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Journal of Purchasing & Supply Management 21 (2015) 103–112

Contents lists available at ScienceDirect

Journal of Purchasing & Supply Management


journal homepage: www.elsevier.com/locate/pursup

SME suppliers and the challenge of public procurement: Evidence


revealed by a UK government online feedback facility
Kim Loader n
The York Management School, University of York, Freboys Lane, Heslington, York YO10 5DG, United Kingdom

art ic l e i nf o a b s t r a c t

Article history: The UK public sector provides an important opportunity for firms to transact business with an attractive
Received 10 October 2013 customer. However there is concern that public procurement processes place smaller firms at a
Received in revised form disadvantage. The views of small firms are under-represented and this paper provides additional, new
10 December 2014
evidence in order to improve our understanding of their difficulties with public procurement. A UK
Accepted 16 December 2014
Available online 31 December 2014
Government online feedback facility has provided an original, extensive and rich source of material from
SME suppliers. It reveals a public procurement process which SMEs perceive to be frustrating and biased
Keywords: against them. Many of the concerns have been reported previously; overly prescriptive qualification
Public procurement criteria, poorly written tender specifications and prohibitive resource requirements remain the most
SMEs
common barriers but the need to supply via a third party is emerging as a new concern. Contract size,
UK
contract length and supplier rationalization did not feature as much as expected. Overall, SMEs are
Content analysis
concerned about public procurement practices and the competence of public procurement officers.
Whilst the UK government is implementing a series of measures, targeted to address these concerns,
further research is required to determine their scope and impact.
& 2015 Elsevier Ltd. All rights reserved.

1. Introduction they still remain (Loader, 2011; Flynn et al., 2013a) despite attention
being given to the issue by successive governments.
Public procurement, whereby a public sector organization obtains In the UK, at the start of 2013, SMEs accounted, in number, for
goods and services from a third party by way of a contract, is 99.9 per cent of the 4.9 million private sector businesses and 48.1
significant both economically and politically (Harland et al., 2013). per cent of private sector turnover (BIS, 2013a). They are recog-
Recent estimates (OECD, 2013) suggest that on average public nized by the UK government as being critical for economic growth,
procurement accounts for approximately 12.8 per cent GDP for for example through job creation, but their contribution to public
OECD countries. In 2012–2013 the UK public sector spent approxi- procurement is also recognized, with SME participation increasing
mately d230 billion on the purchase of goods and services, of which both competition and innovation (Glover, 2008; Cabinet Office,
d192 billion comprised current spending by central and local govern- 2013). Therefore evidence that SMEs continue to be under-
ment, the NHS and devolved administrations (House of Commons, represented in the award of UK public sector contracts (BERR,
2014). The volume and range of public sector spend provides a 2007; Freshminds, 2008) has led to the current UK government
significant business opportunity for firms to trade with an attractive, being the latest to express its concern about the difficulties facing
reliable and prestigious customer (Michaelis et al., 2003; Loader, small suppliers. Consequently it has embarked upon a series of
2005). However, there have been concerns voiced about the chal- initiatives to address their problems, including the announcement
lenges of public procurement for small and medium-sized enter- of an aspirational target to spend 25 per cent with SMEs by the
prises (SMEs). They struggle to find the resources to engage with a end of the Parliament in 2015 (Cabinet Office, 2010), the appoint-
bureaucratic process and are disproportionately affected compared ment of a representative for SMEs and the launch of an online
to larger suppliers (Glover, 2008). Barriers were reported over 20 portal for advertising contract opportunities (Cabinet Office, 2011).
years ago (MacManus, 1991; O’Brien, 1993) and evidence suggests Concern about SME engagement with the public procurement
process has led to increasing interest by the academic and policy
communities, nationally and internationally. Various studies have
examined the challenges that public procurement presents to SMEs,
n
Tel.: þ 44 1904 325029. eliciting evidence about the extent and nature of the difficulties and
E-mail address: kl538@york.ac.uk attempting to provide remedies (for example: Bovis, 1996; Erridge

http://dx.doi.org/10.1016/j.pursup.2014.12.003
1478-4092/& 2015 Elsevier Ltd. All rights reserved.
104 K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112

et al., 1998; Zheng et al., 2006; Glover, 2008). The need to under- approach adopted within the UK (House of Commons, 2014). First
stand both the SME and public sector perspectives has led to explicitly articulated Cabinet Office (1984), value for money is
evidence that has been acquired from public sector procurers currently defined as: “securing the best mix of quality and
(Loader, 2007; Preuss, 2011) and SMEs, including those which have effectiveness for the least outlay over the period of use of the
successfully engaged with the process and been awarded contracts, goods or services bought. It is not about minimizing up front
those which were unsuccessful and those which had not partici- prices” (HM Treasury, 2013: A4.6.3). However, it has been increas-
pated, but would like to do so (Fee et al., 2002; Loader, 2005; ingly recognized that public procurement can be used more
McKevitt and Davis, 2013). However, it has been noted that strategically to achieve additional aims (OECD, 2013). Within this
responses from public sector suppliers can be difficult to collect “extended policy environment” (Schapper et al., 2006: 11) it acts
(Cabras, 2011) and (McKevitt and Davis, 2013) conclude, following as a vehicle for achieving wider socio-economic goals (Erridge,
their review of literature, that the voices of small firms which do 2007) such as sustainability (Walker and Preuss, 2008), supporting
compete for public contracts are under-represented. SMEs, encouraging innovation (OECD, 2013) and aiding minority
The purpose of this paper is to contribute further supplier owned businesses (Ram and Smallbone, 2003; Temponi and Cui,
generated evidence and to improve the level of representation of 2008; Kidalov and Snider, 2011). As a consequence, procurement
SME suppliers, in particular, to the debate. The UK government strategies to support the environment and SMEs, for example,
established an online feedback mechanism which asked SMEs have been established by the majority of OECD countries, 72 and
about their problems with public procurement in order to inform 63 per cent, respectively (OECD, 2013). However, it has been noted
policy discussions on the issue. The contributions to this facility that there are no incentives for procurers to take these wider
have provided the evidence which we report and discuss here. issues into account (Schapper et al., 2006) with the suggestion that
Specifically, the paper examines: they should be addressed through other policy initiatives (NERA
Economic Consulting, 2005). Such a range of goals provide addi-
(1) The range, frequency and nature of barriers to public procure- tional challenges for procurement staff (NAO, 2013) including
ment reported by SMEs and policy conflicts (Loader, 2007; Preuss, 2011) and it is claimed that
(2) The implications for policy and future research. the success and balance of goals achieved is affected by the
discretion and competence of procurement staff (Kidalov and
The evidence from this paper will add to the procurement and Snider, 2011).
supply chain literature, as well as being of interest to the small Although value for money has remained at the forefront of UK
business and public policy communities. There has been recogni- procurement policy, a focus on savings has also been evident
tion of a limited academic interest in SMEs within the field of (Loader, 2007) and remains so, more explicitly, as part of the
procurement and supply chain management and criticism of the current government’s austerity measures (House of Commons,
preoccupation with large companies (Ramsay, 2008), although the 2013). The OECD (2013) has also identified that savings are being
calls for further research have focused primarily upon SME sought, through a variety of measures including centralization of
purchasing (Morrissey and Pittaway, 2004; Ellegaarde, 2006). the procurement function, the aggregation of purchases in order to
However, whilst our knowledge of the purchasing behaviour of achieve economies of scale and by the introduction of innovative
large organizations provides limited insights for the SME purcha- practices. In the UK, public procurement contributed savings of d3
ser, it does have repercussions upon the SME as supplier. For billion in 2010–2011, the first year of the Coalition government,
example, supplier rationalization adversely affects the chances of increasing to d5.4 billion in 2013–2014 (Efficiency and Reform
SMEs becoming prime contractors. This paper addresses this Group, 2014). These were achieved through centralizing the
aspect in relation to public procurement organizations. procurement of some common goods and services, renegotiating
The remainder of this paper is structured as follows. The paper contracts, and reducing spend in some areas such as advertising
begins with a literature review that outlines the public procure- and consultants (House of Commons, 2013). To an extent these
ment context and then considers the existing evidence about SME measures are a continuation of a collaborative approach which has
participation in public procurement. In the following section the existed over a 20 year period in an attempt to encourage govern-
methods employed are presented; the data source is explained ment to maximize its buying power (Loader, 2011).
and the decisions and resulting approach to the content analysis
are presented, including the coding process. In the fourth section, 2.2. Public procurement and SMEs
the results of the analysis are presented and discussed. These
demonstrate that many of the previously highlighted barriers The concern over SME access to public procurement needs to
continue to hinder SME participation, but that some – including be viewed in a wider context which recognizes the significant role
newly emergent concerns – are becoming more prominent. of SMEs within an economy, both in terms of their economic
Remedies and government actions are also discussed. The final presence and the contribution that they can make to economic
section sets out the conclusions of the study, also identifying growth. SMEs, in the UK defined as firms with 0 to 249 employees,
limitations and further research. comprise 99.9 per cent of private businesses and account for 59.3
per cent of private sector employment and 48.1 per cent of private
sector turnover (BIS, 2013a). But it is their potential to stimulate
2. Literature review innovation, competition and job growth (BIS, 2013b; Fee et al.,
2002; Glover, 2008) contributing to economic growth that is
2.1. Public procurement context valued. However, evidence suggests that there are obstacles which
are hindering their success: the internal capacity and capability of
Public procurement is a significant activity for governments the SME, the vision of the owner, and the external environment
because of its scale and, increasingly, because of the broader roles (BIS, 2013b). The latter category, which is the most frequently
it can perform (Arrowsmith, 2010; Harland et al., 2013). According reported, includes concerns about access to public procurement.
to the OECD (2013) it accounts, on average, for 12.8 per cent GDP, In recognition of their importance to economic growth, the
equivalent to 29 per cent of general government spending. The government is intent upon supporting SMEs by addressing obsta-
primary procurement aim across most jurisdictions is achieving cles using a variety of measures, including improving access to
value for money (World Trade Organisation, n.d.) and this is the public procurement. The Coalition’s programme for government
K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112 105

included the aspirational target that 25 per cent of government Pursuit of better value for the public sector is also driving the
contracts be awarded to SMEs by the end of the Parliament in 2015 strategy of supplier reduction via collaboration and aggregation of
(Cabinet Office, 2010). In the current, difficult economic climate contracts, claimed by Smith and Hobbs (2002): 22 to be “perhaps
SMEs have reported that a reduction in demand is their main the most fundamental strategic issue currently impacting upon
economic concern (BIS, 2013c), and therefore public procurement SMEs selling into the public sector”, an issue still in evidence more
provides opportunities to SMEs to gain work. Therefore its recently (Loader, 2011; Preuss, 2011). Other environmental factors
identification as a barrier undermines its potential as a means of such as risk-averse attitudes associated with the public sector, and
support. This is borne out by figures which show low and the impact of devolved service delivery have also been identified
declining levels of SMEs either working for the public sector or as creating barriers for SMEs (Loader, 2005; Pickernell et al., 2011;
participating in the procurement process. The most recently Preuss, 2011).
published Small Business Survey (BIS, 2013c) reports that whilst However, evidence suggests that SME factors also play a role. It
26 per cent of SMEs had carried out work for the public sector in has already been noted that the procurement process is resource-
the previous 12 months, only 10 per cent had submitted a bid, demanding and SMEs appear to lack both sufficient and appro-
both down on 2010 figures by 4 and 2 per cent, respectively. These priate resources for the task. A lack of electronic resources, legal
figures do not reflect the position of SMEs in the economy. expertise (Karjalainen and Kemppainen, 2008) and marketing
There has been an increasing body of evidence demonstrating capability (Michaelis et al., 2003; Walker and Preuss, 2008) are
the low level of representation of SMEs in public procurement, examples of resource deficiencies which are hindering progress.
both in the UK and internationally (Glover, 2008; GHK, 2010; Finally, various contributors to the debate have considered the
Harland et al., 2013). Studies have been carried out to determine appropriateness of the public procurement market for SMEs and
the reasons for the low engagement and poor access, and a range attempted to present a more realistic expectation about the scope
of barriers have been identified. The evidence suggests that the and extent of their engagement with the process. The debate
reasons can be grouped into those emanating from the public centres upon two main issues; firstly, the sectors – or products –
sector and others relating to the capacity and capabilities of SMEs that are more suited to SME supply and secondly, the position of
(Michaelis et al., 2003; Smallbone et al., 2009), and the public the SME in the supply chain. In relation to the type of supply,
sector dimension has been further divided to reflect the dual evidence suggests that SMEs are most likely to be involved in the
impacts of both the public sector environment and the public supply of routine products (CRiSPS, 2006) and also may be suited
procurement process (Loader, 2013). to supplying smaller, niche markets (Glover, 2008). Specific sectors
Some barriers which are associated with the public procure- where SMEs are seen to have a stronger presence include facilities
ment process can be prohibitive for all businesses wishing to management, construction, consultancy, social services (Loader,
supply government. Slow payment, poorly defined specifications 2007; Glover, 2008; Cabras, 2011; Pickernell et al., 2011), although
(MacManus, 1991), a long expensive bidding process (Cabras, 2011) tier of government has been found to influence appropriateness.
and a concern that tender prices must be low (Michaelis et al., 2003) Services with a local dimension are more likely to be procured by
are examples of issues that have been raised. However, there are local government and offer opportunities for local SMEs in
concerns that SMEs face additional and disproportionate challenges particular (Loader, 2013). SMEs can supply the public sector
which can result directly from their size and limited resources directly, as prime contractors, but it has been claimed that sub-
(Smallbone et al., 2009). Several authors have identified barriers that contracting is likely to provide most opportunities (Glover, 2008).
are associated directly with the public procurement process, ranging The Coalition government’s aspirational target that 25 per cent of
from difficulties in identifying opportunities (Michaelis et al., 2003; central government spending be with SMEs includes both direct
Loader, 2007) through to the decision to award the contract and its suppliers and those in the supply chain. However, quantifying both
subsequent management. In order to improve the success of SMEs in amounts is challenging but especially supply chain data as most
securing contracts they must first be encouraged to participate in prime contractors do not routinely collect SME statistics (NAO,
the tendering process, but evidence suggests that there are a 2013). Some data is available from the latest Small Business Survey
number of factors which discourage SMEs from tendering; for (BIS, 2013c) which found that 11 of the 26 percent of SMEs that
example contract size is often claimed to be too large for SMEs stated that they had worked for the public sector in the last
(Bovis, 1996; Erridge et al., 1998; Morand, 2003; Loader, 2007), and 12 months were in the supply chain, rather than prime contrac-
contract length can also be excessive for SMEs (Loader, 2011). tors, a decrease of 5 per cent on the 2010 figures. There are
Other aspects associated with public procurement can also concerns that engagement as a sub-contractor is less rewarding;
discourage participation or contribute to tenders not being suc- margins can be reduced, payment can be slower and the input of
cessful. The need to demonstrate a track record (Loader, 2005; the firm – its ideas – can be reduced (Glover, 2008), all of which
Walker and Preuss, 2008; Pickernell et al., 2011), overly prescrip- are likely to deter SME engagement.
tive requirements including technical, professional and economic
criteria (Loader, 2005; Freshminds, 2008) and the long, costly and 2.3. SME evidence
complex tendering process (Loader, 2007; Freshminds, 2008;
Glover, 2008; Cabras, 2011; Peck and Cabras, 2011) have all been The previous section reports data which has been collected
acknowledged to disadvantage SMEs more than their larger from both public sector organizations and SMEs, and both per-
competitors. SMEs are also being adversely affected by develop- spectives are required in order to fully understand the causes and
ments in the broader public sector environment. Several studies nature of the obstacles which are affecting SME access to public
have drawn attention to the pressures that procurement officers procurement. However, greater awareness of the SME position will
face in balancing competing objectives and the lack of clear enable policymakers to target their interventions to support SMEs
priorities (Zheng et al., 2006; Loader, 2007; Glover, 2008) and more effectively (BIS, 2013b). In carrying out this literature review,
the impact of supplier rationalization (Curran and Blackburn, the existing evidence has been analyzed and collated in order to
1994; Loader, 2011) both of which are seen to be more detrimental determine the extent of SME derived data and the methods which
for SMEs. For example, Peck and Cabras (2011): 21 identify the have been employed. An overview of the evidence is presented
“vulnerability of SMEs” in the face of a narrow interpretation of in Table 1. As can be seen, there are SME derived contributions
value for money, with prior evidence demonstrating a belief that reported by academic studies and government and business
SMEs are less able to compete on price (Loader, 2007). commissioned reports. There appears to be an increase in the
106 K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112

Table 1
Public sector procurement: sources of SME evidence.

Author Year Country Data collection method Data source

Academic journal articles


MacManus 1991 US Survey All size firms
Bovis 1996 UK and Ireland Survey SMEs
Fee, Erridge and Hennigan 2002 NI Semi-structured interviews SMEs
Loader 2005 UK Survey SMEs
Suppliers and non-suppliers
Karjalainen and Kemppainen 2008 Finland Survey SMEs
Pickernell, Kay, Packham and Miller 2011 UK Statistical analysis of FSB survey SMEs
Woldesenbet, Ram and Jones 2012 UK Case studies SMEs
Suppliers to public and private sectors
Orser, Riding and Weeks 2012 US Survey SMEs
Flynn, Davis, McKevitt, McEvoy 2013a Ireland Survey All size firms
McKevitt and Davis 2013 Ireland Survey Micro suppliers
Flynn, McKevitt, Davis 2013b Ireland Survey SMEs

Non-academic (government/business commissioned reports)


Better Regulation Task Force & Small Business Council 2003 UK Review SMEs and representatives
Michaelis, McGuire and Ferguson 2003 UK Interviews All size firms
NERA 2005 UK Case studies SMEs
Freshminds 2008 UK Survey SMEs
Case studies Suppliers and non-suppliers
Glover 2008 UK Survey SMEs
Suppliers and non-suppliers
GHK 2010 EU Survey All size firms
60% SMEs
Broader studies
Temponi and Cui 2008 US Survey (Hispanic) SMEs
Peck and Cabras 2010 UK Survey All size firms
Interviews
Cabras 2011 UK Survey All size firms

amount of evidence becoming available but to date this has been nightmares have you had with procurement? What are we doing
predominantly collected by the use of (semi-) structured surveys, and wrong? How should we fix it?” Although the last element asks for
to have been analyzed using quantitative approaches (see for example suggestions of remedies, the emphasis is upon identifying con-
Bovis, 1996; Loader, 2005; Glover, 2008; Karjalainen and Kemppainen, cerns and problems and this is likely to have had an impact upon
2008; GHK, 2010; Pickernell et al., 2011). There is little qualitative the decision to provide feedback. The potential bias of the
analysis of SME supplier generated data available, although some respondents is noted and recognized in the discussion but the
detailed case study evidence has been published which has added content is consistent with the purpose of the paper which is to
richness to the evidence base (NERA Economic Consulting, 2005; understand more fully the nature and range of barriers, and not to
Freshminds, 2008). Therefore there appears to be a need for additional present a representative view of procurement experiences.
detailed contributions from SMEs, especially using qualitative The feedback facility became available on 1st December 2010
approaches, to develop the richness of the evidence base. and this study is analyzing the contributions reported up to and
including May 30th 2011, a period of 6 months, after which
contributions became infrequent. It was felt that this provided
3. Method an appropriate length of time to capture a sufficient volume and
range of views, and captured the comments of those suppliers
The aim of this paper is to present a detailed analysis of SME who were keen to express their views. During this period 282
suppliers’ views in order to contribute to the existing, predomi- contributions were posted which were all examined for relevance.
nantly quantitative evidence collected from SMEs. The paper is Eighteen were excluded as irrelevant as they dealt with other SME
adopting content analysis to provide additional evidence about the related topics (such as cashflow or VAT) or no clear point could be
range and frequency of barriers and also to provide further detail determined. In addition, another 12 were identified as being
about the nature of barriers experienced. The data comprises the second postings made by a previous respondent and thus their
voluntary reporting of comments by SMEs to an online feedback content was combined to provide usable contributions from 252
facility established by the UK government specifically to elicit the SME respondents. Although the site required contributors to enter
views of SME suppliers. The comments, now archived, were a name, the company name was optional, and there was no
publicly accessible via the official website of the Prime Minister’s requirement to provide further company details such as sector or
Office (GOV.UK, 2010). These voluntary contributions provide a size. Therefore it is not possible to provide a detailed analysis of
novel and original source of SME generated data. The data, which the sample based upon company characteristics or industry.
is in the form of text, can be seen as naturally occurring However it is clear that a range of sectors is represented including
(Silverman, 2006) having been provided without any direction or manufacturing, service and voluntary sectors (for example: boat
influence by a researcher. However it should be noted that the building, legal, property maintenance, grounds maintenance, civil
contributions are likely to have been influenced by the manner of engineering, media, IT). It is also clear that the contributors have
the request for information which was negative in tone. Interest- progressed to different stages within the procurement process,
ingly at least one respondent commented on the negative empha- and with varying degrees of success.
sis of the terms of reference. The web page was headed ‘Your The use of content analysis, and specifically an approach
problems with procurement’ followed by the questions: “What referred to as directed content analysis, is appropriate when there
K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112 107

is already an evidence base but where it is desirable to obtain evaluation and decision making process; and 3. poorly written
further detailed description (Hsieh and Shannon, 2005) which is specifications including ambiguity, duplication and lack of stan-
consistent with the aim of this paper. Content analysis can be dardization. The latter two items are included separately because
carried out using both a quantitative and qualitative approach and of the useful level of detail relating to practice. The complete list of
both approaches have been used here, the combined approach barriers can be seen in Table 2, with the 4 additional items
aiding triangulation (Kohlbacher, 2006). Quantitative analysis can identified by italics.
determine the frequencies of codes occurring and qualitative The first stage of the analysis coded the comments based upon
analysis can be used to provide descriptive support for the codes the revised listing of 27 categories and recorded their frequency.
(Hsieh and Shannon, 2005). Here, the wording used to elicit the The results of the frequency analysis across the 27 barrier types,
feedback suggested that the comments would revolve primarily presented in ranked order, can be seen in Table 3. In total, 552
around the difficulties that public procurement presents (“Your comments relating to barriers have been made by the respondents.
problems with procurement.” “What nightmares have you had These responses are well spread across the various categories of
with procurement? What are we doing wrong?”) and suggestions barrier and range from a maximum of 92 comments down to zero.
about how to improve the situation (“How should we fix it?”) and The most frequent concern attracting 92 contributions (37 per cent
an initial examination of the data demonstrated that indeed the of contributors) relates to overly prescriptive requirements, with
barriers faced and suggested improvements were occurring the second and third most frequent being poorly written specifica-
repeatedly. As the focus of this paper is to learn more about the tions, noted by 68 respondents (27 per cent) and prohibitive
barriers, the content analysis will concentrate upon the data which resource requirements (67 respondents, 26.6 per cent). These all
addresses this aspect. However, remedies will be addressed within fall within the broader grouping of public sector procurement
the broader discussion of the findings. process and it is here that the majority of problems appear to
Using a directed approach it is possible to begin coding occur, attracting 84.1 per cent of all responses. The category ‘Overly
immediately using a set of pre-determined codes which will prescriptive requirements’ refers to the need to satisfy a range of
normally be derived from prior research evidence. The first step qualification criteria (Freshminds, 2008). A closer examination of
is to identify key variables which form the initial coding cate- the comments relating to this issue reveals that insurance is a
gories, but, as Atkinson (1992) observes, material can be organized frequent concern (noted by 23), namely the seemingly excessive
in a variety of ways. A recent review of the literature on SME and costly levels of insurance required for what can frequently be
engagement with public procurement (Loader, 2013) determined low risk and low value work. Respondents also referred to other
23 types of barrier faced by SMEs and these have been chosen as criteria that are difficult for SMEs: meeting turnover thresholds, the
the initial set of codes for both the quantitative and qualitative need to demonstrate a track record, and having policies in place
analysis. The second stage is to determine operational definitions relating to a range of issues such as health and safety, equal
for the coding categories, drawing upon existing theories and opportunities and the environment.
research evidence (Hsieh and Shannon, 2005). For example, in The ranking shows that the top eight types have all been
relation to public procurement, the term ‘bureaucracy’ which is referred to by at least 10 per cent of respondents and again the
one of the codes, is associated with excessive paperwork, includ- dominance of concerns relating specifically to the procurement
ing long and detailed forms and the need for suppliers to process, rather than the public sector environment or small
repeatedly submit similar information with each new tender business sector, can be seen. It is worth noting the frequency of
(MacManus, 1991; Glover, 2008). However, creating operational SME reluctance to engage with the process (perceived to be
definitions can be challenging when terminology is vague and is unfair), the comments about public sector procurers’ lack of
therefore subject to the researcher’s interpretation (Hsieh and professionalism and their risk averse attitudes, and the reference
Shannon, 2005; Baden and Harwood, 2011). to working through third parties. In contrast it is surprising that
contract size has featured directly as a concern by only five percent
of the feedback respondents, despite having been identified as an
4. Results and discussion obstacle by many authors over a 20 year period (for example
MacManus, 1991; Curran and Blackburn, 1994; Morand, 2003; Ram
4.1. Quantitative contents analysis and Smallbone, 2003; Walker and Preuss, 2008). Similarly,
increased contract length was identified by only one respondent
The results of the quantitative contents analysis are presented and the trend towards a reduced supply base was not mentioned
first. Each respondent’s contribution was examined and the at all by these SME respondents. These issues had both been
frequency of points relevant to each of the 23 coding categories identified previously (Loader, 2007), although it is interesting to
was systematically recorded. The length of comment varied con- note that this was based upon evidence from procurers rather than
siderably and so the number of codes per comment also varied, up from SMEs directly.
to a maximum of nine from one respondent. Hsieh and Shannon
(2005) point out that it is possible that the pre-determined codes 4.2. Qualitative content analysis
do not capture all the data, in which case further analysis is
required to determine if a new code or sub-category of an existing One of the benefits of this type of voluntarily reported data is
code is required. Interestingly it was found that the 23 codes did its richness, revealing both a breadth and depth of detail, and the
not allow all the issues raised by SMEs to be incorporated qualitative analysis attempts to portray this richness through the
successfully such that their significance was reflected, and so an use of selected, direct quotes. A tabular approach has been adopted
additional four barriers were added to this list. For example, the to present the words of the respondents alongside the 27 cate-
need to pay to access information was prominent in the feedback gories which were used as the basis for the quantitative analysis
and it was felt that this was not adequately captured within the (see Table 4). This approach both illustrates and supports the
more general ‘Prohibitive resource requirements’ (item 13); there- coding process. The selected quotes are an attempt to capture
fore this has been identified as a separate category. Further some of the detail, but more especially the style and emotion of
separate categories have also been created to represent: 1. the the responses shared on the site.
need to supply via a third party which appears to be a new Some of the comments are brief, straightforward statements
concern revealed by this evidence; 2. the too lengthy tender outlining a lack of knowledge or a difficulty faced (for example
108 K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112

Table 2
Barriers faced by SME suppliers.

Category Associated barriers

A. Public sector
A.1 Public sector environment
Policy 1. Competing procurement objectives, with lack of clear priorities
2. Supplier rationalisation leading to a reduced supplier base, and marginalisation of small
suppliers
Culture 3. Risk averse attitudes
4. Pro-large business attitudes
Organisation 5. Devolved processes produce complexity, confusion and inconsistency
A.2 Procurement process (adapted from Business Link, n.d.)
1. Identify opportunities that are available 6. Inability to determine appropriate contact
7. Lack of knowledge about procedures and opportunities
7a. Need to pay to access information
2. Determine contract requirements and decide whether or not to 8. Size of contract—volume prohibitive
tender 9. Contract length prohibitive
10. Uncertainty of work within a framework contract
3. Take part in tender process 11. Difficulty getting onto approved supplier list
Either 11a. Supply only possible via a strategic partner or other third party
a. Open procedure
Return tender by set date 12. Need to demonstrate a track record
Or 13. Prohibitive resource requirements associated with preparing bids: cost and time
b. Restricted procedure
Two stage process: 14. Overly prescriptive requirements
Pre-qualification stage 15. Bureaucracy
Invitation to tender 16. Procurers lack of professionalism: lack of training, technical expertise
16a. Poorly written specifications including ambiguity, duplication and lack of standardisation
16b. Tender evaluation and decision making process is too long
4. Contract awarded on basis of value for money 17. Narrow definition of value for money/cost focus
5. Supplier outcome:
Success. Contract awarded 18. Slow payment
Failure. Feedback on request. 19. Lack of/poor feedback

B Small Business Sector


Capacity 20. Lack of appropriate resources (management, administrative, marketing, language skills, legal,
electronic)
Skills 21. Poor completion of bids
22. Lack of required standards
Attitudes 23. Reluctance to engage with a process perceived to be unfair

Adapted from Loader (2013).

Table 3
Quantitative analysis of barriers ranked by frequency.

Barrier Type Barrier Respondents

No. Description No. %

A2 14 Overly prescriptive requirements 92 37


A2 16a Poorly written specifications including ambiguity, duplication and lack of standardisation 68 27
A2 13 Prohibitive resource requirements associated with preparing bids: cost and time 67 27
A2 15 Bureaucracy 45 18
B 23 Reluctance to engage with a process perceived to be unfair 39 15
A2 16 Procurers lack of professionalism: lack of training, poor technical expertise 30 12
A1 3 Risk averse attitudes 28 11
A2 11a Supply only possible via a strategic partner or other third party 26 10
A2 7 Lack of knowledge about procedures and opportunities 22 9
A2 17 Narrow definition of value for money/cost focus 18 7
A2 16b Tender evaluation and decision making process is too long 18 7
A2 12 Need to demonstrate a track record 16 6
A2 8 Size of contract—volume prohibitive 13 5
A2 10 Uncertainty of work within a framework contract 10 4
A2 18 Slow payment 10 4
B 20 Lack of appropriate resources ((management, administrative, marketing, language skills, legal, electronic) 10 4
A2 19 Lack of/poor feedback 8 3
A2 7a Need to pay to access information 8 3
A2 11 Difficulty getting onto approved supplier list 7 3
A1 4 Pro-large business attitudes 6 2
A2 6 Inability to determine appropriate contact. 5 2
A1 1 Competing procurement objectives, with lack of clear priorities 2 1
A1 5 Devolved processes produce complexity, confusion and inconsistency 1 0.4
A2 9 Contract length prohibitive 1 0.4
B 21 Poor completion of bids 1 0.4
B 22 Lack of required standards 1 0.4
A1 2 Supplier rationalisation leading to a reduced supplier base, and marginalisation of small suppliers 0 0
K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112 109

Table 4
Qualitative analysis of feedback.

Barrier type Respondents feedback (selected, illustrative quotes)

A.1 Public sector environment


1. Competing procurement objectives 1. Currently there is significant tension in government procurement between the agenda pursuing
centralised major contracts and one which is attempting to enable SMEs to bid for government contracts
2. Supplier rationalization 2. No response relating to this category
3. Risk averse attitudes 3. Public servants with whom we deal are now so risk averse that they are reluctant to take basic and
4. Pro-large business attitudes sensible measures around any spending decision
4. Have consistently been told that we are too small to tender
5. Devolved processes produce complexity, confusion and 5. One department not speaking to another, phrase “left hand not knowing what right hand doing” spring
inconsistency to mind.

A.2 Procurement process


6. Inability to determine appropriate contact. 6. Being able to contact the correct person in the correct dept is impossible
7. Lack of knowledge about procedures and opportunities 7. I don’t know where to look for opportunities
7a. Need to pay to access information 7a. The tendering process should be free to all and accessible by all—otherwise the process is not fair
8. Contract volume prohibitive 8. The bid packages are too big and too diverse for us anyway
9. Contract length prohibitive 9. Now the whole area/county only puts one tender out for the whole area, and this is locked in for five
years. Subsequently all small local companies don’t get a look in
10. Uncertainty of work within a framework contract 10. Framework contracts where you don’t even get asked to quote for any work—we have had three like
that one where when we followed up after a year of hearing nothing, the contract manager had moved on
and no-one knew the framework agreement existed!
11. Difficulty getting onto approved supplier list 11. The problem is getting on the list to be able to tender for small works
11a. Supply only possible via a strategic partner or other 11a. Even though we have provided consultancy direct to a department in the past we are now being told
third party we have to work via a managed services provider who will add no benefit and add additional cost as
margin to themselves
12. Need to demonstrate a track record 12. Start-ups are disregarded and seen as unreliable as they lack track record etc.—in a climate where
business start-up is supported and hailed not understandable
13. Prohibitive resource requirements associated with 13. and given the complex, time consuming and costly tendering process currently in place, we may be left
preparing bids with no option but to direct our energies elsewhere
14. Overly prescriptive requirements 14. The amount of public liability insurance and professional indemnity insurance demanded is simply
ludicrous and disproportionate to the value of contracts we are attempting to win. For example, one 6 week
product delivery contract valued at approximately d10K–d20K, required the supplier to maintain d10M of
public liability insurance and d5M of professional indemnity insurance for 5 years post delivery!
15. Bureaucracy 15. Paperwork is still too long and laborious including information that you have on us already
16. Procurers lack of professionalism 16. The public sector needs truly professional buyers
16a. Poorly written specifications 16a. Frustrating. Because the quality of PQQs is often low. The briefs are often worse. Lazy creators copy and
paste, without thought. There is often a lack of comprehension of need and an inability to communicate it
16b. Tender evaluation and decision making process is too 16b. There are SMEs that are prepared to commit time and resource to engage with the tender process, but
long who become disillusioned with the slow decision making
17. Narrow definition of value for money/cost focus 17. We have found that price is the main factor and the service you have given them over the years makes
no difference whatsoever
18. Slow payment 18. Our biggest challenge has been getting paid with payment often lagging 6 months behind the work
19. Lack of/poor feedback which is tough in terms of cash flow for any small supplier
19. At the moment you are lucky to get any formal feedback on an unsuccessful tender submission—and
when you do it is non-specific and of little value

B Small business sector


20. Lack of appropriate resources (management, 20. With the introduction of electronic tendering only, firms such as ours are at a disadvantage
administrative, marketing, legal, electronic)
21. Poor completion of bids 21. Many don’t have the time to fill in the forms and others don’t know how to fill them successfully
22. Lack of required standards 22. SMEs don’t understand the rule requirements
23. Reluctance to engage with a process perceived to be 23. It is all arranged to ensure only large companies get the work
unfair

comments 6, 7, 11); others provide detailed descriptions of situa- decided where the contracts will go to. Letters, emails and
tions experienced (for example 10, 14). There is a suggestion of phone calls all get ignored. I wonder whether anything will
frustration and exasperation at times with the process (12, 16a), really change.
and many of the respondents appear to have a low opinion of both I recently attended a How To Tender Seminar, where I under-
the process and of the staff engaged in the process (3, 5, 10, 15, 16, stood that, in a very basic way, the Tender process actively
19). A concern for policy makers and procurement practitioners discriminates against us on a number of levels. I left feeling
must be that this does not act to disengage SME suppliers from defeated that an impartial system should be so ‘partial’.
taking part in public procurement. The following two quotes sum
up a number of respondents’ feelings and experiences, and convey However, occasionally, but only infrequently, there is some
some of the despondency to emerge: recognition of the special circumstances faced by public sector
procurers:
I have been trying to win SME contracts in the construction
industry for the past eight years. Up to now I have been unable Above all else – although difficult in a Government environ-
to win a single contract despite spending many hours filling out ment – the selection of suppliers should not be decided on
tender documents, it seems that local government has already price, but on quality and value.
110 K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112

I understand that you have to go through a tendering process in positive and constructive, providing more detailed and therefore
order to obtain what is perceived to be “best value for money”, useful comment as shown in the following example:
but this process is way too tedious for SMEs.
This in particular (referring to localized decision making) has
been apparent in the NHS since the dissolving of PASA (the
For those agencies trying to improve the situation for SMEs it is Purchasing and Supply Authority) – we’ve seen several NHS
worrying that many of the respondents suggest that the situation trusts clubbing together to undertake procurement exercises –
is deteriorating. An example of practice which is seen to be leading to better regional opportunities for SMEs and specialist
worsening is that of firms which have previously supplied the businesses.
public sector now being told that they can only supply through a
third party (illustrated by comment 11a). SMEs see this as being These contributions provide some encouragement for policy-
more bureaucratic, anti-competitive, and often not in line with the makers and small business groups and resonate with Glover’s
customers’ needs. They also drew attention to the potential finding that 41 per cent of SMEs had a good experience of working
negative consequences: firstly financial, whether additional cost in the public sector once a contract was agreed (Glover, 2008).
for government or less financial compensation for the SME
supplier; and secondly in quality, with larger providers engaged 4.3. Mapping SME respondents’ proposals against government
to manage the process and lacking expertise in the specialist areas actions
of the contract.
The focus of the study is upon barriers and the pre-determined There is a further set of content that has not yet been
codes adopted support this aim. However, criticisms of this presented. The government also asked for suggested improve-
approach to analysis identify that the choice and use of pre- ments and many were put forward. Not surprisingly these are
determined categories can not only reinforce the chosen cate- mostly directly related to the barriers identified. For example,
gories (Atkinson, 1992) but also omit material that falls outside of many propose a centralized record of accreditation and other
these groupings (Silverman, 2006). Therefore it seems appropriate documents to avoid the burden of submitting the same informa-
to acknowledge that not all of the comments volunteered are tion many times over, and to harmonize and simplify tender
negative in outlook, despite the phrasing of the questions which documentation to reduce the time and cost required for their
call for negative experiences to be shared, as identified in the completion. Another common recommendation is to allow greater
Method section. There are SMEs which have had some success discretion and flexibility to be applied with regard to the overly
(“We have had some good experiences with procurement”; “As a prescriptive requirements such as turnover, financial history,
small company we have been very successful at winning contracts insurance and health and safety for lower value, or shorter,
and getting onto Framework contracts.”), some who are apprecia- contracts.
tive of the opportunity to provide feedback (“Thanks for asking the Many of these proposals have been identified and recom-
question”, “Thank you for the opportunity to comment. We would mended previously. The Better Regulation Task Force and Small
be happy to assist further as required.”), and others who are Business Council (2003) produced eleven recommendations as a
hopeful about the UK Government’s stated intentions to address result of their review of the barriers SMEs face in trying to supply
the issue (“I welcome the announcements today relating to SMEs the public sector, all of which were accepted by the UK govern-
and encouraging a less bureaucratic approach.”). Others are both ment. The recommendations included proposals that the public

Table 5
SME respondents’ proposals matched against government actions.
Sources (government actions): Cabinet Office (2011).

SME proposals Government actions

1. Improve access to opportunities by having a centralised contact system –Launch of contracts finder—to publish procurement information in one place.
2. Information should be freely available –Contracts finder is freely available
3. Contract directly with small firms
4. Avoid contract bundling, provide smaller tender opportunities, disaggregate large –Micro lots will be used where practical
contracts
5. Allow small firms to submit joint tenders
6. Involve customers in tender specifications
7. Review tender specifications, to be more encouraging for SMEs –Departments will be required to use more outcome based specifications and to
avoid over-specification
8. Adjust contract requirements, such as insurance levels, to be proportionate to, say,
the value or contract length
9. Be more flexible over requirements
10. Devise a centralised record of accreditation and other requirements to avoid –For common commodities, data now needs to be only provided once
duplication of effort
11. Simplify the process, harmonise tender documents –Introduction of a standardized PQQ
–Seeking to eliminate PQQs for central government procurements under d100,000
12. Review the basis of decision making: more flexible, more entrepreneurial system, –SME product surgeries—to enable SMEs to pitch innovative products to
more local and one which gives more weight to factors such as interviews, procurement professionals
presentations and site visits
13. Develop electronic tendering systems
14. Procurement staff need to be trained, and to be more professional
15. Procurement staff should be seconded to the private sector to improve –An interchange programme will be launched to bring private sector professionals
knowledge and also obtain a better understanding of the suppliers perspective into public procurement and to second civil servants to the private sector
16. SMEs should be given help to establish (local) consortia
17. Greater accountability for final selection of successful tender submissions –Accountability through ‘mystery shopper’ notification process, SME panel, and
extended Supplier Feedback Servicea
18. Publish each department’s procurement spend by value and recipient size –Publication of spend with SMEs
K. Loader / Journal of Purchasing & Supply Management 21 (2015) 103–112 111

sector develop a standard prequalification document for lower of elements: the requirements are seen to be disproportionate to
value contracts and a portal to improve access to contract the scale and value of the contract, they are excessive to small
information, including a named procurement contact. However companies with their limited resources and are often inappropri-
the review Glover (2008) found that although progress had been ate to the nature of the work. Further examination identified the
made since the 2003 report, SMEs continued to report similar need for high levels of insurance as a specific example of a costly
issues including difficulties with accessing opportunities and a and often inappropriate requirement. Also evident from the
lack of standardized documentation. The Glover review’s twelve qualitative analysis was the feeling of frustration about the process
recommendations included, therefore, a single electronic portal which was seen to work in favour of larger companies. Its rigidity
and pre-qualification questionnaires that reflect standard qualifi- and standard bureaucratic approach were felt to intrinsically work
cation criteria. against smaller suppliers. The suppliers also put forward a variety
Just prior to the launch of the feedback facility, and during the of suggestions to improve their chances of success and some of
course of its operation, the UK Government has announced and these are now being addressed by government, although the scope
implemented a variety of measures in order to improve the of some of the new measures remains unclear at the moment.
situation for SMEs. These have been mapped against the suggested The evidence suggests that there are implications for all parties
solutions made by the respondents (Table 5). The table demon- that have an interest in this issue, principally policy makers and
strates that several areas of concern are being addressed through SMEs and their representatives, but also including bodies such as
the introduction of various practical initiatives such as the cen- those involved in training procurement professionals. Policy makers
tralized information point and standardized PQQ, actions already need to question why SMEs are continuing to report the same
identified and recommended by the government reviews just concerns and obstacles, even though they have been acknowledged
mentioned. However, some of the proposed actions require further previously within government commissioned reviews, such as the
detail in order to determine their scope and therefore their report Glover (2008), and recommendations made and accepted.
potential impact. For example the use of micro lots should help Ensuring that SMEs are aware of measures is important, and
SMEs but it is not yet clear how extensive their use will be. policymakers and SME representatives need to work together to
Various actions have been recommended previously and some determine which methods are most effective for communicating
acted upon, but clearly the evidence here has demonstrated that for opportunities and processes to SMEs. Frequently voiced concerns
many small suppliers, difficulties remain. Challenges will be to about the professionalism and competence of procurement staff
make SMEs aware of the new measures and to monitor the use and suggests that the implementation of initiatives must also be
consistent application of the measures by public sector procurers. addressed with care. Public procurement organizations need to
ensure that their staff apply existing and new measures properly
and consistently, which may require consideration of the appro-
5. Conclusion priateness and level of training currently available.
The limitations of the study are acknowledged. Some of the
This paper has examined the challenges facing SMEs in supply- criticisms of employing content analysis, such as the subjective
ing the public sector. This paper has contributed to our knowledge choice and interpretation of coding categories, have already been
by providing additional evidence obtained by analysing the com- mentioned. However, it is also recognized that SMEs are not a
ments of SMEs that have been voluntarily provided to a UK homogenous group and care must be taken when investigating the
Government online feedback facility. This source of data has the impact of phenomena within or upon the sector. The lack of
benefit of not being subject to direction or input from the organization detail available did not allow a more nuanced
researcher, although the terms of reference set by government analysis to be conducted. Finally, the comments which have been
have influenced the nature and tone of the feedback. analysed may also suffer from reporting bias as they have been
The data was analyzed using both a quantitative and qualitative voluntarily reported by self-selecting SMEs. Therefore no claims
approach to content analysis which enabled a variety of evidence to can be made about the representativeness of the sample or the
emerge. It was clear from the feedback that SMEs were experien- views expressed.
cing a wide range of obstacles that were adversely affecting their
success in gaining public sector work. The quantitative analysis
determined that the burden of overly prescriptive requirements,
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