Open mike The government’s push for large framework deals is proving costly for smaller firms. So a new Strategic Forum survey aims to find out how bad it’s getting.
Actions taken to secure a positive outcome for one group often have a negative effect somewhere else down the line.
This could be the fate that has befallen some small and medium-sized enterprises (SMEs) in the wake of the government’s drive to improve local authority procurement. Indications are that these firms are losing access to a £14bn market where they have traditionally won work.
Under pressure to become more efficient, many councils are simplifying their procurement processes. Instead of going out to tender for small and medium-sized contracts, they roll together contracts for new build and maintenance, forming framework agreements that last up to four years.
Many SMEs are said to be too small to take on such contracts, but it does not have to be that way. Frameworks should be structured to allow firms of all sizes to operate in them.
The intention with framework contracts was that local contractors would form part of the supply chain, but increasing numbers of firms say this is not happening.
This is a missed opportunity to embrace the ethos of Egan and Latham – which recognises the benefits of collaborative working – by excluding the very sector where these principles are most common.
There is a real risk of damage to local supply chains, and the loss of local knowledge and long-term relationships. Local services and products and an understanding of markets that has been developed over many years by consultants, contractors, subcontractors and suppliers cannot be artificially replicated. Perhaps the real loser in the long term is the client.
There is also the potential loss of best practice know-how. Because smaller firms work for public and larger private clients, they have to comply with tough standards on health and safety, employment conditions and environmental management. If this link between the public sector and SMEs is severed, these benefits would be lost to the occasional client.
The intention with frameworks was that local contractors would form part of the supply chain, but this is not happening
SMEs form the basis of the industry and are probably the principal entry point for apprentices and trainees. Weakening that foundation could threaten the stability of the whole edifice. This is a serous concern, which is why the Strategic Forum’s SME Working Group is launching a survey, run by the National Federation of Builders (NFB), to canvass the views of SME contractors.
At the moment, we have anecdotal evidence but few hard facts to support the case.
I hope the survey will shed light on whether there is a problem, and if so, how serious it has become.
If the study shows the extent of the danger to be as significant as some fear, we will need to explore a range of options to find a way forward. One may be to confine frameworks to contracts worth more than £5m and introduce banding levels.
Another would be to introduce local sustainability criteria into framework agreements, covering areas such as employing and training local people and ensuring the local pound stays in the local economy – along with revenue for local government derived from SMEs.
Overall, a more workable solution might be that advocated by the NFB, which favours a “mixed economy” approach to procurement, involving a balance of traditional tendering and frameworks.
Feedback from SMEs from all parts of our industry is crucial to the success of this study in achieving a meaningful result.
Bill Rabbetts is chairman of the Strategic Forum SME Working Group and former chairman of the National Federation of Builders