NFB research finds councils are unfairly shutting out SMEs from winning construction work by misusing credit-rating checks
Local authorities are unfairly shutting out SMEs from winning construction work by misusing credit-rating checks, a report by the National Federation of Builders (NFB) claims.
Just over one in ten (13%) local authorities admitted using credit-rating checks to asses bidders on a pass or fail basis, contravening EU procurement regulations.
EU procurement regulations do not allow the use of credit-rating checks for pure pass or fail judgments on firms on contracts valued over 拢4.3m.
Yet, on the basis of its findings, the NFB estimates 拢2.1bn of public construction work is procured on this basis.
Credit-rating checks are compiled by credit reference agencies on the basis of a range of factors, including a firm鈥檚 financial reports and corporate structure.
The NFB says credit-rating checks are unfairly biased against SMEs as SME finances are more susceptible to anomalous fluctuations and are more open to interpretation.
Two-thirds of local authorities said they used credit-rating checks as one of a range of weighted factors in the procurement process.
The number of local authorities that use credit-rating checks on a pass or fail basis could be higher, as 10% of local authorities stated they used checks but did not clearly state how they are used.
The NFB survey鈥檚 response rate was 83%, with 288 out of 346 local authorities responding.
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