The Communities and Local Government Committee has called on councils to improve their procurement processes and make it easier for local small businesses to win and fulfill contracts.
The new report recommends that councils do more to meet local needs by awarding contracts not just on the basis of price, but on the basis of "wider social value".
The report concludes: "When letting contracts, councils must not only consider price but how they can benefit the local area and support local small and micro-businesses. This can be achieved by including within contracts requirements that suppliers deliver a specified number of apprenticeships or trainee opportunities, for example."
The report also recommends that councils present an annual report setting out their strategy for incorporating economic, social and environmental value in its procurement, including the impact on local economies and small businesses.
At the same time, local councils need to do more to cut costs for local SMEs. The report says: "The cost to companies wishing to bid for council business can be an eye-watering £50,000 per tender – higher than in most other EU countries. Councils must become more confident in how procurement guidelines can be followed without imposing excessive burdens on businesses."
In particular, the report suggests that complex pre-qualification questionnaires (PQQs) should be simplified and standardised – cutting red tape for suppliers that want to work with more than one council.
John Allan, national chairman of the Federation of Small Businesses, said: "FSB research has shown the value that goes back into the local economy when local authorities spend with small businesses. Small and micro firms need a fairer deal at a local level. We want government and local authorities to respond positively to the points raised – especially on late payments and the support for a streamlined PQQ process."