Lift on assignment ban ‘good news for small firms’

Law change will help small firms bid for public contracts

The decision to allow small businesses bidding for public contracts to subcontract elements to a third party has been hailed as a step in the right direction for entrepreneurs.

Until April 2008, any small company tendering for a government contract faced a ‘ban on assignment’, which prohibited them from outsourcing any element of it.

The government’s decision to lift this ban has been dubbed the first sign that it is finally listening to the needs of the small business sector by business funder Cattles Invoice Finance.

The ban also prohibited small and medium-sized businesses from using invoice factoring or discounting, whereby a business’ debt is assigned to a third party to boost cashflow.

Doug Crawford, managing director of Cattles Invoice Finance, said: “While big public sector contracts have a huge potential paper value to small companies, the reality has been that dealing with these organisations offers more risk than reward.  A recent survey we conducted of small businesses revealed that only 17% of small firms experienced prompt payment from public sector clients. Crawford added that the Treasury’s decision to end the assignment ban will help the government to achieve its target of awarding 30% of all public sector contracts to small and medium-sized businesses by 2013.

He said: “With this important piece of red tape now cut, smaller companies will be able to bid for these contracts with confidence. Without this change, the Treasury’s self-imposed targets would have seemed unrealistic.”

© Crimson Business Ltd. 2008

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