Small Businesses vital for the Ministry of Defence

A report released by the Federation of Small Businesses found that small-medium businesses (SMEs) are overlooked when bidding for contracts with the Ministry of Defence.

In the defence market which has 9,000 SMEs, which is more than France, Germany, Italy, Spain and Norway combined, 90% of exports come from the 20 largest companies.

Despite the MoD’s positive rhetoric towards SMEs set out in the ‘Defence Industrial Strategy’, the FSB claims that this recognition needs to go further. In noting that SMEs offer a host of advantages such as better value for money, better quality of service, innovation and responsiveness, the report finds some disturbing information:

• Nearly three quarters of small businesses rarely or never bid for government work.
• Over three quarters of small businesses believe that there are barriers to awareness of government opportunities.
• Over half of small businesses feel that the process of tendering for government contracts requires more time and resource than their business can allow or afford.
• Over half of small businesses expect the proportion of their revenue coming from the private sector to increase in the next two years – but only one in five small businesses expect their revenue from the public sector to increase within the same time period.
• On average, small businesses find the private sector easier to sell to than the public sector – their rate of success in winning private sector contracts is double their rate of success in winning public sector contracts.
• Nearly three quarters of small businesses feel that the public sector is more difficult to deliver work to than the private sector, due to a greater amount of formality, a lack of responsiveness or understanding, unrealistic timescales and a belief that many small businesses are just going through the motions when applying for work, knowing they have no opportunity of success.

The industry is dominated by the Government as regulator, owner, controlling shareholder, funder of research and development, as well as principal customer and yet the report suggests that SMEs are not being used to their full capability.

The report shows that there are major benefits to both the industry, the MoD and SMEs within the defence market and that these need to be used. The large government budget could facilitate a larger role for SMEs and allows for more specialised and innovative technologies to be exported.

Similarly, as in other markets, times such as these need SMEs which can drive growth and innovation thus providing an excellent base for the economy.