THE BLOG
14/07/2011 06:19 BST | Updated 12/09/2011 06:12 BST

The Procurement Pond Just got a Little Murkier - Bombardier

Then economies of scale clearly dictate that SMEs wouldn't be bidding for contracts worth £1.4billion, those figures are only for the big firms. But big firms need revenue or they will shrink to smaller entities, so they have to make a decision 'do we just land one big fish or lots of little ones?'

The Canadian state-of-the-art aerospace and transportation maker Bombardier has announced it will be regrettably axing 1400 jobs as a direct result of missing out on the £1.4bn Thameslink contract.

The Prime Minister informed the House of Commons: "We inherited the procurement process from the previous government. But we are now looking at all the procurement rules in Europe and making sure that better decision are made in the future."

It's not a great moment for British manufacturing. It's not a great moment for Derby, home to the 1400 workers.

The union, Unite are lobbying Philip Hammond, Transport Secretary pushing for a reversal in the decision.

I'm not sure how successful this will be, as particulars of the tender came to light it would seem a huge financial commitment was required by the successful bidder and this may have had a key role in the outcome.

This started me thinking about two issues attached to small business in the UK.

Firstly, how many other businesses will be affected by this decision; the cornershop where workers bought the morning papers, a pint of milk, and a jar of coffee may be even a mars bar. The butty wagon arriving on site with bacon sandwiches, now has 1400 less potential clients. The supply chain companies, manufacturing components. the HGV owner-drivers, the petrol stations, the local hairdressers, the private children's nurseries, the drycleaners, the local pub or wine bar where co-workers meet after work, the local gym... the list goes on and on.

Small businesses, all supporting the local economy, all supporting the backbone of national economic interest have just found life a little tougher by this decision.

We have clearly paid a price with 1400 redundancies, but who will count the cost too UK SMEs?

This leaves me with, procurement.

Cabinet Office minister Francis Maude has said that it is essential that central government becomes a better buyer of goods and services from small and medium sized companies and also looks to 'buy British' as much as possible.

"We are not going to ordain that there must be more contracts actually going to small businesses, but we will ordain that the procurement system must be run in a way that opens it up to small businesses''

This now gives me two more issues - EU law and the one it seems Bombardier could not overcome.

If you give SMEs, a SME only tender process, its blatant preferential treatment and against EU law.

If you give UK SMEs, a restricted UK SMEs only tender process that's also against EU law.

So what we need is a political decision to raise the amount of procurement available to SMEs, a little less red tape, a more streamlined approach - the Coalition Agreement has this political pledge within it.

Result! Hurrah! Bravo! We are on the right track and there is light at the end of tunnel. Pop down to the cornershop, support a local business buy a bottle of their best Cava, we can celebrate, even in these are austere times.

But wait, hang on, it's too good, put down the Cava, or at least sip slowly, make it last... we must have overlooked something - Political will, check. Inline with EU law, check. SME desire, check. Skilled workforces, check. Finance...

Damn it. What if Bombardier, the global corporation wasn't awarded the contract just because it couldn't provide the financial commitment for the tender? Was it a problem for them and would it be a problem from SMEs?

Then economies of scale clearly dictate that SMEs wouldn't be bidding for contracts worth £1.4billion, those figures are only for the big firms. But big firms need revenue or they will shrink to smaller entities, so they have to make a decision 'do we just land one big fish or lots of little ones?'

The procurement pond just got a little murkier, not only due to competition.

There is a problem with the EU Recommendation for defining a SME.

Enterprises qualify as micro, small and medium-sized enterprises (SMEs) if they fulfil the criteria laid down in the EU Recommendation.

A medium sized enterprise -

A headcount of <250

A turnover of <€50m

Or a balance sheet total of <€43m

A small enterprise -

A headcount of <50

A turnover of <€10m

Or a balance sheet total of <€10m

A micro enterprise -

A headcount of <10

A turnover of <€2m

Or a balance sheet total of <€2m

Is a medium sized enterprise, really medium?

I'll leave you too decide, but hopefully the Prime Ministers review will include some definition questions if we are to help small business flourish and provide some much needed employment across all sectors.