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SMEs say winning government contracts remains difficult

Despite the Coalition’s drive to award more public sector contracts to SMEs many still believe winning such contracts remains difficult. Research commissioned by Fujitsu found that over a quarter of SMEs think it has become harder to win the contracts in the last two years. 

Over three quarters of SMEs questioned for the report perceived it to be difficult to win government contracts. Specific references were made to the longer procurement processes of many government departments; this makes it difficult for smaller businesses to bid as it can often require a large amount of resources.

Just four per cent of survey participants think it is easy for a small supplier to win government business. This compares to the 77 per cent that said it was fairly difficult or very difficult.

During the last two years the government has been working towards an aspiration to award 25 per cent of central government business to SMEs by 2015. Whilst figures from the Cabinet Office suggests that there has been some improvement, with SMEs winning 10.5 per cent of total spend in 2012/13, an increase from the 6.5 per cent awarded in 2009/10, the report suggests the drive has had little impact on perception.

Over one quarter (26 per cent) of SMEs believe it has become more difficult in the last two years for smaller businesses to win public sector contracts to supply IT, engineering to technological services. This compares to the six per cent that believe it has become easier in the last two years and the 50 per cent that think nothing has changed.

Despite the challenges around accessibility, 65 per cent of SMEs said they would be interested in tendering for public sector contracts in the future. SMEs need to demonstrate that they are reliable and can meet the projects requirements when bidding on a public sector contract. A good credit score and trading track record can help small businesses show this, following Graydon’s tips in improving a credit rating can boost opportunities.

John Cridland, CBI Director General, commented on the report. He said, “It is difficult to overestimate just how valuable businesses of this size are to sustainable growth. Lest we forget, SMEs account for 99% of all enterprise activity in the UK. Our own research shows that medium-sized businesses alone could contribute as much as £20-£50 billion to the UK economy by 2020.

“Getting Britain growing means giving all of the companies that fall within that small and medium-sized category the platform from which they can confidently win business from a range of customers.”

Collaborating with a larger supplier is one of the ways SMEs are getting around the challenges they are faced with. The report found that the desire for collaboration is high with 58 per cent of SMEs believing that small and large suppliers should work together to win business. However, collaboration is not commonplace, 23 per cent of survey participants said that collaboration with larger firms ‘rarely or never’ happens in business today.

SMEs also believe that collaboration fuels innovation and growth. Some 59 per cent said that a collaborative approach is ‘essential’ for innovation and 62 per cent say the same about economic growth. Looking ahead, 71 per cent of survey respondents indicated that they are planning on working with a large enterprise to win business within the next five years. Many within this group believe that this will account for a significant percentage of their revenue over the next twelve months.

Businesses that are collaborating should ensure that the firm they are working with is stable in order to avoid negative knock on effects. Using a credit report to assess the viability of a firm can help reduce this risk.

Winning a public sector contract, either solely or as part of a collaboration, can give businesses the opportunity to grow whilst boosting the economy. 

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