The Strategic Suppliers' 10 'Challengers': who are they?

The UK government's 39 'Strategic Suppliers' are a group of companies who provide such vital services to the public sector that the Cabinet Office takes a more hands-on approach to managing the government's relationship with them.

In our latest report analysing the public sector revenue earned and contracts won by the Strategic Suppliers in FY22/23, we noted how several firms make just as much public revenue as the Strategic Suppliers and are growing as quickly but aren't in the exclusive club. Who are they?

In this blog, we've analysed 10 of these 'Challengers' to the Strategic Suppliers to understand what role they're playing in delivering public services, where they're earning their revenue from, and how they stack against the 39 incumbents.

But first, some context:

❓  How do you become a Strategic Supplier?

Before delving into the Challengers, it is crucial to grasp the process through which an organisation becomes part of the Strategic Suppliers group in the first place.

A small number of companies do so much business with the UK public sector or provide such vital services that the Cabinet Office takes a more hands-on approach to managing the government's relationship with them. It designates these critical companies as ‘Strategic Suppliers’.

Each Strategic Supplier is designated a 'Crown Representative' - an individual who acts as the intermediary between the organisation and the Cabinet Office.

Having annual direct public sector revenue exceeding £100m is a practical criterion for inclusion in the list of Strategic Suppliers, although it is not a requirement. While being added to the list is a sign of success, it also comes with greater scrutiny by the Cabinet Office to ensure that public funds are being well spent.

Fundamentally, the Cabinet Office bestows the 'Strategic' designation upon a supplier if the government heavily relies on the goods and services it offers. To mitigate the risk associated with suppliers deeply embedded in public service delivery, a more hands-on approach is deemed necessary.

To learn more about the 39 Strategic Suppliers, click here.

🎯  The 'Challengers' to the Strategic Suppliers

A handful of public sector suppliers earned as much direct public sector revenue in FY22/23 as the Strategic Suppliers, but are not included in the official list. We refer to these suppliers as ‘Challengers’.

Several past Challengers identified by Tussell have since gone on to join the list. Computacenter and Leidos were both identified as Challengers before entering the list in 2020 and 2021 respectively. A majority stake in PA Consulting, also a past Challenger, was acquired by incumbent Strategic Supplier Jacobs in 2021.

Here are the 10 organisations we picked out as challenging the Strategic Suppliers' position in FY22/23:

1️⃣  Veolia

Sector: Outsourcing & FM

Direct Public Sector Revenue (FY22/23): £932m (YoY growth of +15%)

Top Framework (by value of call-off contracts, FY22/23): Treatment & Conditioning Services Framework

Top Public Sector Customers (by direct revenue, FY22/23):

Veolia is a French water management, waste management and energy services provider. Its origins lie in Compagnie Générale des Eaux, founded in 1853.

Veolia is the leading Challenger in the Outsourcing and FM space. Having earned more than most of the Strategic Suppliers in FY22/23 - including many of the Strategic Suppliers in the Outsourcing & FM sector - if Veolia were in the Strategic Suppliers it would rank number 6 out of 39.

In FY22/23, Veolia was awarded three contracts exceeding £100m in value by three local authorities: London Borough of Brent, London Borough of Hammersmith & Fulham, and Hertfordshire County Council. All 3 of these contracts related to waste collection and management.

2️⃣  Vinci

Sector: Construction & Engineering

Direct Public Sector Revenue (FY22/23): £892mn (YoY growth of +10%)

Top Framework (by value of call-off contracts, FY22/23): Strategic Alliance Agreement 

Top Public Sector Customers (by direct revenue, FY22/23):

VINCI is a French concessions, energy and construction firm. Vinci currently operates in over 120 countries worldwide.

Vinci is the leading Challenger in the Construction & Engineering, sector with a YoY direct public sector revenue growth of +10% between FY21/22 and FY22/23.

Data from Tussell's platform shows that Vinci does the majority of it's work with Local Government. Central Government still accounts for sizeable share of Vinci contracts and its work with the NHS being consistently minimal.

In FY22/23, Vinci was awarded 8 separate renovations, refurbishment and fire safety-related contracts by the Ministry of Justice, spanning several prisons across the UK. These totalled £54.8mn in value.

3️⃣  Willmott Dixon

Sector: Construction & Engineering

Direct Public Sector Revenue (FY22/23): £824m (YoY growth of +21%)

Top Framework (by value of call-off contracts, FY22/23): National Framework for Major Works 2020

Top Public Sector Customers (by direct revenue, FY22/23): 

Willmott Dixon is a contracting, residential management and property support business, based in Letchworth.

Having grown 21% in the last financial period, Willmott Dixon is a newcomer in the Challenger list. Willmott Dixon grew more than all but 2 of the Strategic Suppliers, and 1 other Challenger. Willmott Dixon's growth is largely accounted for by its uptick in "works" contracts in FY22/23. 

Willmott Dixon's largest contract win in FY22/23 was a £248m 'Responsive Repairs and Voids' contract with Longhurst Group Ltd - a charitable housing association.

4️⃣  Wates

Sector: Construction & Engineering

Direct Public Sector Revenue (FY22/23): £728m (YoY growth of +5%)

Top Framework (by value of call-off contracts, FY22/23): RM6088 Construction Works and Associated Services 

Top Public Sector Customers (by direct revenue, FY22/23): 

The Wates Group was established in 1897 and is a privately-owned, construction, development and property services company in the UK. They employ over 4,000 people, working with a range of clients and partners from across the public and private sectors.

Wates is the 3rd and final Challenger in the Construction & Engineering sector.

While Wates is growing at a much slower rate than fellow Challengers Vinci and Willmott Dixon, all of the incumbent Construction & Engineering Strategic Suppliers - Laing O'Rourke, Mott MacDonald, Tilbury Douglas and Balfour Beatty - have experienced a decline in direct public sector revenue.

5️⃣  Reed

Sector: Outsourcing & FM

Direct Public Sector Revenue (FY22/23): £597m (YoY growth of +8%)

Top Framework (by value of call-off contracts, FY22/23): RM6160 Non Clinical and Temporary Fixed Term Staff

Top Public Sector Customers (by direct revenue, FY22/23): 

Reed is an employment agency based in the United Kingdom. The company was founded in 1960 by Sir Alec Reed CBE.

As a challenger in the Outsourcing & FM sector, Reed is up against some big names, such as G4S, Mitie & Serco. 

In FY22/23, Reed secured two high-value contracts from Hyde Housing Association Limited and NHS National Services Scotland, totalling £83.1m in value. This represents a significant chunk of £128m worth of contracts in won in the same period.

6️⃣  Boeing

Sector: Aerospace & Defence

Direct Public Sector Revenue (FY22/23): £498m (YoY growth of -11%)

Top Framework (by value of call-off contracts, FY22/23): None used

Top Public Sector Customers (by direct revenue, FY22/23): 

Boeing is an American multinational corporation founded in 1916 that designs, manufactures and sells airplanes, rotocraft, rockets, satellites, telecommunications, equipment and missiles. The present corporation is the result of the merger of Boeing with McDonnell Douglas in 1997. 

Boeing is the highest-ranking Challenger in the Aerospace & Defence sector - despite its negative year-on-year public sector revenue growth.

Unlike all the other Challengers and the Strategic Suppliers themselves, Boeing didn't win any of its awarded contracts in FY22/23 through frameworks. 

Boeing did all of its work in FY22/23 with the Ministry of Defence through only 3 contracts. One of these contracts, E7 Infrastructure RIBA 4-6, was particularly large with at £79.6m. 

Like Strategic Suppliers Thales and BAE Systems, Boeing provides important work for the Ministry of Defence - could this be enough to elevate it onto the Strategic Suppliers list soon?

7️⃣  CBRE

Sector: Outsourcing & FM

Direct Public Sector Revenue (FY22/23): £321m (YoY growth of +22%)

Top Framework (by value of call-off contracts, FY22/23): Integrated Facilities Management 

Top Public Sector Customers (by direct revenue, FY22/23): 

CBRE is an American commercial real estate services and investment firm. The abbreviation CBRE stands for Coldwell Banker Richard Ellis. Over the years, CBRE has acquired many other firms, such as Insignia ESG, Trammell Crow Company and most recently Telford Homes.

In FY22/23, CBRE was awarded a staggering £2.5b worth of contracts.

The overwhelming majority of this value stemmed from one contract - CBRE's Pool's UK Core Property Mandate contract with Hampshire County Council, worth a staggering £2b over its 30 year lifespan.

Out of the Strategic Supplier Challengers, CBRE made the biggest increase in their YoY growth - a massive increase of 22%. However, some of this may stem from pass-through invoices related to rent and/or service charge collection.

8️⃣  Telent 

Sector: Telecoms

Direct Public Sector Revenue (FY22/23): £209m (YoY growth of +15%)

Top Framework (by value of call-off contracts, FY22/23): RM6100 Technology Services 3

Top Public Sector Customers (by direct revenue, FY22/23): 

Telent Technology Services Limited is a British radio, telecommunications, and digital infrastructure systems installation and services provision company. Telent has a team of over 2,400 staff, operating from over 40 locations in the UK and Ireland.

Telent is the only Challenger in the Telecoms sector.

Its competitors within the Strategic Suppliers are BT, Virgin Media and Vodafone. With a YoY growth of +15%, Telent grew more than all of these suppliers..

With both Virgin Media and Vodafone decreasing their direct revenue in FY22/23 and BT breaking even, Telent is moving in the right direction achieving sizeable growth in direct revenue with the public sector. 

BT alone has expiring services contracts with £969mn in 2024-2025 - could Telent be in the mix for bidding on some of them?

As a Tussell customer, you can see these individual contracts and when they are due to expire, helping you to get ahead and build your pipeline out well in advance.  

9️⃣  NEC

Sector: Technology

Direct Public Sector Revenue (FY22/23): £143m (YoY growth of +22%)

Top Framework (by value of call-off contracts, FY22/23): RM3821 Data and Application Solutions

Top Public Sector Customers (by direct revenue, FY22/23): 

NEC is a Japanese multinational information technology and electronics corporation, headquartered in Tokyo. It provides IT and network solutions, including cloud computing, artificial intelligence, an Internet of Things platform and telecommunications equipment and software. 

NEC is the only Challenger within the Technology sector and is the joint-first Challenger in terms of the biggest YoY direct revenue increase, at 22%.

However, NEC is up against a lot of competitors. Within the Strategic Suppliers alone it is up against 14 suppliers working in the technology space, including the likes of AWS, Accenture and Capgemini. If NEC was included in the Strategic Suppliers list, it would only rank 38th by direct public sector revenue in FY22/23.

In order to be amongst this list, NEC still has a lot of work to do - achieving this level of revenue increase is commendable but, doing this for one year alone will not be enough to make it onto the government's list of Strategic Suppliers. 

1️⃣ 0️⃣  Airbus

Sector: Aerospace & Defence

Direct Public Sector Revenue (FY22/23): £90m (YoY growth of -8%)

Top Framework (by value of call-off contracts, FY22/23): RM6235 Space Enabled and Geospatial Services

Top Public Sector Customers (by direct revenue, FY22/23): 

Airbus is a European multinational aerospace corporation. The company's primary business is the design and manufacturing of commercial aircraft.  The company also has separate commercial, defence and space and helicopter divisions. 

Challenger number 10 is Airbus. With a YoY direct revenue growth of -8%, its direct revenue for FY22/23 was the lowest among the Challengers.

Though its direct public sector revenue sits well behind its counterparts' at BAE Systems and Thales, Airbus provides important services to its largest public sector customer, the Ministry of Defence.

Like Boeing, in FY22/23, the MOD was the only public body to award Airbus a contract. Its largest across this period was for a Local Key Management System, with an award value of £4.47m.

The reliance on one big contract or work with one buyer seems to be a trend amongst the Challengers - will this consolidation pay dividends, or will this reliance cost them?

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Despite not being members of the Strategic Suppliers club, these 10 organisations still earn billions of pounds every year from the public sector for their delivery of key goods and services.

Predicting who might become a Strategic Supplier is more of an art than a science: ultimately, it's the Cabinet Office's own judgement of government's 'reliance' on a given firm that decides whether their join the list. Total revenue earned is just one of many factors considered when weighing this relationship.

To understand the current Strategic Suppliers - including who's gaining and losing market share, and which public bodies rely on them the most - download our latest FREE analysis of the Strategic Suppliers.