Public sector procurement
4.52 The growth of any sector depends on businesses
securing orders. The public sector is one of the largest purchasers
in any region. Government Departments, the NHS, local authorities
and so on all require goods and services, often with a high level
of technological sophistication, for a wide range of purposes.
4.53 As described earlier in this Report, RDAs
are facilitating and supporting high value-added technology based
sectors. The spin-out and start-up companies they are encouraging
are part of the supply web of the public sector, and can supply
goods and services that are technologically sophisticated.
4.54 In the Report of our recent Inquiry into
innovations in microprocessing, we noted
that public sector purchasing power could neatly complement Government
policies to encourage the start-up and growth of high-tech businesses.
This Inquiry has, however, highlighted a significant gulf between
what should be related policies.
4.55 We were concerned to learn from Mr Wren-Hilton
that his Internet company was precluded from bidding for a project
within its technical competence (and in which it had a good international
track record) solely on grounds of turnover (p 218). Mr Liversidge
told us of a small Yorkshire-based company making high-tech medical
kit needed by a local hospital but which, because of purchasing
policies, could sell to that hospital only through the German-based
preferred contractor (Q 341). He and Professor Rhodes drew
our attention to the American Government's Small Company Set-Aside
Scheme (QQ 324 & 322), which addresses these points by
ring-fencing some smaller procurements for SMEs and by penalising
the prime contractors in larger procurements if a certain proportion
is not sub-contracted to SMEs.
4.56 We put that interesting suggestion to the
Minister (Q 407), but were disappointed in his quick rejection
of the approach. This denies opportunities to small companies
and, in hindering their growth, reduces dynamism in the regional
and national economies. As smaller firms are lighter on their
feet and can thus be the most innovative, it also denies the public
sector the opportunity to benefit from their fresh thinking.
4.57 Accordingly, we recommend that the DTI should
re-examine the case for arrangements like the USA's Small Company
Set Aside Scheme to help small businesses to access and thus assist
public sector procurement.