Guest post: Trading with small businesses

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Spend Network is a member of the ODI's Startup programme. It has co-authored a report with Centre for Entrepreneurs that quantifies the level of spend by local authorities with small businesses, using open data for the first time. Here, Spend Network CEO, Ian Makgill sets out the challenge for the public sector in increasing its spending with small companies.

Our recent work on spending with small businesses by local government has demonstrated that there are significant opportunities for many local authorities to increase the amount of spend that they extend to small businesses.

The obvious question that flowed from our work was how does a public agency increase the amount of spend with smaller businesses? Thinking about this from our own experience of being a small business selling into government, I realised that the only times we've ever won business from the public sector, we've provided services that we've already delivered elsewhere in Government. Furthermore, we only made sales when the buyer had identified that their needs and our service matched exactly, not when we’d told a buyer that we could satisfy their organisation’s needs.

Now this may say much more about our sales capabilities than it does about public sector buyers but our experience and our research suggests that many buyers were looking to trade with small firms only when other avenues had been exhausted. The reasons why this happens is too large a subject to explore in full here but it seems that working with large, recognisable brands is frequently assumed to be a defence against fraud and error, equally it is assumed that scale will necessarily deliver value. A recent history of government contracting shows that these assumptions are simply not always true.

But how can we overcome these barriers to encourage buyers to engage small businesses? Well, there’s all the usual stuff about how to reduce the burden of the tendering process and making more tender opportunities public but in our experience it doesn’t really matter how much effort you put into making a tender easy to understand, unless buyers are looking to do business with small firms it seems unlikely that they’ll appoint a small firm. So, the real answer is that we need to help buyers to recalibrate their priorities when it comes to trading with small suppliers.

This is where open data can make a difference. Our research is just the starting point for examining the purchasing work of different government agencies. As more government contract data becomes open, we will be able to do more to celebrate the buyers that seek to trade with small firms and highlight opportunities for other buyers to do more. Open data will us help to examine the benefits of working with small businesses as well as highlighting pitfalls of trading with small business.

Increased visibility of contracts creates the opportunity for new conversations about how government trades with suppliers. We can use spending data to examine where small firms deliver the best value for money or to examine what are the common factors that make tenders inaccessible to small firms. The common thread here is open data. By opening the data, we increase the number of people using the data and reduce the cost of analysis. This means that research projects like ours become affordable to businesses, think tanks, charities and academic institutions, which means greater insight from data and more business going to the suppliers that will drive economic growth.

Ian Makgill is the CEO of Spend Network and is part of the ODI startup programme.
September 2014