All local authorities and housing associations should set targets to increase their spend with small businesses, according to the Federation of Master Builders (FMB).
This follows the announcement from Matt Hancock, the Minister for the Cabinet Office, of an ambitious new target to get more small businesses working on central government contracts. A statement from the Minister revealed that in 2013 to 2014, central government spent an unprecedented £11.4 billion with small and medium-sized businesses – ie: those employing 250 employees or less. This is equivalent to 26% of central government spend, however, by 2020, the government wants to increase this to a third.
This would mean an extra £3 billion per year (in 2013 to 2014 terms) going to small and medium-sized firms directly or through the supply chain.
Sarah McMonagle, Head of External Affairs at the FMB, said: “The Government’s announcement that every £1 in £3 is spent with small businesses is welcome but only applies to central government contracts. We want to see an increase in spend with small and micro firms across the board and by every public sector body. In many parts of the country, it is still the case that small firms are all too often squeezed out by larger competitors when bidding for public sector work.”
Sarah continued: ““There are lots of good reasons why the wider public sector should spend as much as possible with small firms. In particular, using construction SMEs has been proven to provide real local economic and environmental benefits. SMEs employ local people, meaning that the money spent is likely to go to local suppliers and remain within the local economy. Furthermore, in the construction sector, two thirds of apprentices are trained by micro firms, meaning that spending more with these businesses could help towards the Government’s target of creating three million new apprenticeships by 2020. An even more ambitious target could go further towards the governments stated aim of 3 million apprenticeships by 2020.”
She concluded: “Some local authorities and housing association are better at engaging with SMEs that others but we’re urging all public sector clients to set a target for increasing the proportion they spend with SMEs. Some may already be spending £1 in every £3 but then they should be working towards spending £2 in every £3. One way the wider public sector can boost engagement in public procurement by small firms is to ensure they are implementing the EU Public Procurement Directive which was brought in earlier this year. The Directive states that public sector clients must break down their contracts into small lots and this makes public contracts much more appealing to small businesses – especially in construction where forming part of the supply chain can be particularly problematic due to late payment.”