Lift Procurement Barriers for SMEs to Grow Welsh Economy Says Wales’ Leading Business Body

A new paper from FSB Wales entitled A Fresh Start for Public Procurement has made a number of recommendations for what procurement can and should look like under the next Welsh Government.

SMEs make a huge difference to our Welsh economy, and so does making the decision to purchase goods and services with them. Previous FSB Wales research with the Centre for Local Economic Strategies found that for every £1 spend with a local SME approximately 63p is recycled into the local economy, vs 40p with a larger company. This demonstrates the economic impact of spending with SMEs in Wales.

Despite this, research has also found that 60% of SMEs find that there are barriers to bidding for public sector contracts, and 28% do not feel able to compete with bigger suppliers. Moreover, 27% feel that the relevant eligibility criteria (such as level of turnover or relevant standards) tends to exclude them.

FSB has also called for the following principles to be the foundation of any future public procurement policy:

• Provide good value to the taxpayer
• Allow for competition in the market place
• Be fully transparent and accessible to all firms
• Serve as a mechanism to grow smaller businesses

Some barriers to SME engagement with procurement include:

• An under-resourced procurement profession – local authorities and the broader public sector are under significant financial pressure and this has led to a situation where the capacity to deliver best practice is severely curtailed. For instance, whilst FSB Wales would like to see contracts broken up into smaller portions to allow for SMEs to be involved in more opportunities, in practice practitioners are under pressure to deliver tenders in the fastest, cheapest way. This means the extra auditing and management cost of presenting SME- friendly tenders goes by the wayside.
• A lack of political imperative – Whilst procurement is undoubtedly a political priority at the national level, its importance varies significantly with anchor institutions and public purchasing bodies. FSB Wales is aware of local authorities which are not able to account for their spending with SMEs or provide any serious analysis of its socio-economic benefit. At the other end of the spectrum some purchasers are implementing lots of best practice.
• A lack of a statutory footing: Whilst the best practice measures related to procurement are encouraged, they are not legally mandated in the same way that planning rules are. This makes it difficult to achieve significant improvements when a number of different authorities are involved.

Ben Francis, FSB Wales Policy Chair, said:

“The approach we take to procurement speaks volumes about the commitment to grow our economy and see the benefits of this felt across Wales.

“So much more can be achieved if the next Welsh Government implements a proactive SME procurement policy and such an approach can be central to rebuilding our economy in a resilient and sustainable way after Coronavirus. We look forward to working with all of the parties to develop what this could look like.

“FSB would look for the next Welsh Government to explore creating legislation to ensure that best practice on procurement is implemented in a much more widespread way.

“There also needs to be more investment to ensure that there is support for the procurement profession to do the things that they currently struggle to. We want to see procurement contracts broken down into smaller chunks that are accessible to SMEs, but this can’t be done when the only objective is to get procurement contracts out of the door as quickly as possible.

“At a time when Wales’ economy needs all of the support that we can offer it, procurement policy has to be a part of that picture. Local authorities across Wales have undertaken campaigns imploring individuals to shop locally wherever possible in order to help local businesses recover from the impact of Covid-19, and we’d like them to consider that they have a role in this through their own spending practices, too.

“If we get procurement policy right, we can all benefit from a Welsh economy which is bolstered by spending with companies which reinvest in local people, local businesses and help boost our towns up and down the country.”