The Prime Minister was last month joined by Cabinet Office minister Francis Maude at an SME summit at the Treasury to announce a range of measures aimed at boosting the involvement of SMEs in public sector contracts.
Many of the proposals, which include implementing a new streamlined procurement process and the launch of a Contract Finder website, are welcome and will be positively received by businesses.
But the Cabinet Office minister and his colleagues should not move away from the use of framework agreements, as he said he wanted to (CN 17 Feb, p5), as this risks lowering service quality without improving opportunities for small companies to grow.
Of course, establishing a diverse provider base for public sector contracts is necessary to achieve the biggest bang for the taxpayer’s buck. In a competitive market, companies are challenged to provide good quality, value-for-money services in order to gain commercial advantage. But firms bidding to become a prime contractor on construction projects must be able to take on the required risk.
SMEs are already involved in delivering large public sector contracts through the supply chain. Prime contractors have built strong partnership relationships with their subcontractors, who are typically responsible for carrying out the vast majority of the construction work.
Large firms in the sector work with tens of thousands of subcontractors, many of which are small, specialised companies. SMEs benefit from a pipeline of work without having to take on a prohibitive level of risk. Prime contractors rely on the expertise of smaller companies that have specialist skills or local expertise. This collaborative approach has been supported through the establishment of national and regional frameworks.
It is right SMEs are given opportunities to work directly with contracting authorities, competing on a level playing field with other providers. But most small companies are unable to take on the risk required of a prime contractor on a large construction project.
Frameworks do not mean an end to competition. Firms still have to work hard to qualify for them, and those that perform badly can expect to be removed from the arrangements. They facilitate the involvement of smaller firms through the supply chain and save money for both government and contractors by avoiding lengthy procurement processes.
The Cabinet Office’s determination to take out cost and improve procurement is welcome. It must now make sure it does not try to fix something that is not broken.
Susan Anderson is director of public services and skills at the CBI