Government spend with SMEs – some success, a whole lot of political spin

Last week the UK Cabinet Office published  a report on UK central government procurement spend with SMEs ( smaller businesses). Now anything that appears in the middle of August does so for a purpose, which is usually to avoid too much media interest. And we suspect that is the case here, because the presentation of success doesn’t quite match up to the facts.

Looking at the data, the headlines are all about comparisons from 2009/10 to the new data from 2012/13. That shows a growth in spend with SMEs from 6.5% to 10.5%.

However, you have to go into the report detail to see that the year on year performance is much less dramatic – spend with SMEs going from 10.1% in 2011/12 to 10.5% in 2012/13. That’s a long way short of the 25% target by 2015 that was originally proposed.

It is also worth noting that the 2009/10 figures are very suspect – when I asked MOD a while back why their figures showed such a big increase from 2009 to 2011/12 the answer was “because we didn’t used to measure it very well”!  We also don’t know if Ministry of Justice are measuring their SME spend properly now given the previous problems.

Of course, Francis Maude made the brilliant Yes Minister move a while back of converting a “target” to an “aspiration”, and including spend through the supply chain in the target – sorry, aspiration. (See our take on that here).

Having said that, this new report is lengthy – 35 pages – with some interesting general material about SMEs that we may come back to. And I do believe that some Departments at least are doing what they can in terms of promoting business to SMEs.

Cabinet Office themselves have taken positive steps – initiatives such as Contracts Finder and the G-Cloud Store have genuinely helped SMEs. Particularly in the IT space, there is a genuine strategic desire to move away from the “oligopoly” of government suppliers as it has been described. And this is new to me - “Government has set itself an extremely ambitious goal that at least 50% of spend on new government IT, flows to SMEs directly and will be looking at its pipeline of business to show that real change is happening”.

It’s also clear that there is still a fundamental issue that SMEs can’t build battleships or take on the risks of DWP’s Welfare to Work contracts, so the 25% target across the board  was probably a bad idea in the first place.

But this presentation of successful progress is political spin of a policy objective that is not on track at the moment. And the elephant in the room is the centralisation agenda that is now the main strand of central government’s procurement policy, with the creation of Crown Suppliers – sorry, Crown Commercial Services – likely to exacerbate the situation. (There’s a nice little example going on right now in Cabinet Office itself, as a framework contract including many SMEs is being wound up, with the business transferring 100% into the Capita GPS Temporary Staff contract).

Centralisation with a national contracting body cannot help SMEs. And don’t just quote Redfern Travel as a counter to this – the fact that is still the only example quoted two years after the contract was let just shows how unusual it was. And that is one firm. What SMEs want is business spread around the market to encourage growth, innovation and new market entrants, not one big contract given to a single SME (who then of course probably stops being an SME!)

Luckily for SMEs, I see a lot more real desire amongst local authorities, who spend more than central civil government anyway, to look seriously at SMEs and local businesses. Now there are pros and cons in this as well, but we mustn’t make the mistake of thinking Whitehall is the only game in town.

Anyway, here is the SME report.  Judge for yourself. Spin, success, or a bit of both?

(And don't forget, you or your firm can contribute to the CBI survey on government procurement - link and our article here).

Voices (3)

  1. life:

    “Cabinet Office themselves have taken positive steps – initiatives such as Contracts Finder and the G-Cloud Store have genuinely helped SMEs. ”

    Maybe – given the levels of spin on this though where’s the evidence? Are SMEs better off net of everything else that’s been replaced the new arrangements? (And small spend anyway). And also, how could one possibly know as a fact anyway, given the changes to spending? Difficult.

    The fundamental question for me, regardless, is why we should have an SME agenda anyway. Is it “fairer”, or part of an unseen business case on behalf of UK PLC?

  2. Public Sector Refugee:

    The “aspiration” to give more business to SMEs is admirable. The ideology which is current Cabinet Office orthodoxy that SMEs can take on a lead role in the delivery of major Government objectives such as immigration control and probation is mad. To misquote Groucho Marx, any SME willing to take on the level of risk involved ought to be disqualified at the outset. A much better way for Government to support SMEs than setting unachievable targets would be to mean what they say about requiring their major suppliers to pay SMEs promptly

  3. Final Furlong:

    Redfern is government ‘spin’ at its best. It’s an SME that gives vast majority of business to the world’s largest hotel groups, railways and airlines. (There must be data on how and where on Central Gov Depts spend their travel through Redfern.) I constantly hear how users stay in central London hotels “opposite or close to where they work” (which, given locations, can’t be cheap…).

    What would be truly wonderful would be a model whereby all users stay in UK-owned ’boutiques’ and B&Bs across the UK and complete Trip Advisor feedback to promote them all to tourists. Big focus on UK SMEs, jobs (especially gender-neutral), capacity-building (more of them) and quality. Often, these small providers score better on TA than the large monoliths. If you can ban first class travel you can ban first class hotels…

    And, finally, see link below. I wonder when it will cease to be an SME?

    http://www.insidermedia.com/insider/yorkshire/96419-redfern-travel-sets-200m-sales-target

Discuss this:

Your email address will not be published. Required fields are marked *