SME Survey: a look into the public sector

Ellie Huckle, Programme Manager for Central Government, techUK, looks at the role that small businesses have to play in transforming public service delivery through their innovation

Small businesses have the potential to transform public service delivery, this is clear to us and has long been acknowledged by government. Furthermore, SMEs make up 99 per cent of UK businesses so it is paramount for the government to work alongside them to meet their needs. However, it is no secret that the public sector technology market is a difficult place to operate for SMEs, with various barriers standing in their way.

The government’s ambition and commitment is evident, they set themselves an SME target of spending £1 in every £3 of their annual tech spend on SMEs by 2022, appointed departmental champions, launched the Digital Marketplace, and have an SME Crown Representative. And whilst we have seen some improvements over the years – the UK is still not harnessing small businesses as much as it should be.

SMEs are all too often overlooked, especially by the public sector. SMEs are agile and they are also extremely innovative which is absolutely crucial when it comes to transforming public service delivery.

In recognising all this, here at techUK we run an annual GovTech SME Survey. From January 2021 to March 2021, we surveyed over 100 SMEs who work in or aspire to work in the public sector to gather their experiences of the market. The findings from the survey are then used to develop recommendations to promote GovTech innovation, ensure a smoother experience when it comes to procurement, and generally help improve access to the public sector market for SMEs.

The survey found that 65 per cent of respondents feel that the Digital Marketplace, an online platform that allows public sector organisations to search for people and technology for digital projects, continues to help improve SME access to the public sector technology market by making opportunities in the public sector more visible and open to all – this number is up from 60 per cent last year and we hope the Digital Marketplace will continue to be a shining light for access to the public sector technology market.

However, we found that a very worrying 92 per cent of respondents do not believe that government buyers have sufficient understanding of how small businesses can meet their needs. This number has been on the rise for the last three years, increasing from 85 per cent to 91 per cent last year. Although SMEs are small, their innovative nature means that they are more than capable of meeting government requirements. Which is why helping SMEs access the market is a crucial part of the work we do here at techUK, and we want to help government recognise the benefits of using SMEs in order to properly utilise their skills and capabilities.

There are a number of significant barriers faced by SMEs trying to access the public sector technology market, and they need to be properly addressed and broken down in order to ensure a smoother procurement process for SMEs. Unfortunately, these barriers have remained largely the same for the past couple of years and the public sector has a huge job to do in giving SMEs more assurance.

The top three obstacles for small businesses identified by our survey respondents are as follows:

A risk-averse culture within the civil service: Despite explicitly extolling the virtues of SMEs, the public sector still struggles to harness them, and this starts with the culture. Going to larger organisations is the most obvious option for public sector bodies, and they perceive this to be the 'safest' one too. This means that many SMEs don’t get the opportunity to showcase their abilities and prove to government that they are just as good, if not better.

Too many frameworks: Public sector frameworks have proved to be a real challenge for small businesses, and at the moment procurement processes are viewed as onerous and frameworks complex. Unlike larger organisations SMEs do not have dedicated framework teams, so getting onto frameworks in the first place requires a huge amount of resource and time that many SMEs just don’t have.

A lack of meaningful early industry engagement: A lack of meaningful early industry engagement is disadvantageous to many SMEs. All too often small businesses are not aware when contracts are about to be published so frequently miss the chance to get onto frameworks and lose out on the opportunity to engage with government buyers beforehand, significantly reducing their chances of supplying to the public sector. Encouraging more early market engagement would give SMEs more time to understand better the requirements, and more time to respond, which will enable them to put their best foot forward.

Despite the enduring challenges, our survey revealed that 40 per cent of respondents do feel that the government has acted on its commitment to helping small businesses break into the market over the last five years – this is promising and reflective of the signs of improvement that we are seeing and of the continued efforts from government, but the figure is still disappointing, and any changes that are happening are proving to be marginal and very slow.

Perhaps one of the most significant findings from our survey is that 82 per cent of respondents want to deal directly with government, rather than work through large organisations as their main route to market as they so often have to do. While some SMEs are very happy to partner up with larger organisations, when it comes to submitting bids, the large majority want to be able to sell directly to government so they can build vital relationships with government departments and increase their visibility to them.

With that said, 81 per cent of respondents do still see the value in partnering with larger organisations but would like to see more from government to encourage larger organisations to work with SMEs effectively. But whether an SME is selling directly to government or indirectly through partnering with a larger organisation, one thing is clear, they all want the same thing - for the procurement process to be smooth and to deliver the right outcome.

Disappointingly, the bottom line still remains, that selling to the public sector continues to be a complex process for SMEs and SME trust in government is extremely limited. It is clear that more work needs to be done urgently.

Following the results of our annual GovTech SME Survey we developed six recommendations for government to help enable SME access to the public sector technology market, these are as follows: more early pre-procurement market engagement, wider use of the Digital Marketplace, more use of Dynamic Purchasing Systems, Annual Price Review built into contracts, fewer frameworks, and ministerial SME Champions.

We need to see government work closer with SMEs on understanding their skills and capabilities and how to make use of them effectively, recognise how SMEs can meet its needs and work to properly address the major challenges. These points combined with our six recommendations for government will no doubt improve the situation for SMEs in time. We know it will not be an overnight fix, but they will certainly ensure that things continue to head in the right direction and help drive the next leap forward in access to the public sector technology market for SMEs.