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  1. Government Computing
April 24, 2023

Complex procurement frameworks stop SMEs bidding for government contracts

More engagement with businesses and greater appetite for risk are also required from Whitehall, new research says.

By Sophia Waterfield

A lack of meaningful industry engagement and overly complex procurement frameworks are stopping SMEs accessing potentially lucrative government tech contracts, new research says. The report from tech trade association techUK also found that the risk-averse culture within the civil service is a barrier for businesses.

SMEs are struggling to make traction in the public sector marketplace, says techUK. (Photo by Daniel Gale/Shutterstock).

techUK’s GovTech SME Survey, published today, analysed the opinions of 100 SME members on a range of topics. They covered how effectively SMEs feel about whether the government has acted on its commitment to help small businesses break into the public sector as well as how they feel about addressing social value.

Over half of the respondents (59%) believe that the government’s Digital Marketplace – suppliers provide services across G-Cloud, Digital Outcomes and Specialists and Crown Hosting Data Centres – is helping to improve SME access to public sector opportunities. But over 90% say that the government does not have a “sufficient understanding” of how SMEs can meet the needs of the central government and the civil service.

Less than a third of respondents felt that the government had acted effectively on its commitment to help small businesses break into the public sector over the last five years. techUK says that this figure has decreased since its survey last year from 40%.

“SMEs are vital to the UK economy, and in the tech sector they are a great source of innovation and ingenuity that the government should support and tap into,” Heather Cover-Kus, head of central government at techUK. “The GovTech Survey shows that there is still work to be done to capitalise on the benefits that working with SMEs can bring.”

The survey was released on the same day as Prime Minister Rishi Sunak pledged to help SMEs better access government contracts. Whitehall procures goods and services worth more than £300bn a year, and Sunak told business leaders at his Business Connect event this morning that his government was striving to ensure this money reaches companies large and small around the countries.

UK government favours big supplies over GovTech SMEs

But Rob Anderson, research director of public sector, at Global Data, told Tech Monitor that while there are some encouraging steps being taken, there is still a long way to go.

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“The Government seems to have lost focus on the direct SME agenda, though many departments are actively encouraging the systems integrators to include SMEs in their supply chains, which is somewhat encouraging,” Anderson says.

techUK’s survey showed that 65% of respondents believe civil service risk aversion is a barrier to accessing the public sector market.

“[The civil service’s] risk aversion tends to be heightened in times of fiscal constant,” Anderson says. “This is reflected in a swing back towards larger suppliers winning more contracts again.” In the financial year of 2021 to 2022, the top 10 government suppliers mainly included Big Tech such as Capgemini, ATOS, Fujitsu, IBM and Capita.

Anderson said that the House of Lords Procurement Bill, which is currently at the report stage in the House of Commons, could make it more simple for GovTech SMEs to bid: "The Procurement Bill is supposedly going to make it easier for SMEs by having a standard set of company information that can be reused for different frameworks and tenders, but we’ll have to see how that pans out," he explains.

However, he adds that there is a lot of "discontent" from SMEs because the Crown Commercial Service has moved away from digital portals such as Digital Marketplace to older procurement platforms such as Bravo. "[It makes it] more difficult to see upcoming opportunities," Anderson says.

Government must do more to engage SMEs - techUK

techUK says that signs of improvement are still "marginal and slow" and has made five recommendations to the UK government on what it should do next.

It says that engaging SMEs in more early pre-procurement market engagement as well as providing more support around social value would help lift them up against larger competitors. In 2021, new procurement measures were put in place that required social value contributions to account for at least 10% of the overall assessment score when selecting a supplier.

"While suppliers are broadly supportive of social value objectives, the implementation of the policy has proven challenging for SMEs in particular as they often do not have the excess capacity or financial resources that larger companies use to address social value questions," techUK states. As part of the survey, 76% of SMEs said that social value in contracts is an "administrative burden."

techUK has also recommended that the government applies fewer frameworks and appoint a ministerial SME champion who can understand the way SMEs operate and their needs. It also said that the government needs to identify opportunities for collaborative bids and partnerships to support SMEs.

Respondents to the survey said they wanted more support when it came to partnerships, with 75% stating they needed a 'direct route' to the market. Over three-quarters (84%) said that also still saw the value of partnering and collaborating with larger suppliers as another route to market.

"Putting SMEs at a disadvantage when it comes to getting onto frameworks and applying social value means the government is missing out on innovation and the full capabilities of the market," it said.

Read more: Defra could bring crypto mining to UK landfill sites

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