Public Contracts for Smaller SME Businesses are clearly needed

On Thursday the MP for Crawley, Henry Smith asked a vital question about businesses and although it related to a very specific case which he then referred to in his subsequent question, it is clear to those of us who work within the broad range of SME companies that we need all of our MPs to ask such questions on a regular basis until things have dramatically improved in our nation as a whole for our trade arrangements. The rest of Henry’s question was in regard to a PPE business in Crawley, but before he referred to that he got this Cabinet Office response from Amanda Milling who is the Minister without Portfolio.

We are ensuring that SMEs are awarded public procurement contracts. Last year, we spent £14.2 billion with SMEs, nearly £2 billion more than the previous year. We have gone further to help to ease the procurement process by introducing a range of measures to tackle the barriers faced by SMEs, such as simplifying pre-qualification questionnaires. We now have the opportunity to make procurement even simpler for SMEs following the end of the transition period.

It is certainly clear that the EU rules which demanded that companies from all over the EU territory could be allowed to apply for any tenders above a certain size did lead to aspects that may well have made matters harder in some cases. However it is clear that such issues are not the only barriers and indeed it was our Government that helped set out these terms in the first instance.

Clearly along with the need for SME’s to be given the opportunity to apply for public procurement contracts, there is also a vital need for an understanding of the difference between the very large SME businesses that do seem to get some opportunities for Government contracts and smaller SME businesses that rarely get considered or allowed to respond. The smaller parts of the SME sector which includes sole traders and companies that employ far less than 50 people are also in many cases capable of a more reactive approach because of their size. When they are able to increase their business through new contracts, the number of people they can take on or work with is often much more significant than when one of the larger medium sized businesses gets an additional contract. Unfortunately even when the Government engages with SME businesses they tend to focus on those with turnovers of close to the £50M upper tier and that employ close to 250 people because there are much fewer companies of that size and they are big enough to be able to treat the Government as if it matters more than some of their other potential customers. The challenge is that in Sussex and Kent as in many other locations, there are very few large Medium businesses for the Government to engage with.

A classic case is in the building industry when it comes to the reconstruction of Schools. So the Government’s Education Funding Agency which is responsible for the Priority School Building Programme (2) selects Companies that are big enough for them to engage with in a modest way. As shown below the Government has set out six regions across our nation and overall they have allowed 15 companies to be included to formally take on the contracts. Of these only one, called Conlon Construction is an SME company and it is only working in the North West region. The rest are all large companies although Eric Wright Construction is only just over the SME size and again it only works in the North West region. So 87% – 93% of the companies on the PSBP2 scheme are not SMEs or close to it and the only actual SME is at the top 80% of the Medium size Business sector. The company I am part of was keen to work on some of the PSBP Schools in our local area and indeed we have finally been successful in one case. However that only came because the School insisted we were allowed to do so. We also applied to work with another School, but there are a total of 9 in Sussex, 13 in Kent and 16 in Surrey. We are a Small Business that grew from being a Micro Business a few years ago because we increased the number of workers which is supposedly what the Government is keen to achieve. The challenge for us to get any work in the PSB2 schemes is that the main contractors for these jobs that are on the list below and those working in our area that we could find out about are all very large and some were not easy for us to get in touch with. They also did not make it possible for us to have a meaningful attempt to win some of the sub contracts even though we are a local SME business. However the even more concerning issue is that in several cases in our area, the main building contractor then passed the building work which is what the contract is meant to deliver over to local SME building companies. Even though we happen to have good relationship with some of these, they are not able to hand over elements to us, because of the way in which the subcontracting works. The main building contractor remains in control and so they make profit for the work they pass on to other building companies and they decide which other businesses get the other parts of the work that is part of the main contract. One of the local building jobs involves a Small Business and another involves a Medium Size Business although it is about half the size of Conlon Construction and the only local business on the Government list (Rydon) did not appear to have been responsible for any of the local contracts. The local smaller sized Medium Business was presumably not considered big enough to get onto the EFA PSBP2 programme, even though in the end they and a local Small Business ended up doing the work, but only once some of the profits and other contract elements had been passed out of the local area.

The UK Government’s Education Funding Agency (EFA) is responsible for the Priority School Building Programme 2. The PSBP is based on the following six regions some of which have companies that are only listed for one region which is referred to. The rest of the companies are listed in two or more regions.  The financial figures are the latest turnover figures published at Companies House.

All 6 Regions

  • BAM Construction – £892m
  • Kier – £4.1bn

5 Regions

  • Bowmer & Kirkland – £938m

4 Regions

  • Wates Construction Ltd – £1.5bn
  • ISG Construction – £538m

3 Regions

  • Interserve Construction – £894m
  • Galliford Try Construction – £2.7bn
  • Bouygues UK – £452m

2 Regions

  • Skansa – £1.9bn
  • Willmot Dixon – £1.1bn

Individual regional companies:

REGION 1 – North East

REGION 2 – East of England

  • G F Tomlinson – £142m

REGION 3 – London and South East

  • Rydon Construction – £120m

REGION 4 South West

REGION 5 – West Midlands

  • Seddon Construction – £130m

REGION 6 – North West

  • Conlon Construction – £41m
  • Eric Wright Construction – £75m

About ianchisnall

I am passionate about the need for public policies to be made accessible to everyone, especially those who want to improve the wellbeing of their communities. I am particularly interested in issues related to crime and policing as well as health services and strategic planning.
This entry was posted in Economics, Education, Environment, EU Referendum, Parliament and Democracy and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s