The commitment was welcomed by the Federation of Master Builders, which represents the SME sector of the building industry, and it urged the rest of the public sector to follow suit.
In 2013/14, central government spent an £11.4bn with businesses employing 250 people or fewer, according to the Cabinet Office said. This was equivalent to 26% of central government spend. By 2020, the government wants to increase this to a third. This would mean an extra £3bn per year (in 2013 to 2014 terms) going to SME firms either directly or filtering down the supply chain.
Civil Service chief executive John Manzoni said: “Further opening up our marketplace to small businesses is good economic sense all round – making it easier for them to access and win government business opportunities, whilst encouraging increased competition and market innovation to deliver best value for the taxpayer.”
Federation of Master Builders (FMB) head of external affairs Sarah McMonagle said: “The government’s announcement that every £1 in £3 is spent with small businesses is welcome but only applies to central government contracts. We want to see an increase in spend with small and micro firms across the board and by every public sector body. In many parts of the country, it is still the case that small firms are all too often squeezed out by larger competitors when bidding for public sector work.”
She continued: ““There are lots of good reasons why the wider public sector should spend as much as possible with small firms. In particular, using construction SMEs has been proven to provide real local economic and environmental benefits. SMEs employ local people, meaning that the money spent is likely to go to local suppliers and remain within the local economy. Furthermore, in the construction sector, two thirds of apprentices are trained by micro firms, meaning that spending more with these businesses could help towards the government’s target of creating three million new apprenticeships by 2020. An even more ambitious target could go further towards the governments stated aim of three million apprenticeships by 2020.”
Sarah McMonagle concluded: “Some local authorities and housing association are better at engaging with SMEs that others but we’re urging all public sector clients to set a target for increasing the proportion they spend with SMEs. Some may already be spending £1 in every £3 but then they should be working towards spending £2 in every £3. One way the wider public sector can boost engagement in public procurement by small firms is to ensure they are implementing the EU Public Procurement Directive which was brought in earlier this year. The Directive states that public sector clients must break down their contracts into small lots and this makes public contracts much more appealing to small businesses – especially in construction where forming part of the supply chain can be particularly problematic due to late payment.”