Why are SMEs often locked out of public sector contracts?

Despite numerous initiatives to improve value-for-money and support growing businesses by bringing more SMEs into the supply chain, it would seem that many vital public services are still being awarded to the same handful of major contractors. The problem is that these contractors have either failed to meet their obligations previously, and/or been driven out of business by contracts that were designed to fail from the outset. Clearly this situation is unsustainable.

There are two major flaws to the government's approach:

1. Accountability is being outsourced to the private sector

The government not only seeks for the private sector to deliver services to the public, but it also aims to make the private sector ultimately responsible for these services too. It is no longer a case of public/private partnerships, but of private sector scapegoats. It is a policy designed to free the Government of any liability for anything in the public sector.

This policy results in the elected Government having zero accountability for public services. If (and when) they fail, the Government simply blames the contractor and appoints another company to do the job for the lowest possible price.

2. Large suppliers still have the advantage

Relating to the first point, large suppliers are often the only ones who can take on the risk that the government expects of them. Inevitably, these suppliers may overstretch themselves and fail. However they can often win it back again because they are the only ones willing to do the work. Some large Government contracts are even being extended beyond their original termination date due to the additional work and uncertainties caused by Brexit.

Do SMEs have the answer?

The answer to this procurement crisis is twofold;

  • The Government must regain ultimate responsibility for the delivery of public sector services and not set up the private sector for failure

  • The Government must deliver on its own ambitions to open up more of the public sector to SMEs

Ultimately, the Government has an obligation to deliver the best possible public services at the best possible price, and it is SMEs, not the large outsourcers, that are often the best placed to do this. A well designed and fair public procurement policy has the potential to be a huge lever for economic growth, but only if applied wisely. It will enable more SMEs to enter the supply chain, award contracts that are fair to the long-term stability of suppliers, and will not outsource ultimate responsibility to private sector scapegoats.

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