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SMEs AT THE HEART OF COMPLEX PROJECTS

The value of putting small businesses at the heart of complex projects

According to statistics from the Department for Business, Energy and Industrial Strategy, there were 5.47 million Small and Medium Enterprises (SMEs) – defined as having up to 250 employees – operating in the UK at the start of 2022. The same figures show that total employment by these SMEs was 16.4 million and combined estimated turnover was £2.1 trillion.

Some small businesses, like Cascade Engineering, are hubs of expertise, founded, managed and staffed by people who really care about their skills and craft. Whatever sector or specialism they are in, they often have a wealth of expertise, knowledge and experience to offer, and that’s why they add significant value to large, long-term and complex projects.

Working in a complex market

And yet historically it has been challenging for small businesses to contribute to these projects. A report from the Major Projects Association Event in May 2018 acknowledged that the market had become more complicated:

“Firms are increasingly engaged through prime contractors or are on frameworks. Direct engagement with clients is becoming far less common. Contractual arrangements are therefore more complicated and procurement processes lengthy and expensive. From a technical perspective the democratisation of information has moved the service offering from selling knowledge to selling the ability to apply it.”

However, it’s worth noting that this was a pre-pandemic event, and that recently at the defence procurement event, DPRTE, our MD, Ben Barrass, found that large OEM and other end clients were keen to engage with smaller businesses.

There are no reliable statistics available at the moment on why this might be, but we can make some assumptions:

  • Resource – engineering resource is a challenge for all businesses at the moment. So it may be quicker and more cost-effective for OEMs to use smaller businesses to meet resourcing needs across particular areas of the project.
  • Specialist skills – large companies are always looking for cost efficiencies. It makes sense to bring in specialist skills when they are needed, rather than to build and maintain an expensive team that may not always be productively occupied.
  • Flexible approach – smaller businesses can respond faster to changes in project requirements, budgets and timescales. OEM teams are often hampered by internal processes or bureaucracy and so may choose to bring in consultants or contractors that bring the agility the project requires.

While this all sounds very positive for small businesses in this space, change is a slow process, and it’s unlikely we’ll see OEMs making a swift change to prioritise using small businesses. Contractors will still have to go through a detailed procurement process and will face their own challenges with resource. So, while we are positive about change in this area of procurement, we recognise that it will not happen overnight.

Where do small businesses sit in complex projects?

Regularly, small businesses are four or more levels removed from the end client. Working under NDAs and confidentiality agreements that mean they are often not allowed to say they are part of the project at all, making it more difficult for these businesses to market their experiences and skills into other project areas.

For complex projects, Cascade operates primarily at Tier 2 or Tier 1, as can been seen from the illustration above. The flow of technical information through the supply chain can be slow, but the root cause of this is usually clear. Commercial decision making can be more difficult to understand, which adds risk both to the project and the relationships between the businesses involved.

It is also interesting to note that the freelancer community helps small businesses flex quickly. They are also used by large businesses to meet short term capacity issues. As the freelance market is finite, however, this means both parties are fishing in the same pond. That adds another level of complexity and potential conflict to resourcing through the life of a large project.

A government boost for small business

Recognising the importance and influence small businesses have in the success of public contracts and the outdated nature of the existing procurement process, the 2023 Procurement Bill is currently before the House of Commons. This Bill is designed to improve procurement activities associated with public contracts. At its heart is the idea that simplification, flexibility and transparency will make government more effective when engaging with various entities including small businesses.

Sitting alongside this, last year the Ministry of Defence set out its interpretation of this requirement in The Defence Small and Medium-sized Enterprise Action Plan. This year has seen the Department for Business, Energy and Industrial Strategy publish its own action plan.

The government has set targets for small business involvement in large projects – particularly in infrastructure and defence projects, for example – so that we can make the best use of the talent and application that is on our doorstep. And SMEs who can prove their worth to procurement departments and internal teams are building reputations that make them a primary choice for future work.

UK small businesses are some of the best businesses in the world. They are agile and flexible – able to solve problems, develop fresh ideas and bring new perspectives. They allow complex – and often sensitive – UK projects to retain intellectual property and innovation within the country, and they are easy to fit into an OEM supply chain. They can flex team numbers, reducing overall costs and making sure the best mix of experts are working on the project at any one time. And they are risk takers, willing to push the boundaries of solution building, material use and performance to achieve better results.

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