21/10/2019
Government targets for SME spend – have you spotted the smokescreen?
Procurement is the single biggest component of government expenditure, yet SMEs are not sharing adequately in the growth of the economy Roughly one in every three pounds that the UK public sector spends is spent on procurement. Total employment in SMEs is 16.3 million; 60% of all private sector employment in the UK.
There is scarce evidence that the government target to spend 33% of its £264n budget with small firms will be achieved without creating disruptive change. Small firms remain disadvantaged by accessing too little of public sector spending and by being concentrated in lower value sub-contractor positions. Millstream Associates (2018) estimate the SME community is likely to have missed out on £33.5 billion worth of government contracts in the ten years to 2022.
So, wouldn’t a more meaningful target see small firms winning more primary contracts that are within their grasp?
Current UK government SME enablement activities (e.g. SME panel, Meet the Buyer, Digital Marketplace) are some moves to simplify and demystify tendering processes but they focus on improving macro-conditions, and as ‘barrier removers’ are not equipped to serve the requirement to build firm-level characteristics of high productivity tendering performance.
Where lies the answer?
Public anchor institutions absolutely need to increase sensitivity towards engaging small firms in their supply chain, but I suspect the real sea-change will be small firms grasping the nettle, building their tendering capability, and kicking ass with their innovation.