Each year the UK public sector spends around £200bn on the procurement of goods and services from third parties, but far too little of this is with small firms.

Although nearly a quarter (23%) of SMEs have worked on public sector contracts over the last 12 months, the figure which is down 2% on 2014, according to the FSB Unstacking the deck: balancing the public procurement odds report.

This figure does not reflect SMEs’ share of the financial benefits of public sector contracts. Based on live contract tenders, data from the Tussell Index of Public Procurement shows that over the last 12 months, SMEs won 19% of directly awarded public sector contracts by value, roughly equivalent to £38bn of total contracts.

This falls far short of the government’s target of 33% of public sector contracts being awarded to small to medium sized businesses by 2020.

FSB is calling on the government and public sector to step up efforts to remove blockages which are preventing smaller firms from supplying services to the public sector.

Proposals include forcing local authorities to publish all contracts over £10,000 on Contracts Finder, as central government does.

At the moment FSB said that local authorities avoid putting smaller contracts on the digital platform as they tend to only publish higher value thresholds which are outside the reach of smaller businesses.

Cherry said: ‘Despite government efforts to reform public procurement practices, most small businesses still face a fixed system which is preventing them from getting a fair share of public contracts.

‘Our report shines a light on how local authorities are getting around their obligations to clearly and fairly advertise contracts which could go to local smaller firms. It is scandalous that only 20% of all local government contracts go to small businesses.

‘In the next few years, we will see work begin on major infrastructure projects across the UK. These projects will bring with them a vast number of public contract opportunities.

‘Smaller firms need to be given the chance to secure these opportunities, it no longer acceptable that they continue to be effectively excluded from the process. For this to happen, it is vital that the Government takes another look at reform to make procurement fairer, simpler and more transparent.’

The FSB proposals include:

• require local authorities to publish all contracts over £10,000 on Contracts Finder, as central Government is required to;
• give the Mystery Shopper Service (MSS) legal power to enforce its findings, and to more effectively name and shame poor performers;
• the government must publish a thorough action plan concerning how it will better enforce the law requiring detailed feedback from local authorities to unsuccessful tenderers;
• local authorities should recognise comparable accreditations to reduce existing barriers of entry to small firms seeking public procurement contracts; and
• replace framework agreements with Dynamic Purchasing Systems (DPS), where possible, so small businesses are not locked out from lists of potential suppliers to local authorities.

The FSB report, Unstacking the Deck: Balancing the Public Procurement Odds, 23 August 2017. 

Tussell Index of Public Procurement April 2017.