SMEs - vital to UK infrastructure delivery and to driving economic growth

Nelson Ogunshakin

A simple and consistent approach across public sector procurement is critical to ensuring SMEs are at the heart of the UK's infrastructure renaissance, says ACE chief executive Nelson Ogunshakin.

Yesterday I attended the networking event for ACE’s small and medium enterprises [SMEs] held at the London offices of our affiliate partner BLM. Our SME membership is the lifeblood of our organisation and as the UK economy grows small businesses will play an increasingly important part.  The ability for our SME members to compete within the market will become essential as future growth will be tied to their success, and I was very interested to listen to the issues concerning them.

The recent shift in government policy has recognised that in order to create an even playing field the regulations affecting public sector procurement need to be opened up to fair competition in the open market.  ACE believes that in collaboration with our SME members our collective voice can influence the changes that will allow smaller businesses to trade more openly and effectively.

ACE has been a strong advocate for a fair and equitable procurement process that gives SMEs an equal platform to win government contracts.  In the past, the campaign has fallen on deaf ears. However, ACE welcomes the new thinking within the Government in their latest version of HM Treasury's ‘Managing Public Money’ indicating a move to provide SMEs with a platform to secure more public sector work as part of the UK growth strategy. 

UK public sector spending in 2012/2013 totalled £230bn on procurement of goods and services - including capital assets such as social and economic infrastructure – which accounted for 34% of managed expenditure. Of this, approximately £38bn is allocated to capital and the rest to current procurement.  £40bn is managed by central government and £84bn by local government, £50bn is spent by the NHS, and £13bn by devolved administrations.

Evidence from the procurement strategy adopted by the ODA for the London 2012 Olympic Games confirms that an equitable and effective procurement process can be successfully implemented to provide a good platform for SMEs to secure contracts without being in breach of the free market European Union public procurement policy.

I fundamentally believe that there is a strong rationale for change.  The Cabinet Office is leading a programme to make central government a more intelligent customer when engaging with the private sector. As indicated by the Chief Commercial Secretary, Lord Paul Deighton at the ACE Conference in May 2014, the government is keen to ensure they recruit people with appropriate skills to capitalise on the purchasing power of Government and take a more strategic and consistent approach to procurement of major Government capital projects. 

Lord Deighton  also stated that government is committed to own the National Infrastructure Plan [NIP] in order to allocate the appropriate funding and create an enabling environment to attract inward investors or finance.  A promise to work with the industry under the NIP’s Strategic Engagement Forum to ensure UK leverage across the supply chain and includes SMEs to deliver the capital works.

The Government has set itself a target of procuring 25% of goods and services by value from SMEs by 2015. The Government has set this target as it considers SMEs to be a crucial engine for growth’ that account for 99% of the UK businesses. 

SMEs have been found to create around £33 of gross added value to the UK economy for every £100 of turnover, compared to £26 for large companies.  In response to ACE and a wider industry campaign, the Government has been looking at ways to change and simplify the procurement process for smaller companies to encourage their involvement in tendering for public contracts.

ACE contributed to the Prime Minister’s 2013 consultation on public sector procurement to make our voice heard on how we felt SMEs could be given more access to future projects, and decided to pursue the following objectives:

  • Cut down on lengthy process by abolishing Pre-Qualification Questionnaires (PQQs) for low value contracts;
  • Mandate the use of standard core PQQ for high-value contracts and ensure small business needs are taken into account in the design of procurement processes;
  • Make contract opportunities easier to find by making them all accessible on a single on-line portal;
  • Make sure small firms get treated fairly by mandating prompt payment terms all the way down a public procurement supply chain;
  • Require all public bodies to formally document their procurement expenditure and prompt payment performance with SMEs.   

I will continue to support the ACE position. As the UK’s economic growth is expected to be fuelled by renewed investment in both social (housing, education, prison, health) and economic (road, energy, airport, water) infrastructure, the SMEs sector would value the decision by the Government to respond to the industry request for a single market principle to be applied to all public sector bodies in their procurement process. This would ensure a simple and consistent approach across all public sector authorities, so that SMEs can gain better and more direct access.

As a start, in order to maintain momentum around our industry campaign, a new “ACE Procurement Commission Group” has been established.  Under the chairmanship of Mathew Riley of EC Harris  its mandate is to establish a best practice procurement process that can be adopted by public sector and develop a sets of recommendations for the future. 

I am very pleased that this initiative is supported by BIS, HMT and the Cabinet Office.  As a first step we are encouraging the wider industry to participate by opening an engagement process on our ACE website www.acenet.co.uk where we are asking our SME members to submit evidence on the issues and challenges they face when pitching for public sector contracts.

ACE has listened, and I have faith that through our on going collaboration with our SME members we are building a road map to guide us to do the right thing in the future.