Procurement reforms have ‘little impact’ on Scotland’s small firms

By Katrine Bussey, Political Editor, Press Association Scotland
The Federation of Small Businesses said 61% of small firms bidding for public sector contracts found the process 'difficult'.

Reforms aimed at increasing the share of public sector contracts going to Scotland’s small businesses have had “little impact”, a new report has claimed.

Andrew McRae, policy chair for the Federation of Small Businesses (FSB) in Scotland, said while there had been a “slew of laudable procurement reforms”, these had failed to increase the number of contracts going to smaller companies.

While just under a quarter of small businesses had bid for public contracts in the last two years, the FSB found three fifths of this group (61%) described the process as “difficult”.

Almost all private firms in Scotland are classed as small enterprises, with 98% of firms having less than 50 employees and 93% having fewer than 10 workers.

But while the Scottish public sector spends about £12 billion a year, figures obtained by the FSB suggest that in 2016-17 just 7.5% of this cash went to micro businesses, with 13.6% going to small businesses.

The FSB’s Broken Contracts: Smaller Businesses and Scottish Procurement report, said that represented “little change” from 2011-12, when micro and small businesses won 6% of 13% of contracts by value.

The report said: “While most parts of the public sector say supporting SMEs is a priority, there’s an absence of specific objectives, action plans, monitoring or evidence from public sector organisations to back this up.”

The Scottish Government passed legislation to reform the public sector procurement process in 2014.

Mr McRae said: “Over the last decade we’ve seen a slew of laudable procurement reforms in Scotland.  Unfortunately, they seem to have had little impact on the share of work won by smaller firms.

“That means that we’re failing to use the full potential of public sector spending power to develop our local economies.

“In this new report, we ask Scotland’s public sector decision-makers to carefully measure how they’re contracting at the moment and develop realistic action plans to improve spending with local business.

The FSB called on the Scottish Government to publish data annually on spending by the public sector, detailing factors such as the size of suppliers used.

It also recommended that ministers should set the target of increasing the total Scottish spend with micro businesses by 1% by the end of the current parliament.

Mr McRae added: “While our top priority is for smaller firms to win more work, Ministers also need to ensure that big primary contractors treat their sub-contractors with respect.

“With thousands of Scottish businesses going under every year as a consequence of late payment, ministers should do everything in their power to help end this scandal.”

Scottish Labour leader Richard Leonard MSP said: “This is an important and timely report which shows why the SNP Government’s procurement legislation is failing our small businesses and so the Scottish economy.

“Small and medium sized enterprises and the people who work in them should see a jobs dividend from the £12 billion spent on public procurement in Scotland each year through the Scottish Government’s budget.

“Instead the major beneficiaries are large companies, many of them either multinational corporations or precarious and failed corporations like Carillion and Interserve.”

A Scottish Government spokesman said: “We recognise the contribution small businesses make to the economy and are pleased the Federation of Small Businesses (FSB) report acknowledges the work government has done to eradicate the worst practices facing small businesses bidding for public contracts.

“We recognise that there is always more than can be done and will be happy to work with the FSB and others to explore what more can be done to ensure public sector procurement delivers maximum value for money, including local economic benefit.”