use a national supplier rather than a local supplier. They need to think about how they can split some of these contracts up so they can be done by smaller organisations.”

A Cabinet Office spokesman said that grouping contracts together to achieve savings from the taxpayer need not exclude SMEs, adding: “We are working to split large contracts into smaller parts which are more manageable for SMEs to bid for. We are also working with prime contractors to ensure that a significant proportion of the supply chain is open to SMEs.”

Working with prime contractors to include SMEs in the supply chain is essential, said Dr Wright, but he warned that it is not the same as the Government itself pledging to give more contracts to SMEs. The Cabinet Office said that enabling SMEs to win more Government contracts is central to its reform of public procurement.

Dr Wright said awarding more council contracts to SMEs would help strengthen the local economy, and explained that the hurdles associated with public sector procurement for SMEs can hamper their growth. “We are sometimes barred from bidding for contracts because they see that it would be too much of a percentage of our turnover. It is a guideline many public sector bodies have now that an individual contract should be more than 25 or 33 per cent of a company’s turnover. It makes it more difficult to grow,” he said. Most of PAWA Consulting’s customers are public sector organisations, and its most recent turnover was £110,000.

Dr Wright also criticised the pre-qualification questionnaires (PQQ) system, explaining: “People who tick all the boxes get invited to make a formal bid. Practically all councils do their own version of it.”

The Government announced a package of measures in February 2011, including eliminating PQQs for most central government contacts under the European Union threshold of £100,000. Dr Wright said the central government approach with regard to PQQs doesn’t stop individual councils from using them, stressing: “PQQs are actually quite an effective way of sorting out who can do the contract – the problem is needless variation in the PQQ wasting time for the suppliers.”

The Cabinet Office spokesman said: “We have shortened, and in many cases scrapped, bureaucratic questionnaires for potential contractors, we are working with major suppliers to create sub-contracting opportunities for SMEs. We have given SMEs a voice at the top table through the Crown Representative and SME Panel, and we have made government truly accountable through the Mystery Shopper Service.”

This allows any supplier to report poor practice. The Government will be launching a further package of measures shortly.