Government moves to exclude bids from suppliers who treat subcontractors badly
Cabinet Office announces new measures to clamp down on late payments to SMEs in supply chain
Now-bankrupt Carillion was among the major suppliers that fail to pay its subcontractors on time. Credit: PA
The Cabinet Office has announced a raft of measures designed to boost opportunities for small businesses to gain government work, including excluding bids for major contracts from suppliers who fail to pay their subcontractors on time.
The proposals include requiring bidders for government work to “demonstrate fair and effective payment practices with their subcontractors”, and giving subcontractors “greater access to buying authorities to report poor payment performance”.
The government spends £200bn on goods and services each year, and has set a target to spend a third of that budget with small and medium-sized enterprises (SMEs) by 2022.
It has also committed to improving payment practice in the UK, in recognition of the problems faced by small businesses who have complained of consistently delayed payments from major contractors including the now-collapsed Carillion.
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Oliver Dowden, minister for implementation in the Cabinet Office, announced the changes today, following discussions in March with the Federation of Small Businesses, the Confederation of British Industry, and industry bodies representing social enterprises, entrepreneurs, and chambers of commerce – which together represent an estimated two million UK small businesses.
Dowden said the government was listening to the business community and “committed to levelling the playing field for smaller suppliers to win work in the public sector”.
He added: “We have set a challenging aspiration that 33% of procurement spend should be with small businesses by 2022 – and are doing more than ever to break down barriers for smaller firms.
“Small businesses are the backbone of the UK economy, and play a key role in helping us to build a strong, viable private sector that delivers value for taxpayers and jobs for millions all over the UK.”
Despite the target, Cabinet Office data published in November revealed that government spend with smaller firms had dropped from 27.1% in 2014-15 to 24% in 2015-16. The figures included both direct spend with SMEs, which had actually increased marginally from 10.9% to 11%, and indirect spend through the supply chain with subcontracted suppliers, which had fallen from 16.2% to 13%.
Among the new measures introduced by the Cabinet Office, government suppliers are now required to advertise subcontracting opportunities via the Contracts Finder website and to provide data on how small businesses in their supply chain are benefitting from supplying to central government.
Prime minister Theresa May has also asked each member of her Cabinet to nominate a minister in their department to act as a small business champion.
Responding to the announcement, Emma Jones, the government’s crown representative for small business, said: “Securing a government contract is a great way for small firms to bring in a steady income stream that can really help their business to grow.
“These measures demonstrate the government’s clear commitment to small business, ensuring they can easily find and access new opportunities to supply to government.”
Mike Cherry, national chair of the Federation of Small Businesses, also responded to the package of measures, highlighting the “clamp down on poor payment practice throughout public procurement supply chains” as a particularly welcome.
He added: “Companies who pay late should not be rewarded with public sector contracts. We need a robust public procurement process that holds larger companies to account for their payment practices.”
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