SMEs: Tangled up in tape

Once upon a time, national contractors used to avoid projects below the £200m level. They were fiddly, and if the client was inexperienced, the hassle might be more than the job was worth. In any case, that wasn’t what they were about. The smaller jobs belonged to regional firms that were familiar with power brokers in the council and chamber of commerce and might well play the odd round of golf with the local businessmen and bank managers. Some contractors, such as Kier and Morgan Sindall, had strong regional roots, but that picture was reasonably accurate.

It isn’t any more. These days the nationals have moved en masse into the regionals’ markets, and changes in the way public projects are procured means they’re doing well. A National Federation of Builders (NFB) survey into public procurement shows this clearly. The data was collected from interviews with 673 firms, 609 of which have a turnover of less than £10m. Of the 609, almost half said there had been a change in their sucess rate in winning public work over the past year – of them 79% said it was worse.

When asked what the biggest difficulty, companies with a turnover under £10m faced when bidding for public projects, most said prequalification questionnaires, followed by being unaware of tendering opportunities. Only 4% said they faced no difficulties. Here, two small businessmen explain the problems they face, and what can be done about them.

Out of reach

John Maddock, the managing director of Lockwood Construction in Merseyside, on paperwork and bundling
There have been a lot of changes in the way councils go about procuring work. A lot of frameworks have been introduced, and complicated tendering processes. We can’t compete for a £30m package, but we could compete for a £5m project.

Building Schools for the Future is a good example. If the six separate schools projects in Liverpool had been tendered separately, we may have been in with a chance of winning one. But by rolling them all together, there is not a company in Merseyside that could win that job now and it will mean whoever wins it will be from outside the area.

The other main problem is the new public sector procurement requirements. You’re required to compete on the basis of resource, accreditations and your marketing ability. SME builders are not large enough to employ people specifically for this purpose and are therefore disadvantaged. The number and length of prequalification questionnaires (PQQs) is a drain on resources and it’s difficult to see how it leads to finding the best builder. Every client appears to have their own version of what is essentially the same thing.There appears to be no self-learning process, whereby if you have delivered consistently for a client that you pre-qualify for the next tender list.

I feel like there is some political understanding about how important the role of regional contractors is, but it doesn’t seem to be filtering through locally. At the moment, it really is public sector work that is keeping us alive. It is well known the crucial role that local SMEs have in supporting the local economy and local jobs. It is perverse that the policies of local government are working against us. I understand that clients want the best price, but it seems now that partnering goes out the window if someone smells the blood of a good deal.

Fighting back

Mark Whitaker, commercial director of ER Hemmings, on forming alliances
We are the lead contractor in Builders Consortium South West, a group of four SMEs that has won a place on a £500m regional framework, called Construction Framework South West, which is run by a consortium of 18 councils. It is intended to be used to procure contractors for works on schools, social housing, libraries and other council buildings and was described as being one of the most toughly contested frameworks of 2009.

The biggest benefit of frameworks is that they allow early contractor involvement and we think that in terms of hitting targets on delivery and budget they are a wonderful idea. I’m well aware that it has been argued that these frameworks and the procurement processes that come with them shut out SMEs, but what we have done proves that doesn’t have to be the case. We are on a framework with companies as big as Wates and there is no reason other SMEs can’t do the same.

BCSW is made up of us in Bristol, Pearce Construction in Barnstaple, RJ Leighfield in Swindon and C S Williams in Taunton. We were required to have a joint turnover in excess of £130m. What we offer is local knowledge and expertise in regions all over the South-west, which should be attractive to any client. And I do think clients will be increasingly open-minded to this sort of arrangement in the future.

The NFB is using our success as an example and to put together a guide for how other SMEs can do the same and I believe there are more consortiums being formed in the Midlands and the South-east. I think this will change things. There was a glass ceiling and I think we’ve taken it away and this sort of thing can be rolled out. It eliminates a lot of other problems like the PQQ – we simply divided it into four and did a quarter each which was manageable. The key to success is being like-minded. You have to act as one unit.”