It’s time to give smaller companies a bigger slice of the procurement pie
Op-ed from Minister Neville-Rolfe, originally published in The Times on Monday 28 November.
Before entering politics, I had a front-row seat in the world of business in an FTSE 100 boardroom as an executive and main board director at Tesco — a high street name, one of Britain’s ’s biggest companies and an employer of thousands that every day relied on the work and products of smaller businesses in its supply chains. I also have worked at much smaller companies, including Dobbies, Red Tractor and Crown Agents. So I know, very well, the challenges faced by small and medium-sized enterprises and the opportunities that we can unlock in government by making the right changes. And now that I’m in government, I’m in the right place to make it happen.
Complex procurement regulations, for example, have long been the bane of small companies. The government, likewise, wants to make it easier for such businesses to work with the public sector by ripping up unnecessary rules.
This week, as the Procurement Bill goes into its report stage in the House of Lords, I intend to make real progress. The bill will slash through red tape, replacing 350 European Union regulations with one simple and flexible framework for the five million UK SMEs that could compete for public sector contracts. It also will tackle late payment in the supply chain.
In the past year, SMEs have won a record £19.3 billion in government procurement spending. It is great to see the graph heading in the right direction, but we all want to see a steeper line.
With the overall procurement pie worth £300 billion, I know from hosting many round tables and from speaking to entrepreneurs and business people that the bill can do more to help SMEs across the country to get a bigger slice. From those conversations, I believe we should use the bill to strengthen three areas.
First, to put contracting authorities in the frame for reducing the challenges for small businesses. Procurement teams will have to make sure there are no unnecessary barriers that might hinder smaller companies in the contract; that bidding timelines are realistic; and that there is a clear timeline so that SMEs can plan accordingly.
Second: accounting. Another burden on smaller suppliers is having to provide audited accounts as a test of their financial standing. We will require contracting authorities to accept alternative evidence where audited accounts are unavailable: this will prevent some businesses being excluded from bidding.
And finally: insurance. A part of the procurement process unfairly penalises businesses that lack the war chests of big corporations. We will make it explicitly clear that contracting authorities must accept evidence that required insurance cover will be in place when a contract is awarded, rather than at the point of bidding. This will save SMEs from having to incur unnecessary upfront costs, a burden they shoulder at present.
With an estimated turnover of £2.1 trillion, SMEs make up 99 per cent of UK businesses and I am delighted to be playing my part in taking full advantage of our restored powers and sovereignty to help our domestic businesses to grow.