Small firms need help to compete for government contracts

Greater efforts to involve smaller businesses in the procurement of goods and services by government authorities would save public money, create fairer competition, and help the economy, the Forum of Private Business (FPB) has said this week.

The FPB, which represents 25,000 small and medium-sized businesses across the United Kingdom, has carried out extensive research to recommend a series of measures that would improve competition in public markets. Chief among them is a requirement that all contracts should be competitively tendered rather than given to preferred suppliers, and the use of approved supplier lists limited. The FPB’s Chief Executive, Nick Goulding, said that would be the most competitive process.

"It makes perfect sense to make it easier for firms to submit bids and gain as many tenders as is possible for each contract, in order to get as much competition as possible. Unfortunately, this is not the current case in the UK."

The FPB researched into the experiences in the United States, after the 1953 Small Business Act, and a series of measures introduced by President Reagan in the mid-1980s. It found that by maximising competition, the US saved taxpayers’ money by diversifying the pool of potential suppliers to also include smaller businesses.

The FPB has also concluded that a target for the percentage of government contracts that should go to smaller businesses acts successfully as an enforcer of fair competitive policies. So does the work of the US Small Business Administration, whose advocates work inside procuring government departments to make sure that contracts are broken out for competition, and not unnecessarily bundled.

In extremis, setting some contracts aside for competition exclusively between smaller businesses can be the only way to ensure than an effective supplier monopoly does not arise, and it can save the taxpayer money.

The FPB’s findings have been presented in a submission to the Trade and Industry Select Committee of the House of Commons, where the organisation will give evidence on 29 January 2006.

The FPB has also criticised the Government for failing to respond to the idea put forward in Europe to renegotiate the World Trade Organisation (WTO) Agreement on Government Procurement. The Agreement prevents EU countries from taking some of the steps the FPB recommends, and yet prevents national protectionism only in about $240 billion of the estimated $5.3 trillion worth of goods and services procured by governments around the world, according to Canada’s Trade Ministry.

"The Agreement is not really worth it as it currently stands," said Mr Goulding, concluding that, "a new agreement allowing SME-friendly measures and extending anti-protectionist coverage is needed. Moreover, we have suggested in our paper that it might even be possible, but the Government would have to act now to get the EU to table an a revised agreement by March."