Why big business still hates small firms

LAUNCHPAD: Large companies are still dragging their feet over issuing contracts to small businesses.

by Rachel Savage
Last Updated: 05 Aug 2014

Big businesses are mostly super keen to profess their support for smaller compatriots. Actions, though, speak louder than words and they just aren’t awarding contracts to small firms.

A majority of large companies issue less than a quarter of of contracts to small companies, even though two-thirds of them work with small and medium-sized firms, according to a survey of 146 companies with more than 249 employees commissioned by supply chain management company Achilles.

Only 12% of procurement managers surveyed said they’re planning to increase the number of contracts they dole out to small businesses, despite the government’s repeated calls for them to do so.

Big firms are baulking at what they see as small suppliers’ ‘financial instability’ and are also worried they don’t comply with standards and regulations, according to the study. Smaller companies do get kudos for being closer to customers, better located, more efficient and flexible, though.

The lack of contracts being awarded to small firms could change, though. New EU rules are coming into force, including companies only being able to specify suppliers have a minimum turnover of up to two times the value of the contract and being forced to explain why contracts aren’t split up into small business-sized portions.

Meanwhile, the government has given itself a target to award a quarter of public sector contracts to small firms by 2015. If it’s going to put its money where its mouth is, though, it’ll have to avoid procurement screw-ups like the one that led to small electronic tag maker Buddi pulling out of a multi-million pound process.

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