Blake Newport

Frameworks need to be more accessible

Construction News - 15/05/2008

Greg Brownlee
Managing Director
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;

  1. An inability to compete with the larger and more powerful organisations

  2. A lack of capability to meet the qualification criteria needed to apply for framework partnerships such as their financial status and ISO 9001accreditation

  3. Administrative burdens of completing lengthy tender documents questionnaires is beyond many SMEs, with an average of three to four weeks required to complete framework application documents

  4. Due to changes to EU Competition Law, councils are no longer allowed to invite companies to tender, and few SMEs have the time or resources to actively search the OJEU for notices of work.

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:

  1. The need for clients to look again at their pre-qualification and tendering requirements so as to make sure they do not automatically exclude SMEs

  2. Large companies should be limited to working on jobs appropriate to their size. Smaller-value jobs should have their own band with restrictions on the size of concern allowed to participate in the tendering process

  3. Clients should not use the same methods or criteria for checking the performance of a local company and an international contractor. SME contractors already pay out for accreditation under Constructionline, CHAS, EXOR and these should count towards a framework application, rather than expecting them to duplicate these efforts

  4. Finally the Government needs to ensure that small companies are both treated properly and protected from the pressures of the larger framework partners.

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.

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