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    SMEs to VCSEs: barriers to benefits

  • Posted on July 21, 2016 by

    Overcoming barriersInnovation, flexibility, value for money, specialist expertise, local knowledge: small and medium-sized enterprises (SMEs) can bring great benefits to the delivery of public sector contracts. Economic growth can be created, competition increased and local investment and social outcomes encouraged. But government needs to think differently if it is to overcome the barriers to contracting between government and SMEs – especially voluntary, community or social enterprises (VCSEs).

    The government aims to increase its spending with SMEs to 33% by 2020. But organisations can’t, of course, award a contract just because the supplier is an SME. And, as our recent report Government’s spending with small and medium-sized enterprises shows, there’s a range of barriers – on both sides – to contracting between government and SMEs/VCSEs.
    Barriers for SMEs
    Leading from the centre

    The government has already done quite a lot to make it easier for SMEs to bid for government work. But we believe that it is not enough to make it easier for SMEs to bid for work they are not suited to. Instead we want government to think about the areas where SMEs can have the most impact and bring the most benefits. It then needs to design both what it procures and how it procures it around the type of organisations it wants to work with. Where it wants to work with SMEs, this can require a substantial change in its approach.

    It requires departments to think differently. Some are doing just this.

    Smaller contracts: Highways England has reduced the size of some construction contracts, allowing SMEs to build up a delivery track record to help secure future business and grow.

    First right of refusal: The Government Digital Service created G-Cloud, a web platform for procuring cloud-based services. Departments must consider cloud options first in any IT procurement, and over 80% of suppliers on it are SMEs.

    Improved subcontractor access: The Department for Work & Pensions has a code of conduct for prime providers; while the Department for Culture, Media & Sport appoints subcontractors before engaging a prime contractor to manage the work.
    VCSE examplesLocal innovations for VCSEs

    Local public bodies are also finding innovative ways of working with SMEs and VCSEs. Our new interactive map includes stories of what different local commissioners around the country have done to make it easier for VCSEs, in particular, to get involved in public service delivery and the benefits they have delivered in doing so. For example:

    A Social Value Taskforce set up by Durham County Council in partnership with the Federation of Small Businesses, develops ways of both getting better value from its contracts and help small businesses and VCSEs win more contract opportunities – e.g. pre-tender supplier information sessions.

    Targeted action by Avon and Somerset Police and Crime Commissioner appraises new procurement projects and encourages VCSEs to bid for specific services where they can add value, including the drugs and alcohol arrest referral contract and support for victims of crime. Running workshops before the formal procurement process enabled local VCSEs to influence the design of services and learn more about the process before deciding whether to bid.

    A Risk Based Sourcing model with simpler processes and reduced requirements for lower risk contracts has been adopted by Halton Borough Council for procurement below EU thresholds, both reducing costs and making it easier for VCSEs to bid for contracts.

    Helpful resources

    Our Commercial capability and contract management page links to all our resources.

    In addition:

    Successful Commissioning Guide – provides guidance on contracting SMEs and VCSEs, for both public service commissioners and the third sector.

    Paying government suppliers on time – recommends ways to improve the speed of payment and achieve the intended effect of helping SMEs.

    SMEs and VCSEs can bring great benefits to the delivery of public services, but it is not always easy for them to get into the public sector marketplace. We would like to see more commissioners following the example of those highlighted here, thinking carefully and creatively about how they can ensure all providers – large or small, business or VCSE – can compete on a fair footing.

    Please share your comments or contact us if you would like to discuss this further.
    Joshua Reddaway

    About the author: Joshua Reddaway is the NAO Director responsible for our Commercial and Contracting Community of Practice. This Practice generates cross-government insight on commercial and contracting matters, develops best practice approaches and ensures these are applied across the NAO. Joshua also coordinates our cross-government studies and he is a regular speaker at conferences. He joined the NAO in 2002.



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