Why SMEs are missing out on public sector work

It doesn’t matter who you talk to, businesses across all sectors are rarely fond of the public sector procurement process, and construction is no exception.

Tendering for public sector construction work is often unnecessarily bureaucratic, and as soon as you’ve mastered one method, you can bet it won’t be long before you’re learning a new one. This is news to nobody, but there is a much more serious issue, which is the negative attitude of the building industry’s SMEs towards bidding for public sector work - negative largely because of the procurement process.

I sit on the Association for Consultancy and Engineering (ACE) SME forum and was at a recent meeting when the subject was raised.

Approximately 80% of the companies represented there admitted that they simply didn’t bid for public sector work because they felt they were so unlikely to win it. People working for larger organisations might find this hard to believe, particularly as the government has pledged on various occasions to promote small businesses through its spend on procured goods and services. Its target was that 25% of all government contracts should be awarded to SMEs. However I suspect this figure is far from being achieved.

The question we have to ask then is, why?

I have no doubt that the government wants to give SMEs more work. After all, SMEs are hugely beneficial to the economy and to government opinion polls. But the primary reason SMEs often don’t win public sector contracts is because it is local authorities, local NHS trusts, etc, that are the procurers, not the central government and there has been a move to favour multidisciplinary bids that deal with every facet of the project, believing this creates efficiencies. In fact, they end up missing out on the essential skills specialist suppliers provide. This is not only detrimental to their project, but to the construction industry as a whole.

Every time local authorities neglect to even consider appointing a specialist they are increasing the chances of another SME going out of business

Skills shortages are becoming more and more of an issue. This summer an Elemense/One Poll survey revealed that a whopping 57% of those in the technical and engineering sectors believed their sector was suffering from a skills shortage - more than in any other area of industry.

Local authorities, without realising it, are exacerbating this problem. Every time they neglect to even consider appointing a specialist they are increasing the chances of another SME going out of business. With this goes the specialist skills and training that only a specific engineer, stonemason or technician can possess. This is negatively affecting projects now, and once the market recovers the situation will be worse, with the loss of a generation of skilled trades people.

The central government needs to find a way to ensure that local governments allocate work to SMEs. The problem is not that local governments do not have highly skilled people, they do; there are just not enough of them to go around. What is needed is a national strategy to develop the next generation of in-house expertise in procurement, project management and technical areas to ensure public sector projects are procured and managed efficiently by highly-skilled public servants; ensuring SMEs are not excluded by teams with insufficient in-house expertise.

At a recent discussion with a number of NHS estates managers I was shocked that not one of them had a coherent succession plan, not one had an apprentice (despite the government’s stated desire to increase the number of 16-19 year olds in apprenticeships), and not one was engaging with their local community to enthuse the next generation of school leavers to choose a career in construction, or was even aware of the Engineering Development Trust (EDT), a charity we as engineers engage with to develop engineering skills in 16 to 18-year-old A-level students.

I know there is no money available from the government, but it doesn’t need to cost significant amounts. There are about 530 NHS trusts in the UK. If each one supported one of the EDT’s programmes in their local community at a cost of £2,000 per trust, we would enthuse more than 2,100 budding Brunels a year. Multiply that by every local authority and every other organisation that spends government money and bring in every private sector company in our industry, then the number of young people we can enthuse about construction runs into the tens of thousands per year. This could perhaps set in train a process that brings enough skills back into our industry (both in the public and private sectors) to allow us to really innovate to save costs - rather than just pushing for everyone to do more for less money.

In the short term, we have joined forces with a group of different SMEs especially to bid for public sector work and have secured two healthcare frameworks in six months. Each company brings its specialist skills to the consortium so we’re able to deliver all aspects of a project under one umbrella, which is attractive to local authorities. The group was specially created to compete with larger companies when bidding for public sector work and exists as a separate legal entity.

SMEs and their specialist skills are the lifeblood of an industry that is of huge importance to the UK economy. It is imperative that both the government and smaller companies themselves devise ways to ensure they win work and remain healthy.

Steve Hale is director at Crofton Design