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Make it local

Local procurement has always been an issue for small and medium sized businesses. Although they officer great value to the local community, often providing value for money products, they continue to face huge barriers to getting public sector contracts – winning only 16 per cent, says John Walker

The new government heralds many changes for the UK both in terms of reducing the huge public deficit as well as creating a more environmentally stable economy as we move forward in the low carbon agenda. The recent announcement that the government plans to overhaul the NHS, which will see management bodies scrapped and financial control handed to GPs, could act as a boost for small, local firms as decisions on suppliers and contractors may be made locally rather than from a central office.

Currently, there are some good initiatives to allow small firms to see what contracts are available, for example an online search portal which lists all opportunities above £20,000 as well as courses and regional workshops to explain how to effectively bid for contracts. The government, in a bid for transparency, has also urged all local councils to promote all items of spend over £500 – including invitations to tender. This is a great way to inform local businesses about the contracts currently available.

The FSB is hopeful that the government will still adopt the twelve principles which came from the Glover Review, initiated by the previous administration. It is estimated that the total public sector procurement budget is worth £175 billion but less than 20 per cent of this goes to SMEs as already mentioned.

The principles of the Glover review indicate that small businesses do not really get a fair deal when it comes to being able to supply the public sector. Many decisions on who will win a contract are taken in a central office and in some cases this may mean that a business could be supplying a product or service from one side of the country to the other. Through adopting all of the principles outlined in the review, small firms will have a much simpler process to go through, such as a standardised pre-qualification questionnaire which will help to overcome some of the hurdles small firms face when bidding for work.

The FSB is an advocate of keeping trade local and for public sector organisations it makes sense to ensure that contracts are awarded locally. Small firms can deliver innovative and reliable locally-based services that generate significant income for the local economy and provide value for money. Research shows that up to 70 pence in every pound goes back into the local economy, making economic, business and environmental sense.

Throughout the recession, small businesses have had a tough time. Their profit margins have been squeezed as consumers cut back. To get the UK squarely on the road to recovery, supporting local businesses will be the key – from the food you supply in the canteen to the company that supplies the linen. Some things will be a little more difficult to source locally such as medical equipment but where possible alternatives can be found.

The recent trend towards locally sourced products led the supermarket chain ASDA to change the way it approaches its supply contracts. For the last eight years, it has included products from local producers, often small businesses and local farms, on its shelves and has helped more than 500 small firms get more than 6,000 products into ASDA stores all over the country.

To make this small business friendly, they use local sourcing hubs in several locations across the UK. This means that small firms have access to a wider audience and, more importantly, the hubs act as an intermediary between the small firm and the supermarket, cutting down on all the paperwork the supplier has to deal with.

This is a crucial point to remember when dealing with small firms. Often, they might have one person who deals with all the paperwork but, more commonly, the business will be a sole proprietor. Of the 4.8 million small businesses in the UK, over three million of them are sole traders and this is why many businesses believe that it is difficult to get any form of public sector contract.

Sourcing locally for any product or service shows a commitment to sustainable working practices. Holding open days for local firms to brief them on what opportunities are coming up would give them a chance to discuss the criteria and, if necessary, form a consortium with another business to ensure it can deliver and give them the best chance of winning a contract.

Small businesses often feel they are at a disadvantage against bigger businesses which have teams of experienced bid writers that pitch for tenders. Often, the experience is available on the doorstep yet a firm that’s based sometimes hundreds of miles away wins the pitch. To be truly sustainable, policies should be put in place which first of all limits the search radius for a firm to do the job. If no business can be found within that area, then it is widened. This will cut down on the number of miles people will have to travel as well as putting cash right back in the local economy.

The NHS and local authorities could act in a more sustainable way by sourcing more products and services from local, small to medium sized companies and in the process, help their local economies. This must involve being proactive in telling local companies about what contracts are available and how best to go about applying for it with constructive feedback on why they haven’t won. Small businesses will be the driver of economic recovery and everyone can do their bit to help their local area grow and prosper.

John Walker is policy chairman, Federation of Small Businesses

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