Data on spend with smaller suppliers from UK Government Departments and Cabinet Office can’t be trusted

At the risk of losing friends in Cabinet Office, we must report that recent claims that there has been a dramatic growth in government spend with small suppliers (SMEs) are, I’m afraid, unsafe. That doesn’t mean they’re incorrect – but it’s clear that the data is not good enough to say with any scientific certainty (or even reasonable probability) that the claims are sound.

We reported last week on the Ministry of Defence, who with commendable honesty admitted that they couldn’t explain their apparent growth in spend with SMEs and it might result from changes in the way the numbers are measured.

Now we’ve had our Freedom of Information response from the Ministry of Justice, the other Department that showed a huge increase in apparent SME spend according to the Cabinet Office. One element of that we thought was the inclusion in the latest data of smaller law firms who provide legal aid services– but we suspected they weren’t included in previous years’ figures.

This was confirmed by MoJ in their reply to us.

“ I can confirm that Legal Aid providers have been in our returns since the start of the 2011/12 financial year”.

So there’s one obvious reason for the significant apparent growth in the SME figure - a pure classification issue. Some of the law firms listed as SMEs are also not exactly what we’d normally think of as SMEs, even if they might technically fit the criteria – Tuckers,  for instance,  with around 200 fee-earners, are not exactly tiny!

New Court Building in Colchester (courtesy the Colchester Gazette)

More serious doubts emerge from the list of top  50 SMEs by spend provided to us by MoJ. (They couldn't provide the equivalent list for 2009 by the way). They included names such  as Service Support (Avon & Somerset) Ltd – the MoJ’s largest “SME” supplier last year - and Modern Courts (East Anglia) Ltd).

When we looked into these, it’s clear that they are Private Finance Initiative “special purpose vehicles”, formed to run the PFI projects for building / rebuilding and management of courts around the country. These are multi-million pound contracts, requiring serious financial strength,  and as such, the SPVs are generally owned by a large firm or consortium – two large construction firms, Laing and Mowlem look like they are in the lead in these cases.

I questioned MoJ on this and their response was “Dun and Bradstreet have informed us they (the SPVs) are SMEs”.  Now, as an ex D&B Procurement Director, I’d be interested to know how such organisations are being classified in this way! But I find that hard to believe this is correct even technically, and by no stretch of the imagination are they what Francis Maude or David Cameron are thinking about when they talk about their (genuine) desire to see more spend going to smaller firms.

We’ve also seen another Department who appear to be classifying all spend on Procurement Cards as “SME spend” but we need to look into that a little more carefully before naming names.

But anyway, the clear message is this. The data isn’t good enough at the moment to show clear trends, growth or otherwise, so claims on SME spend need to be taken with a veritable de-icing the M25 quantity of salt...

Voices (2)

  1. Toby Derodon:

    Hi Peter, some very valid comments made in your post. Rob has pointed out an excellent point in his comment, The SME’s do need to be looked at, they’re simply just not good enough.

  2. Rob:

    Thanks for your persistence Peter. I recall a number of posts on your blog specifically highlighting the spin and, particularly, in relation to the inclusion of legal firms in MOJ’s SME analysis, taking aside the utter nonsense, of course, of retrospectively including the SMEs identified within Departments’ existing supply chains… On the latter point – found buried in the footnote of the related report – it is clear that there was far more interpolation than extrapolation.

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