PROCUREMENT
Why public procurement holds the key to small business growth
Making the most of government’s buying power has the potential to drive small business growth and unleash the potential of the UK’s science and technology base, says Ruth Puttick
A
Ruth Puttick is knowledge and insights specialist, NESTA and co-author of ‘Buying Power? Is the Small Business Research Initiative (SBRI) driving innovation in the UK’, published in June 2010. The report can be downloaded at
www.nesta.org.uk
s public finances are in dire straits and we look for new sources of
growth, the spotlight must focus on making better use of what little money is available. With the government spending around £220 billion a year on goods and services, intelligent spending represents a powerful lever to drive innovation. Public procurement to stimulate small business growth is not a new concept: policy makers have for years been trying to devise ways to make better use of government’s spending power, but most haven’t had the desired results. This is why programmes like the Small Business Research Initiative are so important.
Designed to help public sector bodies to procure research and development services from small businesses, the newly reformed SBRI has the potential to transform government’s approach to supporting small, high tech companies.
It follows a two-stage process, with an initial competition phase inviting companies to pitch their solution to a specific issue and to receive up to £100,000 to test the feasibility of their solution. After the first phase, companies can bid to develop a working prototype, with contracts worth up to £1 million over two years.
The scale of challenges being tackled are diverse and incredibly ambitious, ranging from tackling superbugs in hospitals to reducing the weight soldiers have to carry whilst on
Jul/Aug 10 foot patrol in warzones.
NESTA’s research shows that despite its infancy, the SBRI is having real impact. By spurring companies to complete demanding contracts, the SBRI is accelerating technology development and filling a vital funding gap. Contract R&D funding is an important avenue for growing technology businesses, especially with scarce venture capital funding - only 80 companies raised venture capital in 2009 compared to 205 in 2005.
Although much larger and more established, the American Small Business Innovation Research programme (SBIR), upon which the SBRI is modelled, demonstrates clearly just what the UK should strive for. A study revealed a striking impact on company growth. Over ten years, the American companies funded by the SBIR generated five times more growth than other companies. This finding supports what is known about growing companies in the UK – R&D contracts are of vital importance.
As well as driving business growth, supporting these companies could revolutionise public service delivery. SBRI has widened the net for solutions which have proved elusive through other routes and enabled the public sector to tap into a wealth of creative, innovative ideas.
One example of this was the discovery of a technology being
developed in the lucrative racing industry to detect asthma in horses. An NHS competition searching for solutions to long-term health conditions uncovered this solution and tested its use for humans.
This has the potential to revolutionise asthma detection which until now has relied solely on the patient blowing into a spirometer, which means those unable to use it, such as babies and the elderly, cannot be properly diagnosed. If successful, this technology could help save some of the one thousand preventable asthma- related deaths a year.
Now the SBRI is starting to have real impact, attention turns to the future. Although the first solutions from the SBRI competitions won’t be ready for another year, a key challenge is how to ensure that these technologies don’t get marooned and that there are mechanisms in place to commercialise and fully exploit them. Indeed, with the evidence starting to show the value of SBRI, scaling up will become the next challenge. Getting more departments to adopt the initiative will be a significant step forward for start- ups and for the public sector.
It is crucial that these challenges are overcome to harness the full potential of public procurement, maximising the gains for companies, the public sector and UK economy as a whole. The UK now has the right mechanism in place. It is time for departments to fully embrace it.
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