Government opens contracts to 500,000 SMEs
500,000 newly incorporated Small and Medium sized Enterprises (SMEs) will be able to bid for Government contracts more easily following new financial assessment guidance announced by Andrew Smith, Chief Secretary to the Treasury.
The appraisal of the financial stability of contractors to Government was previously largely based on three years' profit and loss statements.
Under the new guidance cash flow will be emphasised more strongly in a more flexible financial assessment. This reflects good commercial practice where risk is assessed according to the specific situation, not bureaucratic formulae.
According to the Treasury, the initiative will particularly benefit new SMEs delivering goods and services, including IT and consultancy. The second improvement it will bring is that contractors' liability will be assessed on the basis of the value for money for the particular contract, where previously it was often assumed it should be unlimited.
Unlimited liability was a barrier to competition because it led to high insurance costs for suppliers. Invariably this simply increased the final price for the Government and taxpayer.
According to Mr Smith this will open up the Government market and increase competition and innovation.
Mr Smith said: "These improvements will bring out healthy competition in the marketplace and demonstrate this Government's commitment to fair access for all suppliers, including SMEs. This is excellent news for business and ensures best value for money for the taxpayer."
Nigel Griffiths, Minister for Small Business at the Department of Trade and Industry, said: "The removal of the need for three years' worth of audited accounts, and the change from unlimited liability to a value for money liability determination will mean that thousands of small and medium enterprises will now be able to access public procurement contracts."
The improvements have been drawn up by the Office of Government Commerce (OGC) in consultation with the Small Business Service.
An OGC spokesman said: "These improvements, together with the publication in June 2001 of guidance on 'Tendering for Government Contracts', are a direct result of OGC's strategy to make this market more accessible to all potential suppliers including SMEs.
"Financial assessment is now following best practice making a rounded business judgement. Previously it tended to focus on three years' profit and loss statistics which may have been perceived as a barrier against younger companies. There is now fair access for all in business assessments.
"Contract liability rules were previously open to interpretation and unlimited liability may not have delivered the competition it set out to do. With this clarification of the guidance there is now in place a commercially rounded assessment of contract liability, encouraging a broader range of companies to compete for government contracts.
"The guidance amounts to removing barriers to competition and a clarification of the rules on contract liability. A greater diversity of suppliers will encourage innovation and new approaches. This will bring scope for greater value for money for the taxpayer and bring increased benefits for the wider economy. Examples of fields where this will apply could well be in the field of IT is important that improvements bring benefits to all sectors."
--
Richard Powell, UKTECH