4th March, 2015

FINALLY it is being recognised that the current model of contracting which favours huge corporations like G4S and Serco may be a bit lacking!

I turned to the radio and shouted an emphatic "Hallelulah" the other week!  A Conservative MP was talking about the problems for small organisations and businesses becoming involved in large contract delivery and how this was not an ideal situation.  You can see a quote from the piece at the end of this article.*  At the same time, the government announced that it has reached it's target of 25% of all procurement on government contracts being from small and medium sized enterprises (this would include the voluntary sector though the figure for delivery from our sector is probably very small indeed).  

In any event, the figures are as follows:

  • 2010/2011 - 6.5% of procurement was flowing directly to SME's
  • 2011/12 -   Direct 13.7% and indirect 0.8% according to the Cabinet Office publication "Making Government Business more accessible to SMEs - One Year On".  These figures seem to be projections based on the year to date, however they don't square at all with the figures for 2012/13 and 2013/14 where we see a huge leap in the indirect spend.  
  • 2012/13 - Direct spend 10.5%.  Indirect spend 9.4%.  Total 19.9%.  
  • 2013/14 - Direct spend 10.3%.  Indirect spend 15.8%. Total 26.1%.

I am not at all sure what to make of these figures.  There seems to be a trend towards a lowering of the amount spent directly with SME and a huge jump followed by a plateau-ing of the amount spent with SMEs via larger contractors.  It's tempting to be cynical about the figures (and that could be the topic of a whole other blog post!) but if we take them as they stand it's clear that SMEs are punching well below their weight in the sphere of government procurement - SMEs make up 99% of the businesses in the UK and nearly 50% of the UK economy by value.

In 2011 the government took a number of measures to make it easier for SMEs to bid - namely they appointed a Crown Representative to provide a voice for smaller businesses at the top table, they created an easier Contracts Finder system and they abolished Pre Qualification Questionnaires on any contract less than £100,000.  It seems that the amount of business being done with smaller businesses has increased, but the large suppliers are still at huge advantage.

Ironically it is the economies of scale and the margin that they put on work that enables the huge contract firms to be excellent at putting in bids.  But it is also the scale of these organisations that makes them less able to deliver on the ground and ultimately leaves less money in the pot for delivery.  So they win the contracts and then the delivery is (in some cases) not nearly as good as it would be with a local firm or voluntary organisation but the local firm or voluntary organisation wasn't able to put in a bid because they are too busy working on delivery of other jobs and they don't have the time to develop the knowledge required to bid!!!!

Putting in complex bids for work is risky - it takes time and it may result in nothing.  Large organisations are ready and willing to spread their risk, but small organisations can't afford to.

Are there any answers to this dilemma?  Well, the government's commitment to 25% of contracts being delivered by SMEs seems to have helped judging by their own figures ..... and there is a requirement from us all to insure that large contract bidders are including the smaller SMEs and the voluntary sector; and the government is also working to make it's Contracts Finder website easier to use.  It's unlikely however that many not for profits or small SMEs will be bidding for big contracts on their own and this puts the onus back on us as a voluntary sector support agency and on our members to collaborate both with each other and with the commercial sector to put in bids.  As a starting point for this perhaps we have to start networking better with potential partners (voluntary, statutory and commercial).

What do you think?  Should the voluntary sector be taking part in delivery of big government contracts at all?  Do you have personal experience of the bid and tender process?   Are you working to make links with the commercial bodies bidding for contracts?  I'd love to know where you stand on all this.

This article was written by Fiona Cooper, Communications Manager at Nova

You can leave a comment below.

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 *The quote that made me shout at the radio:

"One of the problems that we've had in recent years is there have grown up enormous service provider companies such as G4S, Serco and various others who have become good at bidding for contracts which is a separate skill from implementing them and delivering the work and hiring the people you need to perform the contract should you win it. 

So I'm afraid that too often the government is seduced by the rhetoric of big companies with big balance sheets who can afford to take a loss, certainly for a year or two on the contract, saying: "You don't worry about that, we've got the people to put on this contract" and then things don't always work out as smoothly as they should and the savings don't always materialise.

So, I don't think it is the case that we should always be going for the big contractors on the assumption that that will save money.  Very often the local knowledge that local suppliers offer is much more valuable and much more value for money in many cases."

Quote Richard Bacon MP (Cons) on File on 4 on the 20th Feb 2015 - at 35 minutes in. 

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