Levelling the playing field: The benefits of working with SMEs and how public sector organisations can make it easier for them to bid for work – Procurement Essentials

NB: This article was originally published on 12 May 2023. All information was correct at the time of writing, but may not be fully applicable following the introduction of the Procurement Act 2023.

At CCS we understand how important it is to have a diverse range of suppliers working with the public sector. We’re committed to taking positive action to make sure that the SME sector is well represented in our agreements. Our 2021 action plan reaffirms our role in enabling customers to increase the proportion of their procurement spend that goes to SMEs.

The success of this commitment is measured using SME spend through public sector contracts. £2.2 billion was spent directly with SMEs through CCS’s commercial agreements in 2021/22. An additional £687 million compared to 2020/21

This article outlines the benefits of working with SMEs, such as, but not limited to, opportunities to achieve greater social value through your procurement, access to highly skilled workforces and greater localisation, and how to encourage SMEs to bid on your procurements. 

What is an SME?

In relation to its procurement activities, the UK Government currently defines Small and Medium Enterprises (SMEs) in accordance with the below:

Source: GOV UK 

The benefits of working with SMEs

SMEs make up an essential component of the private sector business landscape. According to the 2022 Business Population Estimates there were almost 5.5 million businesses in the UK at the start of 2022. SMEs accounted for 99.9% of the total number. Importantly SMEs employed 61% of the private sector workforce which was 16.4 million employees. They also earned 51% of the turnover in the UK private sector.

There are many benefits of working with SMEs such as good customer service, due to highly skilled and experienced workforces and smaller chains of command. SMEs are often more adaptable and agile to situations than larger organisations due to their smaller nature, which allows them to respond quickly and flexibly to changing requirements and provide the most suitable solution (ideal for tight timescales). 

SMEs can also support greater localisation, which can reduce carbon footprints associated with delivery helping to support public sector organisations in reaching net zero. They also create local jobs, and can contribute to the local social value agenda in other ways, as they are more committed to the community they live and work in.

Barriers to public sector procurement for SMEs / public procurement reforms

Historically, small to medium sized enterprises (SMEs) have faced a range of barriers in accessing procurement opportunities and in winning contracts. These barriers include but are not limited to: contracting authorities being unaware of SMEs and the types of goods and services they can potentially provide; SMEs viewing the procurement process, often rightly, as overly bureaucratic; SMEs not having the capacity to bid for opportunities and compete with large business; and the process of procurement often being undertaken on the basis of cost therefore ruling out the ability of SMEs to demonstrate their wider value.

The government is in the process of shaking up and transforming our procurement system by changing existing procurement rules in the Procurement Bill which is currently being debated in Parliament. The upcoming procurement regulation reform, Transforming Public Procurement, aims to make it easier for businesses to enter public sector supply‑chains and this will benefit SMEs and Voluntary, Community and Social Enterprises (VCSEs), both of which have historically faced barriers in working with central government and wider public sector. The Procurement Bill represents an opportunity to make it easier to do business with government such as including a new duty that will require contracting authorities to pay due regard to the barriers faced by SMEs, removing these where possible.

How CCS is supporting SMEs to access public sector procurement opportunities

CCS published our last SME Action Plan in 2021. Since then, we have made good progress, working to reduce barriers for SMEs to work with us and simplifying our public procurement processes. 

For example, we know that suppliers spend a lot of time reading and completing bid documents and that these can be complex and long, which can be problematic for those organisations which are too small to have in-house procurement knowledge.  

To help to address this we created a CCS standard template for framework contracts for common goods and services. The Public Sector Contract (PSC) is shorter which makes it simpler to use and easier to understand what is required, in terms of the bid and rules of engagement. An updated version has recently been published that has capped liabilities on GDPR (it was previously uncapped) further reducing the barriers for SMEs.

Other ways we aim to support suppliers is by publishing information and guides on our website and using commercial agreements that are easy to enter at any time. Our recently updated information for buyers and suppliers pages have guidance for SMEs about bidding for public sector contracts as well as where to look for opportunities and how bidding works. It sets out what you need to do to register to get alerts, how to respond to opportunities and outlines the process of supplying through CCS.

How can Dynamic Purchasing Systems help SMEs?

As explained in a previous article, Dynamic Purchasing Systems (DPSs) offer the ability for suppliers to self-certify making joining quick and simple at any point through the life of the DPS. 

In addition DPSs have unlimited numbers of suppliers offering buyers unrestricted access to smaller suppliers and they are not limited to a maximum term of four years. 

We currently have 25 of these open, which can be viewed on our upcoming agreements page that cover a wide range of varied services, such as learning and training, emerging technology products and service, geospatial services, research and insights, financial services, transport, utility and fuels, construction professional services and building cleaning.

How can the public sector continue to work and support SMEs in the future?

It’s important that the public sector continues to remove the barriers and increase opportunities for SMEs.

Some of the ways this can be achieved are through:

Communication

Pre engagement communication and dialogue with the supply base allows you to discuss upcoming opportunities and understand their individual business capabilities. It may highlight new solutions not previously considered in your public procurement which are more suitable and provide better value.

You should also provide feedback when a bid is not successful so they understand how to improve.

Keep things simple and streamline documentation

When you are drafting your Invitations to Tender (ITT) use clear and simple language, always writing in plain english where you can.

The best way to attract SMEs is by making your opportunity easily accessible. Although SMEs undergo the same procurement process, there are a number of things you can do to make the opportunity more attractive. Take into consideration a number of your procurement requirements and how restrictive they may appear e.g. not over specifying and adding unnecessary cost, creating suitable lotting structures, and incorporating only relevant policies and procedures.

Considering award weightings

Social value is incorporated within most tender evaluations, but you may look to amend the weightings to reflect its importance to your own organisation, just remember to not make your stipulations too onerous, as this can just add cost.

Ensure all opportunities are fair and open

Opportunities, where it is appropriate, need to fit the capacity of SMEs. Although we do acknowledge that some requirements will be too large for SMEs to respond to, you should consider SMEs responding using a consortia bid. Consortia bids offer SMEs the opportunity to work together to join commercial agreements. You can share consortia bidding guidance, which will increase understanding and provide clarity on navigating the procurement process when bidding as a consortium. 

Learn more

Visit our social value webpage or get in touch with our expert team to find out more about social value and the benefits of working with SMEs.

More: You can now find all of our Procurement Essentials articles in one place on our website.