The government’s initiative to help SMEs secure public sector contracts is widely welcomed, however if government is to reach its target of awarding 25 per cent of central government business to SMEs by 2015, both SMEs and Government will need to do more.
In fact, a recent study has revealed that despite government’s efforts the tendering system in the UK takes 53 days longer than the EU average, making the UK the third slowest country, behind Greece and Ireland, in awarding contracts to SMEs.
SMEs have traditionally found it tough to compete for government contracts with many smaller suppliers still struggling to reap the benefits, citing red tape and the perception of being unable to compete against the major suppliers, who dominate the sector as major inhibitors. As a result small businesses remain sceptical about securing a share of government tenders.
Therefore, Government needs to examine its procurement policies and ensure that when SMEs tender for work they have a fair chance of winning the contracts.
In addition, government should encourage main contractors to extensively use SMEs as tier 1 and tier 2 subcontractors, and not just for scraps of business that they cannot fulfil themselves.
SMEs can win a larger slice of public sector budgets by forming strategic, mutually beneficial relationships with major contractors, acting as tier 1 or tier 2 sub-contractors to prime supplier or a vendor neutral managed service provider (VNMSP).
For the primary contractor there are numerous economic and environmental benefits to be gained from using small, local businesses, while for the SMEs working with principal contractors helps to open up the supply chain.
SMEs need to realise that they already have a way of being part of government contracts. They can start by becoming a strategic partner to larger organisations, providing the specialist skills they lack.
Working with a larger organisation will offer SMEs the benefit of greater access to future opportunities and financial growth. Also, the SME will benefit from gaining an understanding as to how the tender process works, so they can eventually tender for contracts themselves in the future.
SMEs can benefit significantly from being a sub-contractor to the prime supplier including:
Tender costs – Many government tenders are extremely large and therefore call on a lot of manpower and time to build and respond to. Main contractors will handle this on behalf of suppliers, meaning that SMEs save a lot of money on time and resource
Less time spent on sales – Orders will come direct from the contractor so a supplier won’t have to deal with the ongoing associated costs of selling or marketing to clients
Access to greater opportunities – Large contractors are likely to have contacts in some of the country’s largest companies and organisations. By joining their supplier network, an SME will be able to reach organisations that they may otherwise have been unable to
Fair and transparent working – Suppliers start on a level playing field with others, regardless of their size
Rewards for the best suppliers – Main contractors often reward the best suppliers they work with. Being a good supplier is likely to mean that more government contracts will come your way in the future
Simple processes – Due to their size, the main contractor will be used to dealing with large tenders. Therefore they can manage the process to make each stage simple for any supplier
Government continues to strive to help SMEs win more government contracts, for this initiative to be truly successful smaller suppliers need to realise and take advantage of other ways to go about getting a slice of the contracts on offer.
Top tips on how to do this include:
Understand your market place – The prime contractor has generally taken care of the sales process to the client and is looking at you for your delivery capabilities. Make sure the staff and resources you deploy are 100% focused on delivery and avoid deploying direct sales staff, as they will have a disproportionate expectation of margin return and delivery may suffer.
Demonstrate your strengths – SMEs tend to offer a more bespoke, localised service and be more flexible in their approach.
Demonstrate your ability to offer added value – the customer and main contractor, (where relevant) will appreciate and recognise this.
Ask for feedback – Always ask for feedback, and seek advice from other successful SMEs and how they worked with contractors.
Jon Milton is business development director of Comensura
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