Encouraging SMEs to bid for govt work is 'backfiring'

Moves by the government to encourage small IT firms to bid for public sector contracts are driving many away, says trade body UKITA

The government's strategy of encouraging small and medium-sized IT businesses to bid for public sector contract is driving some suppliers away, according to UKITA, a trade body that represents small IT firms.

According to UKITA director Andrew Corbett, the government's policy of encourage small business to apply for contracts has led to an influx of consultants, often former public sector workers, bidding for the same work.

These new entrants to the market often undercut market rates in order to make a start in the business, he says.

Corbett told Information Age this morning that this has led many of its members to stop bidding for the work. "The odds are lengthening, and the margins are shortening," he said.

"The government's heart is in the right place, but the law of unintended consequences is at play," he says. "A lot of our members are telling us that the strategy has encouraged a lot of unsuitable people to bid for the work, and that they are undercutting the market because they haven't got any overheads yet."

"Many of our members are saying they are moving out of [government work] because it is no longer viable, and others tell us they are going out of business altogether."

Read the full story here: http://www.information-age.com/channels/it-services/news/2126373/encouraging-smes-to-bid-for-govt-work-is-backfiring.thtml