System locks out small firms from public sector work

The Times, by Susan Love

Susan Love is policy manager at the Federation of Small Businesses in Scotland

Maddeningly, the complexities and time commitment required by the procurement system mean that smaller businesses like mine simply cannot compete. And that’s a great shame because the public sector could really do with the support of skilled cost-effective businesses like mine.”

The words of Mairi Damer, who runs a small business, could have been spoken by any number of Scottish entrepreneurs. Her views — that Scotland’s procurement system locks out innovative startups as well as long-established local firms — are shared by many businesses.

The official figures on how we spend public money make grim reading for those who believe that social outcomes, public services and successful local economies are linked. After a decade of procurement reforms about 20,000 fewer businesses supply their council than in 2009. And despite legislation designed to boost local suppliers, 7.5 per cent of Scotland’s £12 billion procurement spending power goes to businesses with fewer than ten staff.

This spending pattern not only drives a wedge between smaller firms and the public sector, but also means we’re failing to use the state’s spending power to develop our local economies. The destruction wrought by the collapse of Carillion and the failure of Interserve ought to have taught us a lesson about the wisdom of packaging supersized contracts so that only a few large outsourcing specialists can pick them up. Instead, some public decision-makers still believe such an approach delivers value, failing to see the key role their spending has upon local economies.

The ugly truth is that for many public bodies the priority over the past decade has been the aggregation of contracts, allowing money and jobs to seep out of local communities. With such purchasing patterns now entrenched, it’ll take political will to break the barriers to Scottish smaller companies getting their fair share. We’ve seen that determination in Manchester where civic leaders realised that procurement was a tool to give their local economies a boost. As a consequence they achieved a 15 per cent swing in local procurement in three years.

The Procurement Reform (Scotland) Act was supposed to spur similar change. In the years since it was passed, using our public sector’s spending power to advance local economies slipped down the political agenda. Therefore political leaders need to say no to the procurement status quo and push for change in purchasing. Otherwise thousands of business owners such as Mairi will for ever feel locked out.