Construction SMEs lose out on 90% of public sector contracts

Published:  20 June, 2013

More than 40% of construction SMEs are failing to win nine out of 10 public sector contracts, and over half have seen their success rate fall when bidding for public sector work over the past five years, according to a new report by the Federation of Master Builders (FMB).

‘Improving public procurement for construction SMEs’ examines the barriers facing small construction firms when attempting to engage with the public sector procurement process, and outlines a series of recommendations to tackle the problems. These include requiring all public sector clients to use PAS 91as the basis for their construction pre-qualification questionnaires, review the limitations they impose when assessing the financial viability of SMEs attempting to get on to a framework, and use their regional online portals to advertise opportunities to buyers.

Cabinet Office Minister Chloe Smith MP gave the keynote speech at this week’s (18 June) launch event in the House of Commons, attended by MPs, Peers, local government representatives and FMB members.

Brian Berry, chief executive of the FMB, said: “Public sector construction contracts are worth more than £37bn per year – almost 40% of all construction output – so it is vital that SMEs are able to win their fair share of this work. The economic and environmental arguments for procuring with small local businesses are widely accepted, so now it’s a case of finding ways to increase this type of procurement.

“Our report highlights a number of barriers that are preventing construction SMEs from winning public sector contracts, and proposes a range of sensible and achievable recommendations for how these can be overcome. Although some parts of the public sector are good at engaging with construction SMEs, others are not and our report shines a light on best practice in the hope that it will improve performance right across the public sector.

“I’m delighted the FMB is working with the Cabinet Office and the Local Government Association on these important issues, as it will take a co-ordinated and collaborative effort by both government and industry to improve the public procurement process for construction SMEs.”

Councillor Peter Fleming, Chair of the Local Government Association’s Improvement and Innovation Board, said: “Councils have a vital role to play in driving economic growth, helping to create the right infrastructure and environment for local businesses to succeed.

“At the heart of this, councils are ensuring that they are open for business, in particular working with SMEs and local suppliers to make it easier for them to bid successfully for public contracts on everything from building houses to caring for the elderly. Indeed, many councils from all over the country now award more than half their contracts to small- and medium-sized UK businesses.

“But with council funding being cut by more than a third by central government, there is simply less work around, particularly in the construction sector. The LGA is therefore working with the FMB to highlight local authorities that have streamlined their procurement practices or introduced support for local suppliers, and using these examples to promote best practice across the sector and help level the playing field as much as possible for SMEs.”

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