Government spending with SME's - a difficult nut to crack


Their target was for SME’s to receive 33% of government spending by 2020, equivalent to £1 of every £3 that Whitehall spends on goods and services, delivering £3b worth of new business to SME’s every year.

According to the National Audit Office, the government has tried to harness the potential benefits of involving SMEs in the public-sector marketplace for many years, to take advantage of the many benefits that SME’s offer, including flexibility and their innovative approach. 

In 2014-15 the government declared it had increased its annual spend with SME’s by 27%, surpassing its target of 25%.  However, according to the National Audit Office, this increase coincided with work undertaken by the Cabinet Office’s Crown Commercial Service’s (CSS) to improve its data, suggesting that the increase may have been due to the work done by the CSS rather than an actual increase in SME activity.

According to an article on Public Spend Forum a recent report by the Federation of Small Businesses (FSB) found that despite government attempts to increase spending with small businesses, very little of the £200 billion a year spent on third-party goods and services goes through small firms. Only 23% of small and medium-size businesses (SMEs) worked with the public sector in 2016. 2% lower than reported in 2014, and the number of SMEs, which expressed an interest in competing for a public-sector contract in the last year, has also fallen by 4%.

FSB has undertaken research into why more small businesses aren’t looking to enter into Government contracts and supply directly to the public sector. Concerns include a lack of awareness of the opportunities available, difficulties in being accepted onto Government frameworks, a lack of feedback on unsuccessful tenders and multiple problems with accreditations and accreditations agencies.

The report’s findings have resulted in the following recommendations which the FSB asks the Government and public sector as a whole to implement urgently:

  • Local authorities to publish all contracts over £10,000 on Contracts Finder
  • Give the Mystery Shopper Service (MSS) powers to enforce its findings, and to more effectively name and shame poor performers.
  • The Government must publish a thorough Action Plan detailing how it will better enforce the law requiring detailed feedback from local authorities to unsuccessful tenderers.
  • Local authorities should recognise comparable accreditations to reduce existing barriers of entry to small firms seeking public procurement contracts.
  • Replace framework agreements with Dynamic Purchasing Systems (DPS), where possible, so small businesses are not locked out from lists of potential suppliers to local authorities.

FSB believes if these recommendations are implemented, some of the most serious barriers inhibiting small businesses from supplying to Government would be removed, which in turn would advance economic benefits along with improvements to public service delivery.


Information for this blog has been taken from:

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