Lift Procurement Barriers for SMEs to Grow Welsh Economy

A new paper from FSB Wales, entitled "A Fresh Start for Public Procurement" makes a number of recommendations on what procurement can and should be like under the next Welsh government.

SMEs have a huge impact on our Welsh economy, as does the decision to buy goods and services with them. Previous research by FSB Wales with the Center for Local Economic Strategies found that for every £ 1 spent at a local SME, approximately 63p is returned to the local economy, compared to 40p for a larger company. This shows the economic impact of spending on SMEs in Wales.

However, research also shows that 60% of SMEs experience barriers to tendering public sector contracts and 28% feel unable to compete with larger suppliers. In addition, 27% are of the opinion that the relevant approval criteria (such as sales level or relevant standards) tend to exclude them.

The FSB has also requested that the following principles form the basis of any future public procurement policy:

  • Give good value to the taxpayer
  • Allow competition in the market
  • Be completely transparent and accessible to all companies
  • Serve as a mechanism for smaller business growth

Some barriers to SME engagement in procurement are:

An under-contracted procurement profession – Local authorities and the public sector are under significant financial pressure. This has created a situation where the ability to deliver best practices is severely limited. For example, while FSB Wales wants the contracts to be broken down into smaller parts so that SMEs can take advantage of more opportunities, in practice practitioners are under pressure to submit offers in the fastest and most cost-effective way. This means that the additional audit and administrative costs for presenting SME-friendly tenders are neglected.

Lack of Political Imperative – While procurement is undoubtedly a political priority at the national level, its importance varies significantly with anchor institutions and public purchasing agencies. FSB Wales is aware of local authorities who are unable to record their SME spending or to carry out a serious analysis of their socio-economic benefits. On the other end of the spectrum, some buyers implement many best practices.

Lack of a legal basis: The best practice measures in connection with procurement are promoted, but are not required by law like the planning rules. This makes it difficult to make significant improvements when different agencies are involved.

Ben Francis, Chairman of FSB Wales Policy, said:

“The approach we are taking to sourcing speaks volumes about our commitment to growing our economy and the benefits it is showing across Wales.

“Much more can be achieved if the next Welsh Government implements a proactive procurement policy for SMEs. Such an approach can be central to rebuilding our economy in a resilient and sustainable manner after coronavirus. We look forward to working with all parties to find out what this might look like.

“The FSB would look to the next Welsh government to look into legislation to ensure that procurement best practices are much more widely disseminated.

“More investment also needs to be made to ensure that the procurement profession is supported in doing the things they are currently struggling with. We would like procurement contracts to be broken down into smaller parts that are accessible to SMEs. However, this is not possible if the only goal is to get procurement contracts out of the house as quickly as possible.

“At a time when the Welsh economy needs all the support we can offer, procurement needs to be part of that picture. Local authorities across Wales have run campaigns encouraging individuals to shop locally wherever possible to help local businesses recover from the effects of Covid-19. We would ask them to take into account that they have a role to play in this through their own spending practices. also.

"If we get procurement policies right, we can all benefit from a Welsh economy backed by spending with businesses that reinvest in local people and businesses that help strengthen our cities across the country."

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