Small firms hit by heavy public contract charges

As reported by Startups.co.uk, the government increased the chances of small firms winning public contracts last year by awarding work on a regional, rather than national, basis.

Ministers also announced that entrepreneurs would be offered support to help them compete with larger firms to create a “diverse and competitive supply market”.

However, the FSB said that small companies are being hampered by costs imposed by accreditation bodies that vet firms interested in taking on public work.

The small business lobby group said it was unhappy that:

• Businesses are required to pay an annual fee, in some cases more than £500, even though some small firms will only bid for one or two contracts a year.
• Many years of reliable service from existing suppliers is often ignored.
• It is unclear who monitors the work of the accreditation companies to ensure consistency.

Traditionally, large companies have dominated the bidding process for council contracts, but the government has promised that by opening up the market, up to £109 billion of work a year will be available to small firms.

Tina Sommer, trade and industry chairman at the FSB, said that she had some sympathy with councils because in many cases they are trying to encourage bids from small firms but are unsure of the best way to go about it.

“But approved lists, excessive paperwork and a raft of different entry requirements are really not the answer.

“Using third parties puts another layer of bureaucracy and cost in between councils and small firms and shifts the cost burden onto business.

“Local authorities in England alone spend £40 billion of taxpayers’ money each year on buying goods and services and yet government figures suggest that three-quarters of English councils do not have a written procurement strategy in place.

“We would urge all councils to speak to local businesses, and ensure they listen to their views when putting these strategies in place,” she said.