Council contracts? Great if you're a corporate, not a local business

Locked out: councils shut small firms out of millions

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Councils say they want to buy local. Small businesses say the system makes that almost impossible. New research suggests thousands of talented micro businesses are being locked out of public sector contracts by procurement rules written for big corporations, leaving local authorities missing out on innovation, value for money and the chance to boost their own local economies.

For many founders, the biggest obstacle isn't winning the work – it's getting through the maze of paperwork, insurance demands and legal jargon just to submit a bid. If councils are serious about backing small businesses, critics say they must stop talking about inclusion and start redesigning a procurement system that still shuts out the very firms they claim to support.

COUNCILS SAY THEY SUPPORT SMALL BUSINESSES: THE SYSTEM SAYS OTHERWISE

New analysis reveals local authorities are still shutting out small and micro firms from bidding for contracts, with processes built for big suppliers. Without change they’re missing out on the real talent and innovation.

Britain’s small and micro businesses are being locked out of council contracts by systems so complex, so corporate and so outdated that many founders don’t even bother trying.

A new review of council procurement across the East of England shows that while local authorities talk about supporting small businesses, their processes were built for big suppliers, and they still operate that way.

The Report’s author, Ken Cole, director of the consultancy Projects & Practice, says: “Thousands of talented small and micro firms miss out on public sector work, councils miss out on innovation, and communities miss out on local economic growth” We need to create a different mindset that values micro businesses in our local areas and works with them to help them work with us.”

Procurement Designed for Corporates

Despite the best attempts over decades small businesses still face portals that require hours of navigation and forms longer than a novel, written in legal jargon that they need to pay lawyers to unpick. By the time they’ve done that they’ve usually lost the will to bid for the tender and decided to buckle down to doing what they’re already doing. If they do decide to take it further the realisation that the level of insurance cover they’d need was designed for multinationals and that the financial tests exclude firms the size of theirs anyway is the final straw. The system assumes suppliers have compliance teams, legal advisers and bid writers. Small businesses have the founder.

Councils Are Risk‑Averse

Despite new freedoms under the Procurement Act, many councils still behave as if they must approve suppliers who tick technical boxes rather than choose the right supplier for the job.

Officers fear making mistakes so they default to big, familiar suppliers. Small businesses are seen as “risky” even when they’re the best option.

Onboarding Is a Nightmare

Small firms report multiple portals, repeated uploads, no single point of contact or clear entry route and no feedback at all when they don’t get the contract. It’s easier to walk away than to keep trying. Councils lose good suppliers and great ideas before the process even starts.

Communication Is Patchy

Small businesses don’t know where opportunities are listed or who to speak to, to find out how to get on a supplier list. Opportunities are scattered across websites, portals and PDFs. Most founders simply give up.

Long, Complex and Corporate

Many council contracts run to 60–100 pages, filled with unintelligible legal clauses, disproportionate KPIs and compliance requirements that are irrelevant to small firms.

Councils say they want local suppliers and then hand them documents only a top lawyer in a big multinational could love. Why is that necessary for a local contract.

Qualification Requirements Shut Out New Firms

Small firms are excluded by turnover thresholds that are unrealistic and insurance cover they couldn’t possibly afford and are highly unlikely to ever need. Requirements for levels of experience and the financial tests are designed for corporates too. Councils unintentionally block the very suppliers they claim to support. This is unintentional because most local authority procurement people have never run small businesses and make assumption without knowing how they really operate.

Councils Don’t Measure Small Business Outcomes

Most councils don’t track small business bids and wins or note what it is that makes them drop out of the tender process. Without having much better data, there’s no accountability and no understanding of how to improve the processes. Better data and data sharing between local authorities should help.

Small Businesses Need Support Too

Many founders don’t understand procurement language or how to present capability. They worry about getting it wrong and don’t know how to build relationships with councils.

Councils must provide training, templates, “how to work with us” sessions, feedback for unsuccessful bidders and starter contracts for new suppliers, but they’ve still got to crack the nut that is engagement. Councils need to do the engaging rather than expecting business owners who have no time to do anything other than survive, to come to them.

The Fix

Councils must:

• simplify onboarding

• publish all opportunities in one place

• create micro‑friendly contract templates

• reduce thresholds and insurance demands

• use judgement, not just compliance

• track SME outcomes

• provide training and support

• actively choose local suppliers

• use Procurement Act freedoms properly

This isn’t just about procurement and applies to all of the local authority local economic development.

Get Growth

Small and micro businesses want to work with councils. Councils say they want to work with small businesses. If they get this right that’s where innovation, job creation and economic growth, sits. The system on the other hand was built for corporates and still blocks small businesses at every turn. It’s time for a complete mindset change about working with small and micro businesses, and their importance and value, for the benefit of everyone in the local community. If councils are serious about supporting local economies, they must stop talking about small business inclusion and start redesigning the system.