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The Issue

Winning a public sector contract has been notoriously difficult for small businesses. Poor advertising and the bundling of contracts together, combined with high costs and red tape, make it harder for small firms to compete.

Our research shows our members do more business with the NHS, local councils and education institutions, than with central government agencies and departments. Our findings also show when local authorities spend money with small firms, the local economy benefits by an average of fifty-eight per cent.

Action FSB has taken

  • We’ve repeatedly called for the Government to further open up public procurement for small firms.
  • We’re calling for buyers across the public sector to break up large contracts to create more work opportunities for small firms and better advertise those that are available.
  • We’ve published Chain Reaction, a report looking at the problems faced by small businesses in supply chains and actions that can be taken by Government to resolve these issues and support small businesses.

Our Ask

We want the government to meet and exceed its target for a third of all public sector contracts to be awarded to small businesses. To achieve this, the Government should re-think the current approach of grouping contracts together, presuming it will lead to efficiencies. We believe local authorities should also increase the number of contracts awarded to small, local firms. Our research shows as a result they spend more and employ more, in the local economy.

We also believe the government should look to consider excluding those suppliers with bad records in supply chain management from future contracts. Further, government should strengthen the Prompt Payment Code by introducing a new penalties regime, overseen by the Code’s Compliance Board.

We want the government to Improve the use of Dynamic Purchasing Systems (DPS), by examining all Framework Agreements within their departments to identify those framework agreements where moving to DPS will lead to improved value for money to Government and prevent the public sector being denied access to small businesses

Achievements in...



  • The government has now committed to extending its target of public procurement spending with SMEs to 33% by 2022.
  • As part of these reforms the government has also announced a series of other changes to address many of the issues faced by small businesses bidding for public sector contracts.
  • We’ve successfully campaigned for 30 day payment terms to be passed down the public sector supply chain.
  • Each government department must now have a small business champion minister to advocate for small businesses.

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  • FSB Wales has called for, and secured, a National Procurement Service (launched in Nov 2013).
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  • FSB Scotland has secured the first piece of primary legislation, which should ensure the Scottish public sector considers the economic impact of their purchasing decisions.

  • In 2013 we lobbied the Scottish Government on the need for more public sector contracts to be broken up and awarded to smaller businesses.

  • The Government directly responded to our concerns with the Procurement Reform Bill.

  • The Bill is now law and is the first procurement legislation of its type to be passed in the UK.  It  should ensure more public bodies see the wider benefit of spending with small, local businesses.

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