Yes (procurement) Minister – is there another change in the SME ‘aspiration’?

We featured here how the Government's target on awarding contracts to smaller suppliers has become an 'aspiration' and it is now averaged across all Departments. Then after last Friday's announcements on Whitehall procurement plans, Final Furlong pointed out in the 'comments' what seemed to be another subtle change of emphasis in the 'aspiration', with more focus on money being spent with SMEs down the supply chain rather than at first tier.  We're very lucky to find therefore this verbatim transcript of a recent conversation in Whitehall that explains exactly what happened here. (With apologies to any readers who have never heard of 'Yes Minister'!)

-Ah Bernard, do come in. We seem to have a bit of a problem. Some of the Departments are telling me there’s no way they’re ever going to hit this target of giving 25% of their procurement spend to small firms – SMEs I think we call them.

- Yes Minister. Small and Medium Enterprises.  Well, we’ve already started backtracking – we’ve made it an aspiration rather than a target.  And said we’ll average it across all Departments, AND that it will apply over the full term of the government, not on an annual basis.

- Does that solve the problem then Bernard?

- No Minister.  That still doesn’t give us enough wiggle room.  We have some departments such as DWP and Defence who are never going to get near it, and because they are so large, even averaging it across Whitehall won’t help I fear.

- Does anyone even care Bernard? Should I be worried?

- It does help of course that you are a Conservative led administration - the Federation of Small Business and Chambers of Commerce are always much less forthcoming  with their gripes when you are in power Minister compared to... when the others are in charge.  But eventually even the FSB might catch on. Then we have the usual annoying bloggers who take an interest in these matters...

- So what do you suggest we do? Change the target?

- No Minister. Sir Humphrey and I were talking about this and we had what – forgive me Minister – we think is rather a good idea.

- Well go on then man, don’t just stand there grinning inanely!

- Well, we believe it would be quite easy to subtly change the words to include spend with SMEs in the supply chain within the ‘aspiration’ of 25%. So if you put a contract in place with – let’s say, Rolls Royce, then of course they spend some of their revenue with small firms in their supply chain.

- Right...

- Now, we’ve done the Maths...

- I thought you were all PPE chaps in the senior civil service?

- Well, we did have to borrow a tame Mathematician from the Office of National Statistics.. but this is how it works. Let’s take MOD. Suppose only 10% of their procurement spend goes to SMEs.  The other 90% goes to large firms like Rolls Royce. Then let’s assume that half of that 90% pays for those firms’ own staff. The other half – 45% - goes to their suppliers. Now let’s assumes that 20% of that spend goes to SMEs; so that’s another 9% of the MOD’s spend gone to the SME’s who are suppliers to the first tier.

But of course the sequence continues.  Some of the money Rolls Royce spends with their big suppliers also goes to SMEs at the next level down, and so on, and so on.  Now, that gives us an infinite geometric series, which we can sum using the formula a / (1-r) where a is the first term in the series and r is the geometric multiplier.

- Bernard, my head is beginning to hurt..

- Almost finished Minister. In this particular case, if 90% of MOD’s spend goes to large companies, and then 20% of each of those supplier’s spend goes to SMEs, and so on ad infinitum..  you do know what ad infinitum means Minister?

- Yes, yes, go on!

-  Then doing the Maths, it means that using our formula, exactly 15% of the MOD’s spend goes to SMEs through the supply chain. So we add that to the 10% that goes directly from MOD and – hey presto – we have 25%!

- Brilliant Bernard! So how do have a proposal for this subtle change of words?

- We think something around ‘doing business’ rather than ‘awarding contracts’ should do it, Minister. Gives us scope to say that includes the sum to infinity expenditure through the supply chain...  What about, Government’s overall aspiration to do 25% of its business with Small and Medium sized Enterprises (SMEs)”...

- Bernard, Bernard. You’ve saved the day again. What would we do without you! Would you like a small sherry?

- Thank you. Yes (procurement) Minister, I rather think I would.

Voices (4)

  1. Phoenix:

    Can you make this a series, with an episode each month, perhaps? That would be a really cool feature for the Spend Matters blog. Already looking forward to part 2…

  2. Flog:

    Brightened my day as well, sitting in an airport waiting on a flight! Took me back to my school days – my that seems (was) a long time ago

  3. Mike Pringle:

    Brilliant – got my day off to a great start!

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