SMEs 'too risky' for public sector

Small- and medium-sized contractors (SMEs) are being frozen out of £2bn in government contracts, according to a report by the Better Regulation Taskforce (BRT).

The 52-page document shows that during procurement many smaller contractors are seen as: "too risky" to use; are ruled out of tender lists because of a lack of experience; and are not given briefings after losing a bid to show how they can improve.

The report claims that many SMEs do not even get past the expression of interest stage.

One SME told researchers that it lost out on a government contract for being too small and for having limited management capacity. Another added that it was "impossible" to get feedback on a failed tender.

Findings from the report have now spurred the Office of Fair Trading (OFT) to investigate the employment of SMEs by government departments. Results are due back by the end of the year.

Included in the investigation will be the use of long-term frameworks.

The BRT report makes the following recommendations:

n Better promotion of the Government Procurement Card by the Office of Government Commerce (OGC), the Office of the Deputy Prime Minister and the Local Government Association to ensure prompt payment to SMEs.

n A common pre-qualification document for lower-value contracts to be developed for the public sector.

n Prime contractors should demonstrate, during the procurement process, that they achieve value for money through effective use of their supply chain.

n Government departments must ensure that larger contractors pay their supply chain promptly.

n Departments should also be required to include procurement policy statements on how they engage with their supply chain in their annual reports by the end of this year.

n Departments and local authorities should list details of prime contractors and contracts on their websites.

Specialist Engineering Contractors Group chief executive Rudi Klein said: "There is little point adhering to best practice when dealing with first-line contractors while SMEs, which are at the point of delivery, are treated appallingly."

"The OFT's inquiry is promising news," said Federation of Master Builders director general Ian Davis.

Barry Stephens, chief executive of the National Federation of Builders, said: "One of our biggest concerns that we'd like to see addressed is the inconsistency that exists between government departments when it comes to procurement practice."