Member Article

Public sector procurement: frustration for construction SMEs

Mark Wakeford, managing director at Stepnell, tells us why public sector procurement is still a fustration for construction SMEs.

While it’s good to hear that the Government is planning to double the amount of business going to small and medium-sized enterprises (SMEs) from £3 billion to £6 billion by the end of this financial year, public sector procurement and the complex and expensive bidding process continues to favour larger businesses.

More for less

SMEs account for 50 per cent of GDP yet we still struggle to get on the tender list of public sector projects because these opportunities are not widely publicised or made accessible and affordable to the SME community to compete. There is also a general lack of understanding about the role smaller construction and supply chain companies can play in delivering innovative and high quality products and services to the public sector that provide British taxpayers with higher tax returns and ‘more’ for ‘less’ in these constrained economic times.

We need to debunk public sector perceptions of SMEs being too small to do the job when in fact many employ up to 250 staff and have significant experience and expertise in delivering large, complex construction projects - from PFI schemes to schools and hospitals. SMEs don’t have the big general management overheads which are passed on to the client, but can be highly focused on a single market area.

Government contracts need fairer award system

Government construction projects need to be awarded on a more proportional and fair basis to appropriately-sized companies and expensive bidding processes, red tape, and disproportionate eligibility requirements removed.

We are currently seeing big contractors travelling large distances to do small public sector projects which are unlikely to deliver good value. Complex and unnecessary pre-qualifications are also making these contracts less accessible to smaller construction companies. This is not only stifling competition and innovation, but putting the long-term survival of SMEs – the lifeblood of our economy – in peril.

Just 12 per cent of public sector contracts are currently awarded to SMEs. This is an improvement from an initial six per cent, but it still means that the Government has some way to go to reach its target of giving 25 per cent of its business to smaller companies by 2015. And while the Government says it wants to give smaller firms more work, SMEs are seeing public sector procurement moving increasingly towards large collective contracts which are being awarded to a handful of big, national builders.

If the trend continues public sector construction projects will end up in the hands of just a few large construction companies, reducing competition that would otherwise keep prices low, quality high and stimulate innovation. I am not arguing for special treatment, but for the value that SMEs can bring to a project to be recognised and for appropriately sized and skilled contractors to be given the opportunity to carry out the works.

Public procurement provides small businesses with vital new markets and a reliable revenue stream. In return, construction SMEs provide the economy with innovative products and services that will stimulate growth, create jobs and consistently deliver more for less.

This was posted in Bdaily's Members' News section by Mark Wakeford .