The government definition of a Small to Medium Size Enterprise (SME) is a company of less than 250 people. In Scotland any company of 250 people is huge. Given that only 2% of IT companies registered in Scotland have more than 200 employees then fulfilling the Government requirement that 33% of Public Procurement spending must be with SMEs should be dead easy. By all accounts it’s not.
The government has taken steps over the years to try and make it easier for smaller companies to work with government and public bodies. However, how small is too small for an IT company to be considered for public procurement contracts? How can small companies be incentivised to try for Public Procurement contracts, and what help do they need to deliver?
In Scotland 85% of IT companies have less than 20 employees. These small companies are creating some great products and seizing the challenges that technology brings. They are innovators, not only creating products but they also look at ways to stretch the boundaries of technology. However many of these companies are not great at publicising what they do and they may not even consider trying for any public procurement contracts because they are both wary of bureaucracy and unaware of how to check the potential contracts in the public sector.
There are of course the inevitable anecdotes of the smaller companies i.e. 20 employees or less who have tried and failed to obtain public procurement contracts. Their experiences suggest issues with bureaucracy, financial acumen, scope changes, governance and due diligence. Perhaps this reflects the difficulties that large organisations have interacting with the smaller more agile companies.
A significant issue for small companies is the cost of responding to RFIs and RFPs. The smaller the company the more likely there are to be issues with the cash flow, not because the company is not profitable, but purely because of the lumpiness of money in versus money out. Taking people away from paid work to respond to a Public Procurement tender needs some careful consideration and the company has to believe it has a real chance of getting the work. This is an issue, the smaller companies do not believe it is a level playing field. In one example, a council sent out an RFI to 10 companies, 6 of who were local ICT companies, and the remainder of who were large corporates. The contract was not awarded to the local companies. Perhaps the means of awarding these contracts needs to be reconsidered, and public and government organisations need to provide reasons for NOT awarding a contract locally.
In the words of a friend of mine ‘If there is a real appetite to pass business to SME’s then the government must find a way to reduce the bureaucratic burden to the smaller players and understand how SME’s operate’.
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