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Small and Medium-sized Enterprises: Public Procurement Contracts

Volume 805: debated on Monday 7 September 2020


Asked by

To ask Her Majesty’s Government what steps they are taking to ensure that small and medium-sized enterprises are awarded public procurement contracts.

My Lords, the Government are determined to ensure that SMEs win public contracts when they offer good value for money. We are committed to tackling the barriers that SMEs face. Each department publishes an SME action plan setting out its commercial strategy to increase spending with smaller businesses. Central government spend figures published for 2018-19 show that SMEs earned £14.2 billion through government contracts. That is nearly £2 billion more than the previous year and the highest since government records began in 2013.

I thank the Minister for that Answer. SMEs account for 98% of the UK’s business population. The Government are prudently seeking to enhance their engagement with the SME sector. In that regard, the Government’s own target for spending with SMEs is 33% by the end of 2022. As we go through one of the worst recessions in our country’s history, there will be a greater desire to achieve economies of scale through higher aggregation of demand in the form of centralised procurement, potentially at the cost of SME participation. However, we know that the SMEs are incredibly innovative and efficient. When given the opportunity, they would be able to drive national economic growth and prosperity. The Government must therefore harness their true potential and ensure that the SMEs are able to play a vital role in the procurement framework and are not left out of the national strategies. Government departments will need to listen to SMEs’ concerns and find solutions without compromising delivery and value for the taxpayer.

Each government department publishes its own SME action plan, which describes how it is engaging better with the SME sector to address the department’s own needs and increase spend with SMEs. Particular departments hold early-market engagement events to explain and discuss their requirements with a wide range of suppliers.

My Lords, could my noble friend please tell me what departments are doing to make sure that SMEs can get on the preferred list of companies—where departments use this—and that the buyers within those departments are rewarded for making the extra effort to deal with small suppliers and are not risking their own careers by doing so?

The noble Lord makes a very good point. We encourage all SMEs that are interested in bidding for public sector opportunities to use Contracts Finder, which lists all tenders over £10,000. SMEs can create an account to get email updates for opportunities that align with their business interests. Public sector contracts are, of course, awarded after a fair and open competition process and commercial buyers are encouraged to ensure that all tenders are suitable for SMEs

My Lords, one area where there is a ready-made opportunity for boosting our industrial output and supporting struggling —and, indeed, collapsing—SMEs is defence. The Prime Minister recently stated that our nation requires

“a shipbuilding industry and Royal Navy that reflect the importance of the seas to our security and prosperity.”

Hurrah for that, but our shipyards—and particularly the SMEs that support them—are in dire straits. They need a commitment to a rolling programme of warship building if they are to survive, and the Navy is desperate for more ships. Can I ask the Minister whether this requirement is being given prominence in the current integrated defence review?

The noble Lord is, of course, well aware that I am not a Minister in the Ministry of Defence, so I shall have to write to him on that.

Would the Minister agree with me that, as well as being good business, it is morally incumbent on the Government to procure from SMEs owned and run by people who look like those that they serve? If he does agree, could he explain why—despite years of lobbying from people like myself and groups representing BAME and women-owned businesses—the Government still do not know how many such businesses they are procuring from? What you do not measure, you cannot manage.

I can tell the noble Baroness that, since its launch in 2012, something like 20% of our start-up loans have gone to entrepreneurs from black, Asian and minority-ethnic backgrounds and, throughout this crisis, we have hosted a series of round tables on our wider support scheme for BAME businesses.

My Lords, the Government are keen in their EU negotiations to allow UK companies to benefit from state aid where appropriate. Will the Minister therefore confirm that it is equally important for the Governments of Wales, Scotland and Northern Ireland to ensure that the SMEs within their own territory are helped to secure public procurement contracts for which those devolved Governments are responsible?

Of course, I cannot speak for the devolved Governments, but I am sure they are doing all in their power to ensure that as many small businesses as possible receive contracts.

My Lords, as you know, the Federation of Small Businesses is running a campaign called “Fair Pay Fair Play” about what it calls the scourge of late payment. Can the Minister enlighten the House as to when key components of this campaign, such as putting the Prompt Payment Code on a statutory basis and giving powers to the Small Business Commissioner, will ever be introduced?

We are completely focused on fulfilling the Government’s manifesto commitment to clamp down on late payments and strengthen the powers of the Small Business Commissioner to support small businesses that are exploited by their larger partners. At the Spring Statement, as the noble Lord will be aware, the Government announced that they will require large companies’ audit committees to review payment practices and report them in their annual accounts.

My Lords, does my noble friend have details of the financial value of UK companies that are engaged in delivering EU public procurement contracts? In the run-up to the post-Brexit period, are the Government engaged with these firms regarding support because, for many businesses, this may be their main or whole business?

The noble Baroness asks a good question. Unfortunately, we do not gather data on how many UK SMEs are involved in EU procurements. However, there will, of course, be a high level of access to markets in the EU once the UK has joined the WTO general procurement agreement as an independent member. This is expected to be at the beginning of 2021. The UK’s market access offer for services is the same as the current coverage under the EU’s GPA schedule. Reciprocal coverage will continue once the UK is a GPA party.

I call the noble Baroness, Lady Scott of Needham Market. Baroness Scott? No? We will go on. I call the noble Baroness, Lady McIntosh of Pickering.

My Lords, can I ask my noble friend the Minister what opportunities there will be for small and medium-sized businesses in the food sector to bid for contracts to deliver food to schools, hospitals, prisons and other public sector services? This is a wonderful opportunity to have locally produced food locally delivered for local consumption.

I agree with the point that my noble friend is making but, of course, each individual contracting authority will have its own strategy for food procurement. The Crown Commercial Service has established a number of frameworks for the provision of food, and this agreement will deliver a UK-wide SME-inclusive food-procurement service for public sector food buyers.

In the Covid era, small businesses are most at risk and need help from the Government. Can the Minister answer whether he agrees?

Of course, all businesses will need help during the Covid crisis, and we have one of the largest programmes of help for companies and businesses in the western world.

My Lords, could the Minister explain to the House the—[Inaudible.]—The procurement process for public contracts is often enormously cumbersome, time-consuming and costly—[Inaudible.]

My Lords, I am afraid the noble Baroness, Lady Altmann, is completely inaudible, but I suspect the Minister might have an idea of what she is trying to say.

If we heard the noble Baroness correctly as she was interrupted, I think she was asking about the bureaucracy associated with public sector procurement contracts. We have removed complex pre-qualification questionnaires from low-value contracts and increased the transparency of opportunities via the Contracts Finder website, which covers current and future public sector contracts and award notices above £10,000 in central government and £25,000 in the wider public sector. Contracts Finder is available on a single, free-to-use digital platform and we encourage all SMEs to access it.

My Lords, all supplementary questions have been asked, fortunately, and we now move to the second Oral Question.