Mark Rogerson is Serco’s Group Operational Efficiency Director

Click here to see US and UK approaches compared

Small firms are the growth engines of both the US and UK economies. In the US, small firms make up 99.7% of all businesses, account for about half of GDP and employ roughly half the total workforce. Between 1993 and 2009, small enterprises were responsible for 65% of the 15 million new jobs created during that period. Their contribution to the UK economy is equally significant: five million small businesses employ well over half of the private sector workforce and contribute more than 49% of UK turnover, as well as 64% of all commercial innovations.

The US approach

The US government has a long record of supporting small businesses. US Public Law, passed in 1978, amended the Small Business Act, originally passed in 1953, to change large business participation from voluntary to mandatory. Since his election in 2008, President Obama has approved a variety of measures including the Small Business Jobs Act of 2010, which puts more capital in the hands of small enterprises, while the Startup America Partnership supports entrepreneurs running firms with high growth potential. Federal policy, designed to provide greater access to government contacts, gives preference to small companies, particularly those owned by veterans, women, the economically disadvantaged, service-disabled and minorities. The amount of money in play is significant: the US government spends more than $600 billion each year buying goods and services from the private sector. In 2009, $96.8 billion of that was spent with small businesses as prime contractors. This figure doesn’t include the additional billions small businesses received as subcontractors. Encouraging small businesses to prosper is clearly part of the US government’s ethos.

What about big businesses?

The dollar threshold of a federal contract mandates the required percentage of work which must be contracted to small businesses. Many large government contractors have needed to put measures in place to help realise the US government’s small business agenda. As part of this, Serco enlists the participation of small business teammates both when we are the prime contractor and the subcontractor to a small business as part of our US Small Business Plan. Additionally, Serco has developed a mentor-protégé programme, whereby our senior managers support and coach US small businesses.

One of Serco’s protégé small businesses is HeiTech Services, a business owned and run by a female former US Navy officer. Together, Serco and HeiTech Services have won several contracts that have contributed to the growth of both companies. HeiTech is one of many firms benefiting from the government’s advocacy of small businesses.

However, there are a number of issues to be overcome with a small business strategy. A small business will sometimes win a government contract and include subcontractors in order to fulfil all contractual requirements, if it doesn’t have all the resources, infrastructure, expertise or past performance needed. In these cases, small businesses establish teaming agreements with a larger organisation, which offers the breadth and depth that it lacks.

This means big companies must be agile and responsive to ensure the right support model is in place swiftly. In the US, Serco is a subcontractor to several small businesses in this way. One example is a Service Center Operations Support Services contract, a $117 million task order from the Department of Homeland Security to provide business support services to the US Citizenship and Immigration Services. Our prime contractor is Veterans Enterprise Technology Solutions (VETS), a small business owned by a service-disabled veteran.

The UK approach

The UK government, which is clearly committed to supporting small businesses, has already put an ambitious plan into action. It is tackling head on one of the UK’s biggest obstacles for small businesses, namely that it can take months or even years for contracts to move from tender to completion and bid outputs can be onerous. Small businesses simply don’t have the infrastructure or the resources to handle that. By contrast, the procurement cycle in the US can be as short as 45 days, while the bidding documents can be as few as ten pages long.

The UK government has promised to get rid of the excessive bureaucracy involved in procurement processes. It has launched a website called Contracts Finder, developed by Serco for the Cabinet Office, which lists all contracts worth more than £10,000, making the government’s procurement process much more transparent.

Learning from challenges faced by the US, the UK government has also announced an aspiration that 25% of government contracts by value, including those in the supply chain, should be awarded to small- and medium-sized businesses, effectively levelling the playing field by not prioritising either big or small businesses.

What can big business do to help?

For larger companies these changes can be seen as an opportunity to rethink their contracting model by helping small businesses, voluntary organisations and charities navigate the procurement process. Serco is well placed to understand the challenges facing small businesses as we have worked with this sector throughout our history and have
provided a range of government-funded support services for them through Business Link.

We will, however, need to raise the importance of small businesses as part of our supplier strategy. We currently have about 7,000 small enterprises in our own supply chain that we want to help grow with us. To facilitate this, Serco has established a Small Business Advisory Body, which is chaired by a small business owner, has a dozen members and meets quarterly with the aim of giving feedback and ideas that can help stimulate SME growth and help us improve the supplier engagement process. Small business conferences are being planned and we are also launching a mentor-protégé programme similar to that in the US.

The UK and US governments both recognise the importance of small businesses within the economy and are supporting them through their own procurement processes. There is without doubt a responsibility, as well as a commercial incentive, for big business to also support small businesses: for the sake of doing our job even better, for job creation and for a healthy economic recovery.