Blake Newport Associates Ltd
The Government’s creation of a committee to reduce the barriers to SMEs is a welcome approach to tackle the problems affecting many of the small contractors competing for public sector work - a considerable market worth nearly £23 billion.
The main difficulty for SMEs has been found to be in breaking into large framework agreements, which have been set up since Egan’s Rethinking construction report of 1998.
Whilst these framework agreements have been hailed as an exemplar form of partnering, utilising open book accounting and delivering many cost and time benefits, the strategy employed to procure them has left many SME contractors out in the cold.
Problems that have been created for contractors include;
But many people in the construction industry would argue that the role of the SME is not as a main supplier but rather as part of the supply chain and indeed Rethinking Construction highlighted the opportunities for small contractors to work as subcontractors.
However a recent survey by the National Federation of Builders highlighted that this simply wasn't the case, with only 18% of respondents acting as subcontractors for a framework contractor.
This figure is hardly surprising, with many major contractors having poor records of paying on time, employing inefficient adjudication processes and in light of the credit crunch now applying further financial pressure on their supply chains.
It is therefore important that SMEs have the ability to be involved at the first tier of a supply chain in order for them to have more control over both their business management and finances.
But whilst it is encouraging to see that the Government has recognised the difficulties facing SMEs in public sector procurement, there are still a number of additional areas that must be addressed in order for them to effectively tackle this issue. Such as:
The realisation of the Government’s plans to better support SMEs in tendering for public sector contracts wont come to fruition until next years budget.
For now SME contractors should look to utilise their contractual processes and use effective contract management to provide both protection and clarity of their situation.
This will then allow contractors the confidence to work with the larger players in the industry – helping to minimise the likelihood of adjudication and late payment problems.