What are the barriers for SMEs when bidding for government contracts?

Andrew Hawkins

Last week, TechUK published its seventh annual GovTech SME Survey, analysing the opinions of 100 SME members on a range of topics.

The key takeout from the survey was that SMEs operating in the public sector continue to face challenges. 

Overall, only 27% feel government is helping small companies break into the public sector, while 92% don’t think it understands how small businesses can meet its needs.

Amongst its five recommendations for government to improve its relationship with SMEs, Tech UK said it wants more pre-procurement engagement and support on the social value question. 

To level the playing field against larger competitors, it also suggested fewer frameworks and advocated the appointment of a ministerial SME champion to better understand the needs of SMEs.

Here are my thoughts on some of the themes from the survey.

A lack of early industry engagement

Based on my experience, early industry engagement happens in three ways. The first is no engagement, which leaves potential suppliers in the dark. The second is when engagement occurs but the information is general and doesn’t allow suppliers to determine if the opportunity is worth pursuing. 

The third, and most effective form of engagement, is when clear and practical information is provided about what is needed as well as broader cultural and environmental elements of the client’s requirements. 

Pre-market engagement is very helpful when it’s done well and the buying organisation is committed to it. It saves us time because we can quickly determine if the opportunity is worth bidding on. 

And for the ones we bid on, it gives us a better understanding of how to approach the project. The benefit to the buyer is the opportunity to get more innovative and better value proposals from a broader range of suppliers.

I have seen some great examples of pre-market engagement, for instance, from the Home Office. And more should be encouraged to do the same. 

Too many procurement frameworks

The Digital Marketplace was a great tool that helped SMEs access more opportunities. The TechUK survey found that 59% of respondents believe it helped improve SME access to the marketplace.

But the portal was retired recently, much to the annoyance of many. The Crown Commercial Service (CCS) says it was closed because it is no longer fit for purpose. But the move feels like a step backwards.

Generally, there are too many procurement frameworks, which can be difficult for small businesses to navigate. 

You still get government organisations with their frameworks, meaning SMEs must submit separate applications for each. These applications are never as simple as you think and are onerous for SMEs with limited resources. 

While some organisations need their own frameworks due to special requirements, I feel most opportunities can go through existing CCS frameworks.

The risk-averse culture within the civil service

According to the survey, SMEs think the government is too afraid of taking risks, which makes it hard for smaller companies to access the public sector market. 

It’s true that during tough times, the government tends to go with larger suppliers because they feel it’s more secure. But we’ve found that showing evidence of our capabilities and following industry standards helps build confidence.

We’re good at adopting basic capabilities and proving our skills. For example, we have certifications like ISO 27001 and cyber essentials, and we follow GDS/CDDO practices and other security and cloud standards. We’ve also won and delivered government projects that evidence our understanding of the complexities around security, delivery, and aligning with the public sector’s culture. A recent example of that is the work we did with the Home Office. 

As part of our growth trajectory, we’ll take on larger contracts between £10-20m. Although we’ve been successful in working with public sector clients — as we haven’t really seen too much of this risk-averse nature — it will be interesting to see if being an SME puts us at a disadvantage when it comes to these bigger projects.

Is the social value requirement too onerous?

New procurement measures implemented in 2021 require social value contributions to account for at least 10% of the overall assessment score. 

While SMEs support social value objectives, some have found implementing the policy challenging. Larger companies have the capacity and financial resources to show more output regarding their social value work.

Small businesses can still perform well but it depends on how the government measures social value. Is it based on the quantity or the quality of the work?

Our responses to social value questions are strong and we score at the top end. Our focus isn’t just on showing outcomes but also demonstrating our commitment to doing more in this area — something that’s baked into our values and mission. 

But government organisations need to give guidance and practical examples to SMEs of what good social value looks like. 


Andrew Hawkins is the Public Sector Lead at Zaizi. If you would like to speak to him or find out more about our work, please get in touch.

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