Public sector urged to consider SMEs

The UK government has been called upon to make it easier for small businesses to win public sector contracts.

With IT spending on the up, this could provide a fillip for resellers.

A joint report from government think-tank the Better Regulation Task Force (BRTF) and the Small Business Council (SBC) highlights the need for a level playing field for SMEs in winning public sector contracts.

In its most recent budget the government extolled the value of smaller businesses to the economy.

But according to the report's authors, little is being done to encourage smaller firms to win government contracts.

"It's no use saying that SMEs are vital to the economy, and in the same breath saying they're too risky to do business with," said Teresa Graham, chairman of the GRTF and SBC sub-group.

Currently, large IT services firms like EDS and Capita have been awarded the majority of central government contracts.

But the importance of small firms should not be underestimated, according to Tola Sargeant, an analyst at research firm Ovum Holway.

"Many of the smaller firms have specialist knowledge that larger firms simply do not have," she said.

The Office of Fair Trading (OFT) is considering applying special rules to markets such as technology, where small businesses are important in fostering competition and innovation.

Such rules could stipulate that public sector contracts should come with a minimum percentage to be awarded to small businesses. But it would be difficult to enforce, according to Sargeant.

"It would be a massive logistical exercise trying to measure where contract wins have gone through sub-contracting. The best chance for small businesses to win this business may be as part of a consortium," she said.

Graham suggested that smaller firms would also be helped by an easier submission process for tenders, and training to deliver better tenders.

Ovum Holway predicted that public sector IT spending is set to rise by nine per cent annually until 2005, in contrast to private sector spending which looks set to remain static.

The government sector will therefore be a lucrative market for resellers looking to grow their business.

A decision on the recommendations is expected within two months. The Prime Minister has asked for ministers to respond within 60 days, and an OFT spokesman confirmed that it was currently studying the report.