UK Prime Minister David Cameron made his pro-growth speech this morning. Alongside a lot of good stuff around large-scale investment projects, I thought there might be some mention of how public procurement might help smaller businesses – and there was. But only just… a blink and you miss it moment.
That means opening up access to finance, creating an attractive environment for venture capital funding, getting banks lending to small businesses again and insisting that a far greater proportion of government procurement budgets are spent with small and medium-sized firms.
So how’s that going to work then?
And in the days and months ahead we will be setting out our plans in all these areas.
Right. So nothing concrete yet, not even a confirmation of the single portal to advertise all government contract opportunities that has been planned since way back during the last Government’s reign?
And let’s just put down one marker here. There has been talk about “25% of contracts will be awarded to SMEs” as a Coalition commitment.
Here’s the point to look out for. Are we talking about 25 % of contracts by volume to be awarded to SMEs or 25% of Government spend to go to SMEs (i.e. by value)? Because they are very different. Like most organisations, the profile of spend for every public sector body I’ve worked with shows a very long tail. There are many small suppliers that account for a large number of contracts, orders and invoices, but often make up a relatively small percentage of total spend.
So I will bet my mortgage on this fact: pretty much every public sector organisation already awards 25% of their contracts by volume (at least) to SMEs. Many fewer place 25% of their total spend with SMEs, although I know some local authorities do; it is harder for large organisations with a need for national suppliers, such as DWP or MOD, to achieve that.
A commitment to 25% of contracts by volume is therefore meaningless; it happens already, it probably has since the day the public sector was invented. A commitment to 25% by value would mean something; although there is another whole discussion to be had around how the public sector could make this happen legally within EU procurement regulations.
Anyway, don’t be fooled by the rhetoric, and look out for that distinction when any announcement is made on this topic.
And if I were running the Federation of Small Businesses I would be jumping up and down about this now to get the point across.