Five reasons why SME’s are the perfect construction partner for Local Authorities

With the 2023 Procurement Act due to come into force this October, local authorities up and down the UK are being directed to revise their existing contracting approaches to increase the level of turnover delivered through SME’s. It has long been an aspiration of the government, as part of its localism agenda, to remove the considerable barriers faced by any SME who wants to deliver services on behalf of the public sector. They hope that encouraging the use of SME’s will unleash greater dynamism and value for money from public investment and provide a catalyst to the growth of new businesses.

As an SME ourselves, we obviously welcome the opportunity the Procurement Act will provide for us to deliver essential social infrastructure for the public sector – yet we also believe that the benefits to Local Authorities in engaging SME’s are considerable. In this article we take a look at the top five reasons why public sector clients would benefit from working with SME’s in the built environment.

1. Greater value for money

Many local authorities are facing the real prospect of bankruptcy yet demand for the services they provide has never been higher, with much of our social infrastructure beginning to crumble. There has therefore never been more of a need to demonstrate value for money when delivering projects with the public purse. With their lean overhead and operating structures, SME’s are able to offer lower costs to clients without compromising on quality, safety or timescales – especially on low to medium value projects where project preliminaries are likely to form a greater proportion of the total cost. For such projects, SME’s often represent the ‘right horse for the course’ and can offer superior value for money over larger providers.

2. More responsive to client needs

As publicly accountable institutions, local authorities have a wide range of stakeholders that they have to satisfy and emerging needs that they have to address. This can often lead to challenges arising during development and changes needing to be made as a project progresses. In such an environment, clients need flexibility and an ability to make decisions quickly. With fewer layers of management and less bureaucratic red-tape, SME’s are better able to offer the dynamism and adaptability required to meet changing client needs. Additionally, SME’s tend to have high levels entrepreneurialism due to their founders often working in the business and close to the front line, promoting ambition amongst employees and a culture that encourages opportunities to create value for their clients.

3. Better customer experience

Successful project delivery is invariably built on solid and trusting relationships between people, not boxes on an organisational chart. When public money is being invested, clients want to know who is ultimately responsible for delivery of the project from start to finish and know that they can pick up the phone to them for answers. Within SME’s, people tend to be more hands-on and work across traditional role boundaries to ‘get the job done’ on behalf of clients. Due to their flatter organisational structure, SME’s promote greater responsibility and personal accountability for project delivery, whilst the resulting reduction in politics and hidden agendas leads to greater trust and more effective collaboration between parties. Also, given their smaller scale, each client and project matters, so the incentives to perform are high.

4. Contribute to the local economy

Delivering capital investment through businesses in the local economy can multiply its impact beyond the benefits of a project, through increasing employment, investment in education and skills and promoting the growth of local businesses. Since the Social Value Act was passed in 2012, local authorities have had to demonstrate a commitment to local spend, which often drives up the costs on a project. By using SME’s to deliver their projects, local authorities can meet their social value obligations without adversely affecting project costs. Local spend is what SME’s do as standard, not an added extra – being regional contractors, their supply chains all tend to be local as well, ensuring the maximum potential boost to the local economy and the growth of jobs and skills in the population.

5. Successful project delivery really matters

Local authorities are entrusted by their residents to provide essential services to their communities and deliver improved standards of living for all. As committed public servants, the success of capital investments is essential to secure the long-term future of their region and protect the most vulnerable within it. Regionally based SME’s not only contribute to the growth of the economy, they employ people who live within the same communities local authorities are endeavouring to support. Not only do SME’s have to live with the outcomes of the projects they deliver, they are also reliant on having a good reputation in the community. This means that SME’s have real ‘skin in the game’, ensuring that every effort is made to deliver projects on time, to budget and to a standard that will effectively deliver services to the local community for years to come.

The 2023 Procurement Act reflects the governments belief that SME’s have an important role to play in delivering projects on behalf of the public sector, in order to inject more competition, dynamism and innovation into the current market. This is not to disparage larger firms as they have an important part to play, particularly on larger, riskier and more complex projects where scale is an advantage – yet too often these firms are employing a sledgehammer to crack a nut. The new act should not just be viewed as a way to boost spend with smaller firms, but as a way to enable local authorities and public sector bodies to select more appropriate partner to deliver certain projects. This article identifies just some of the acknowledged benefits afforded by the working with SME’s, demonstrating not only that they are more suitable to deliver a significant proportion of public sector projects, but also more aligned with the outcomes those projects are trying to achieve in the community.