Small steps towards small business contracts

The Government has launched two pilot schemes to try to give easier access to Government contracts for small businesses.

Chief Secretary to the Treasury Paul Boateng outlined details of the pilots in the West Midlands and Haringey, North London, when he addressed the Ethnic Minority Business Forum in London. Although the initiative is in areas with a high proportion of ethnic minority businesses, they are not exclusively targeted as such.

The Government announcement claimed that in both pilot areas for the trials, SMEs are vital to the local economy with a high proportion of the 290,000 SMEs in the West Midlands owned by people from ethnic minorities, whilst 47 per cent of businesses in Haringey are ethnic minority owned.

Chief Secretary Paul Boateng said: "Government has been listening to the concerns of small businesses and is determined to ensure that the role they perform in the local economy is given proper recognition. Black and ethnic businesses are central to this in many parts of the UK.

"We have acted to help businesses access Government contracts more successfully. These pilots will help test solutions on the ground in our business communities to make sure that SMEs are helped to deal with issues such as bidding costs, advertising, information, processes and paperwork.

"We will be reviewing the pilots when the results are available in the coming year so we can build on the lessons learned. This is a vital step forward for small businesses and the equal opportunity agenda."

Both pilots will run into the spring of 2005 and an evaluation will be carried out within 12 months.

The West Midlands pilot will:

• Simplify the mechanisms by which small to medium sized businesses find out about and bid for government work.
  
• Streamline the procurement processes to provide a simpler and more cost-effective approach, including piloting a standardised 'pre-qualification' process.
  
• Setting up of a Regional Supplier Development forum.

The Haringey pilot will:

• Develop a web 'portal' by Trade Local, (an initiative of the borough) which will include information about tendering opportunities both within Haringey.
  
• Simplify Haringey's 'pre-qualification questionnaire' - the application form that all prospective suppliers need to complete in order to be considered as a supplier to government - and other tender
  documents, to assist companies in understanding the requirements.

Office of Government Commerce

The announcement from the Office of Government Commerce (OGC) lists the measures already taken by the Government to support SMEs with procurement issues including:

• New Financial Appraisal Guidance, allowing SMEs to be considered for government contracts even if they cannot produce three year audited Accounts.
  
• Distributing contact details for the purchasing department of all major government departments and other Government offices.
  
• Taking steps to actively encourage public sector buyers to consider the potential benefits offered by SMEs when placing contracts with suppliers.
  
• The running of pilot schemes to establish a 'common IT language', which will allow SMEs to conduct business online with government regardless of which IT system they use.

The announcement also claims that: In addition to making it easier for SMEs to access government contracts, the Government has introduced a wide range of measures to encourage and support enterprise across society. Measures to help create the right environment for small business to flourish have focused on maintaining a stable macroeconomic environment, modernising the tax system to ensure that entrepreneurship is rewarded and ensuring that regulation does not impact disproportionately on small businesses.

Government has also introduced a series of more targeted measures to tackle specific market failures such as access to finance, skills and business advice. The Treasury launched the 'Bridging the Finance Gap' consultation at Budget 2003 which focuses on how to ensure that growing and small businesses have efficient access to capital. The consultation runs till July 25 2003.

Chipping away at barriers

After this announcement, UKTECH interviewed a spokesman from the Office of Government Commerce to identify what impact this might have on the future. The overall impression given by the OGC was that there was a genuine desire to include small and medium size businesses more in Government procurement, but they recognised that this was not going to be achieved overnight. This measure - and others which have been announced - was seen as chipping away at the perceived barriers.

The OGC spokesman told UKTECH: "These pilots and other initiatives are in part in response to the report by the Better Regulation Task Force, although Ministers have yet to respond officially to it.

"From an OGC point of view our remit is to open up the Government market place. SMEs have a great deal to offer Government and we are taking several initiatives, including the common approach to doing business and procuring online, to ensure that the playing field is level."

The OGC was established in April 2000, to act as a catalyst in procurement issues and to work with civil departments to achieve best value for money in their commercial activities. One of its responsibilities is to open up Government contracts to SMEs.

Best value

The OGC said: "The Government genuinely wants to see value for money. The Government isn't spending its own money, it's spending the tax payers' money - that's yours and mine - and it wants value wherever that comes from, regardless of size. If you are an SME and are able to do what the Government wants, you shouldn't be barred.

"Government can't be seen giving companies an inside track, and that applies to small companies too. There are good as well as bad small companies as well as larger ones.

"Sometimes there are going to be contracts where common sense says it needs a big supplier involved but it could be that if that project is broken down into various parts then an SME will do better in a niche, specialist area than one big supplier for the entire project.

"As we've sifted through the wreckage of past disasters in some Government contracts, we have noticed a pattern emerging. Where one company is awarded an entire contract as one big package there have been examples of problems. But it makes sense that if it is broken down, it can stand more chance of succeeding as specialists can be brought in for specific tasks - and SMEs can play a role in that."

UKTECH raised the role that freelancers could play in exactly this type of arrangement. We discussed an example where adopting the approach of using a specialist team or niche suppliers from the freelancing or small business sector, could have made the difference. One example, often one which has been all too common in the Government's past experiences of IT procurement, was when a total package was awarded to one large supplier. The specifications went through the IT spectrum, from supplying the hardware to developing the software. While the large single supplier was well suited to the former, its expertise was not in the detailed software development and the project ran into big - and expensive - problems at that stage.

The OGC said: "We need horses for courses. The SME might not be able to supply bulk quantities of PCs, but we do want to see the innovation they can bring to projects which require their skills and abilities. We are taking a step on the road."

Accounts

UKTECH discussed some of the specific problems which have been identified and which affect freelancers.

The OGC said: "We have recognised some of the barriers which have been in the way. In the case of freelancers, there have been examples of where individuals have been working for the big companies and have been good enough to set up their own business and go it alone or with one or two other people. In some cases, they might even have been working on Government projects.

"In the past, they might have wanted to bid for part of a contract, but they would have been required to produce three years accounts. If they are just starting out as a business they won't have them so it meant that they - and we - would have to wait before we could use them. OGC looked at this and thought if they are good enough to break away and set up their own businesses then why let them slip through our fingers? We should look at other factors rather than a rigid three years, like turnover, the calibre of the directors and other aspects.

"These small businesses can bring innovation and added value in so many areas by their enthusiasm and ability. Our job is to take away the obstacles so they can be used.

"We are starting to chip away at the perceived barriers. But it's also going to be down to the SMEs to show if they are up for it or not. We are going to go for value for money. If the larger companies are the best they will get the work, if the small companies are best suited, they should get it.

"We are going to do everything in our power to break down barriers and open up the Government markets."

Common IT system

One move the OGC has made is to encourage Government departments to use a common IT language for procurement, so that small businesses will not be prevented from even leaving the starting blocks of an application.

The OGC spokesman said: "This will help a small company go online and apply for a contract in the same way as ICI or any other large company. Then it is down to quality. It is not always going to be down to price, in some cases that will be the main factor for a fixed piece of work, but in others there will be variables.

"We will be looking for small suppliers to bid in the same way as a large supplier could and piloting a common IT language means anyone who has a commercially recognised system won't be held back."

Freelancers' input

During the UKTECH interview with the OGC spokesman, there was a strong sense that they genuinely wanted to change the way they procured contracts. In part, this could be due to the fact that there have been so many high profile disasters involving the same large suppliers, that the political masters and their civil servants have tired of wiping the egg off their faces and are interested in looking at new and innovative formulas.

It was also refreshing to talk to a Government official who had a real understanding of the benefits freelancers could bring, especially in specialist or niche areas.

The principle behind UKTECH is that by identifying opportunities and providing a network for freelancers to communicate with each other and external bodies, the 'drip, drip' effect of the benefits they bring would begin to filter through.

UKTECH and individual members of its network were acknowledged and thanked for their contributions in the recent consultation with the Better Regulation Task Force which resulted in a report and series of recommendations on improving access to public contracts for SMEs. Ministers have yet to respond officially to that report, but these measures and a perceived shift in attitude seem to indicate that the 'drip, drip' effect is beginning to permeate the corridors of power. See UKTECH's stories about the Better Regulation Task Force Report SMEs - Government told to put money where mouth is and the original consultation which involved the UKTECH network of freelancers Public Procurement - Any Experience?