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Welcome for plans to open public contracts to small firms

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A government initiative aimed at making it easier for smaller firms to win public sector contracts has secured the approval of a leading business group.

The Forum of Private Business (FPB) welcomed moves announced by the government to make public contracts worth £236 billion more accessible to small firms and to link procurement to prompt payment.

The measures were announced as part of the government’s strategy for improving the prospects of SMEs.

Under the plans, public sector organisations must ensure that at least a quarter of all contracts should be awarded to small businesses.

Individual departments will be required to publish not only their procurement contracts but also how many of them go to SMEs.

The government said it will be looking at using more open frameworks and purchasing systems to tackle what can still be a closed procurement system that favours ‘preferred bidders’ – typically large companies – and effectively excludes many small firms.

To guarantee that firms are paid on time, the government is additionally pledging to pay the majority of primary public sector contractors within five days and to make sure firms further along the supply chain are paid within 30 days.

Phil Orford, the FPB’s chief executive, said: “Following the spending cuts, it is important the government addresses the key areas of public procurement and payment in order to achieve a real private-sector-led recovery with small businesses at its heart – which means business growth and job creation.

“Providing sound policies on procurement, finance and enterprise follow – and more importantly are followed through – this will prove to be a welcome plan that, along with more work on tax and red tape, should help firms to flourish.

“Freeing up supply chain finance will be even more crucial as the economy continues to recover. It is right that the public sector sets the standard for private companies to follow, and strengthening initiatives like the Prompt Payment Code, which is one option the Government has discussed, will certainly help to achieve this.”