Woke Public Sector Procurement Policies are forcing small suppliers out of contention.

British Small to Medium Enterprises (SME’s) are being forced out of supplying to the Public Sector by procurement policy demands that they cannot afford to implement.

Deputy Prime Minister Angela Rayner seems determined to add to the woes of British SMEs

About twenty years ago I worked for the Mayor of London, specifically Transport for London and in that job I worked closely with the Procurement department. Back then there was a huge drive to improve what was called ‘sustainable procurement’. The idea was to make it easier for local small businesses to supply and work with the various organisations under the Mayor’s remit. So if you needed to award a contract for paperclips, you allowed Bob’s Paperclip Emporium on Finchley Road to bid and you made allowances so that Bob could compete with the likes of Viking. The principle was very simple - to put money back into the community and the best way to do that is through local small businesses.

The principle spread to paying bills on time. Small businesses don’t have the access to sheep credit that large businesses have and they can literally face ruin if forced onto invoice schedules longer than 30 days. It got so bad around 2008 that in some industries, corporates were putting suppliers onto and 6 month payment schedules. The suppliers had little choice but to factor the invoices - to the uninitiated - to borrow money against the invoice, which obviously costs money. It became such a scandal that at the time, The Telegraph started to name and shame corporates doing this to their suppliers.

Larger suppliers always have lower costs simply through economies of scale but cost isn’t always the reason why suppliers are appointed. Local suppliers often have local knowledge, hands on delivery, and quick response times when issues arise. You often find expertise is higher at the smaller supplier. Finally there is the social aspect, already mentioned. Engaging a supplier who is owned by an international conglomerate is literally sending money overseas. Surely companies and especially public sector organisations servicing a community should consider their responsibility to that community?

So why are we increasingly seeing smaller suppliers forced out of supplier relationships, in particular in the public sector?

One of my clients makes highly specialised products for the health sector. They have been doing this for decades and have a great reputation, skilled management and workforce mean that this is a British success story and they have been able, until recently, to compete with larger suppliers from abroad. . They employ about fifty staff in a rural location in the West Midlands and are exactly the sort of business that the government should be encouraging and, where possible, assisting. They aren’t looking for any favours, their products are excellent and speak for themselves, all they want is a level playing field on which to compete.

So why have they withdrawn from the latest Cabinet Office Framework for the supply of their type of products into the NHS?

Firstly, what is a Cabinet Office Framework? The Cabinet Office runs a series of Procurement Frameworks to support the UK public sector. So let’s say I am a recruitment agency who wants to supply bin lorry drivers into local Councils: I go onto the Cabinet Office Framework website and I look to see if there is an open Framework accepting applications to supply. I find the Framework specific for the provision of staff into Local Authorities and I then have to jump through a series of hoops to ensure I meet the requirements of the framework. This is demonstrating that you’re a bona fide, solvent business with the right group of policies to meet the demands of the framework. Once awarded I can bid to supply to any Council bin department looking for drivers who use that Framework to help them engage with suppliers. The Framework system is essentially there to support Public Sector organisations so they don’t have to do the donkeywork of checking out their suppliers. The NHS uses them extensively.

Now you are probably aware that increasingly we have been seeing large organisations impose Environment, Social and Governance (ESG) policies on their suppliers through their procurement policies. Most notoriously we are seeing quite radical Equality Diversity and Inclusion policies and training forced onto suppliers by corporate and public sector procurement teams. The purchasers want to demonstrate their commitment to ‘change’ the world and one way to do this is to force ‘change’ down through your supply chain by making demands on suppliers that have nothing to do with the product or service that is supplied.

Now this started off as a fairly well meaning and innocent initiative. For example, it is entirely reasonable to ask a supplier to demonstrate their Health and Safety policies when engaging them to supply a product. It’s entirely reasonable to ask them if they comply with waste disposal polices around toxic substances like asbestos. But it has become a charter for imposing red tape, control and ‘behaviours’ through the supply chain.

If you are a politician who wants to ‘change things’, back in EU days this might have been a Commissioner, these days its someone like Angela Rayner or Ed Milband; let’s say you want businesses to behave in a certain way. Well, here is a ready made vehicle through which to drive REGULATION.

And that is exactly what has happened. The Framework agreements have been the enforcement arms of the State but also of anyone with an ideological axe to grind for a long time now. Investment companies like Aberdeen Asset Management (I refuse to call them Abrdn) or pantomime villains Blackrock love them because they allow them to force all sorts of ideological training and policies on their supply chain.

So what’s the big deal? Surely it’s all about box ticking? Well, yes and no. You see the Procurement Departments and the Cabinet Office know about box ticking so they go to lengths to ensure that your business is compliant. ‘Lengths’ means sometimes sending your management team to the Client for Equality Diversity and Inclusion training. It can also mean spending thousands of pounds and many hours writing long and involved ‘Net Zero’ strategies. It always means publishing an Anti Slavery Policy, even if exempt under UK law, because your business turns over under £45 million.

This last point is interesting. In the past the government knew that saddling small businesses with unnecessary red tape undermines their ability to compete with larger businesses. The Anti Slavery policies are there to make sure that you are doing everything possible to ensure that the products you are buying from overseas aren’t being made by people who are being exploited in slavery or chattel slavery. As most businesses under £45m turnover are not directly dealing with suppliers in this category, those businesses have been given a legal exemption in an attempt to level the playing field and make them more competitive.

Only the Cabinet Office Framework people don’t care about the law and demand one anyway.

Last year, my client pushed back when an NHS trust insisted he send his senior management team to them for two days in the middle of a working week to take their Equality Diversity and Inclusion course. It wasn’t enough to have your own policy, no, they wanted to make sure your team was fully trained in their ideological beliefs. The sheer hubris here is astonishing but most staggering is how removed from the reality of commercial life do you have to be to expect a small business to send three of its top people on a training course, half way across the country in the middle of a working week. Six man days, travel, hotel, the impact of them being out of the company. It’s essentially a whole week's production, business development, administration down the drain to massage the ego of an NHS Trust leadership team who are probably chasing an award of some sort.

And don’t for one minute think that you can get away with simply adding the costs to the bill. Oh, no, this comes out of your pocket.

The final straw for the Managing Director was when the Framework Managers demanded an involved and detailed Net Zero strategy demonstrating how his business planned to become Net Zero over the next five years. This had to include figures, business plans, supplier choices etc. He put his foot down and said ‘no’. He demonstrated how much it would cost him to produce such a document: over £20k in either his company’s time or more likely, external consultancy fees.

So he’s withdrawn from the Framework application leaving it open to large corporations who have departments whose only role is to produce such policies and who have teams in their sales departments who are specifically there to win Frameworks.

My question for Ms Rayner and others in the government is: ‘How do you expect small businesses to compete when you load them with so much red tape it places them at a significant disadvantage to corporations?’

I won’t hold my breath for an answer because Labour have already stated that they intend to make EDI training and policies mandatory in Public Sector procurement. So at a time when the FTSE100 and 250 are pulling back on EDI, at a time when across the world, and in the USA, we are seeing employers dump DEI/EDI and U turn on the politicisation of the workplace, the UK Government is doubling down.

And what about my client? Well, NHS Trusts are so far not obliged to buy through the Cabinet Office Frameworks. They tend to though because it makes life a bit easier, but if you have a product or service they require they can buy it directly from you, it just involves a bit more work. Yes, they usually demand the same paperwork from you, but at least you can sit down with a human being and explain why you won’t be producing it and they can then decide whether they still want your product enough.

Cabinet Office Framework agreements are making life impossible for small to medium suppliers. Where ‘sustainable procurement’ once meant putting money back into the community by engaging with local suppliers, it now means ESG, EDI, interference, red tape and, of course, costs all of which make it very difficult for any smaller supplier to compete.

He’s now engaged with his MP but I wouldn’t hold my breath as the new government has demonstrated that it either has no interest in helping small to medium enterprises, and is following a series of policies that effectively transfers revenue from SMEs to corporate suppliers or they are so detached with the realities of running an SME in the UK in 2025 that they are making error after error.

Either way, it is yet another example of the egregious treatment SMEs are facing at the hands of the State.