A government pledge to end the “procurement oligarchy” that shuts out small firms has divided the sector, with larger contractors warning that the move will increase suicide bidding.
At a recent ‘SME summit’ at the Treasury, attended by H&V News, Prime Minister David Cameron and Cabinet Office minister Francis Maude outlined a package of measures to help smaller firms win more work.
The plans could see the dismantling of large contracts and a move away from frameworks. The Prime Minister unveiled plans to eliminate PQQs for all contracts under £100,000 and introduce a single PQQ form for all procurement of common commodities, emulating the PAS91 scheme.
He also launched the Contracts Finder website, announced the appointment of Crown commercial representative Stephen Allott to build dialogue between government and smaller suppliers, and promised Dragons’ Den style product surgeries where SMEs can pitch innovative products.
These measures follow the conclusion of a review of contracts with large suppliers.
Mr Cameron said the changes would provide billions of pounds of opportunities for SMEs, making the system more transparent.
He said: “Too many contracts are signed off behind closed doors, with little or no public scrutiny. That can be good for the contractors, who can charge over the odds without being properly challenged. However, it is not good for the taxpayer, who is being shortchanged and denied value for money,” he said.
Mr Maude said the measures would put an end to the “procurement oligopoly” that shuts out small firms.
Construction SMEs welcomed the measures, saying they would benefit industry and the taxpayer.
Crofton Design managing director Steve Hale said his firm had focused on local relationships after losing out on complex procurement schemes such as Building Schools for the Future.
“There’s a real benefit for SMEs who can deliver better value, as it gets away from national contractors with huge overheads,” he said.
Another SME contractor said the moves would help “level the playing field”.
But reaction higher up the supply chain was less positive. The director of one larger SME said: “Breaking up some of the huge contracts held by the likes of Carillion and Balfour Beatty would be useful, but if they are thinking about splitting up frameworks it would be disappointing - it would mean bottom price, poor service.”
National contractors also urged caution, arguing that framework agreements and large contracts offered economies of scale that help keep down the cost.