Small but mighty: priming SMEs for success in defence

With the UK Government launching measures to provide small and medium enterprises (SMEs) better access to the defence supply chain, Lindsey Hartley, Director at AtkinsRéalis, discusses how primes can create more opportunities for SMEs to play their part in national security.

When SA Group, a Wiltshire-based business management and technical consultancy, first considered pursuing larger defence contracts in 2018, they were hesitant. Like many SMEs, they were concerned about resource-intensive bidding processes, lengthy qualification requirements, and widely-acknowledged procurement issues in defence.

But today, the employee-owned company has tripled in size from 30 to 100 since 2020, with support to the Aurora Engineering Partnership (delivered by QinetiQ, AtkinsRéalis, and BMT) peaking, one year, at over 50% of their annual turnover. “Over the last few years as a whole, Aurora has been our most successful route to market,” explains SA Group's William Machin, Head of Sales and Marketing. “Originally, we were cautious about pursuing the larger contracts, but constant feedback and more transparency gave us confidence to go for larger and more complex proposals.”

The transformation wasn't just about size. Aurora enabled SA Group to diversify beyond its project management roots into software development, cyber security, and technical architecture. Most importantly, it opened doors across the defence landscape. “We were mainly in one area of Defence Digital, but Aurora allowed us to spread across programmes. It became a critical entry point, allowing us to see programmes we didn't know existed or how to access.”

SA Group’s experience illustrates what's possible when defence procurement genuinely adapts to the commercial realities of SMEs, creating jobs and driving growth.

The scale of the challenge

Almost 70% of defence spending goes to regions outside London and the South East, yet only 4% of this spend goes to SMEs¹. To tackle this, Government will increase Ministry of Defence (MOD) spending with SMEs by £2.5 billion by May 2028, a 50% increase against 2023/24², as well as establish an SME support centre. It’s a win-win: MOD gets the more specialist expertise, innovation and agility SMEs can offer, while small companies will grow their expertise and business.

But SMEs still face barriers, as acknowledged in the Strategic Defence Review³. Inherently complex and resource-intense bidding process can deter new entrants, with lengthy vetting, security clearance and classification requirements. Investors need long-term certainty to back start-up’s plans, which defence has historically struggled to provide. And when contracts are awarded, defence can be prescriptive, rather than allowing SMEs to iterate and innovate.

The government's SME initiatives and procurement reform are welcome, but defence must truly evolve its relationship with SMEs and defence primes are crucial to success.

Primary support

Defence primes, working on major programmes and delivery partnerships, are key conduits for SMEs. Aurora is one such partnership: MOD benefits from the combined heft of QinetiQ, AtkinsRéalis, and BMT, and a 230-strong provider network including small, niche businesses.

Aurora has evolved over the years to accommodate specialists, but we know there is always more to do. In the last year we have introduced several larger, more strategic contracts – delivering further advantages to MOD and allowing greater involvement in more complex projects.

Feedback indicated that we were not always providing sufficiently clear project requirements or timely responses to proposals. We have since revised our procedures and processes, improved transparency in evaluation criteria, reset expectations on how we interact and improved access to customer insights.

SA Group notes competitions are overall better run, especially with transparency on scoring and feedback – elements that help SMEs learn and improve their bids.

We have driven innovative defence solutions by facilitating SME idea presentation to critical MOD decision-makers. Dragons’ Den events have resulted in both tangible tasking for many ideas and the recruitment of high-calibre individuals. We continue to develop the provider network to meet current and future MOD enterprise skills and capabilities, including funding support for apprenticeships and military veterans transitioning into civilian jobs.

The Aurora Futures Lab, which works across Front Line Commands on a wide range of projects, from early experimentation to horizon-scanning studies, includes over 250 organisations. Of these, 77% are classified as SMEs, and 59% as micro or small organisations. Aurora operates as an open network, regularly onboarding new providers and maintaining low entry barriers.

Perhaps most importantly, Aurora actively facilitates collaboration between SMEs. SA Group’s Machin notes, “AtkinsRéalis has said to us, ‘We’ve noticed you're bidding for this, have you spoken to this organisation?’ So, if a dozen things need to be delivered, we can collectively bid and pull them together.”

Building relationships

Building these positive relationships with SMEs is key for defence organisations seeking to work more closely with smaller businesses. A relationship-led rather than transactional approach helps build understanding of each organisation's capabilities and strengths.

Lessons on SME inclusion can also be learnt from similarly complex and highly regulated sectors, such as civil nuclear. The majority of AtkinsRéalis’ civil nuclear supply chain are SMEs, which we have better supported through tailored work packages, bespoke contracts, and dedicated onboarding support.

This is particularly important in engaging with non-traditional defence SMEs. With the rapid expansion and evolution of technology, innovative technologies are becoming increasingly important in the battlespace. The Strategic Defence Review said, “There is a deep range of partners outside Defence that it must work to bring in alongside its prime contractors, from technology and innovation startups and scale-ups, to small and medium-sized enterprises...”

By working with SMEs to assess and develop novel ideas, defence organisations can help the MOD understand where these technologies can be applied. Primes must be careful to build the trust and respect of smaller companies, who may fear their ideas being stolen, or that terms and conditions will be weighted in favour of the prime.

The path forward

The Government's new SME initiatives are welcome, and likely to have a positive effect across defence. Defence primes need to invest now, or risk being left behind. Identifying what sovereign capabilities will be needed, and what long-term investments will be made, will allow smaller organisations the certainty to plan.

As SA Group's experience demonstrates, when frameworks are designed with genuine transparency and support, SMEs don't just participate – they thrive and contribute capabilities that defence genuinely needs. The question isn't whether SMEs can contribute to defence; it's whether defence is ready to embrace the changes needed to make that contribution meaningful.

SA Group's advice: how to improve SME participation in defence

Collaboration and the need for specialists
Help SMEs work together on complex requirements they couldn't tackle individually, connecting organisations with complementary capabilities. “Primes also need to recognise when they don’t have the in-house expertise needed,” says SA Group’s Machin.
Feedback loops and transparency
Provide honest feedback on scoring and clear reasons why bids succeed or fail. This transparency helps SMEs learn and improve future submissions. “There can be radio silence after a bid submission, and you just have to assume you haven't won,” Machin says. “Aurora has improved its scoring of bids and saved us time by ensuring that work is not advertised for the sake of it.”
Data collection and upfront expectations
Government needs better systems and data to track SME participation and spend accurately, including their role in prime contractor teams. “Spend data on SMEs can be blurry because SMEs collaborate with primes, but they may only have a small percentage of the workshare. A solution is for Government to set out the rules of engagement before a framework goes live,” says SA Group’s Machin.