MOD shows growth in use of smaller suppliers – or does it?

You may remember our curiosity following recently published data that showed a huge growth in the UK Ministry of Defence’s spend with smaller suppliers (SMEs). It formed a large element of the Cabinet Office’s overall  claim that central government business with SMEs has grown very strongly.

So we asked  MOD some Freedom of Information requests about the data. I think it’s worth publishing their response in full – I have to say, it is very impressive in its thoroughness and openness, even if it does raise some questions. Part 1 today, part 2 tomorrow.

Probably not bought from an SME supplier

And before we get into their comments, remember that the data quoted by Cabinet Office was (rather strangely ) for 2009/10 and for 2011/12. (We’ve asked Cabinet Office what happened to 2010/11). So here is the MOD response.

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“Thank you for your e-mail of 12 March 2012, in which you seek information about the increased spend with Small and Medium Enterprises (SMEs) and a list our top fifty SME suppliers, together with spend data for 2009/10 and 2011/12. This is considered to be a request for information under the Freedom of Information Act 2000.

I can confirm that the Ministry of Defence (MOD) does hold some information relevant to your request.  I regret, however, that due to differences in the manner that statistics were compiled in financial years 2009/10 and 2011/12, we are unable to conduct a like for like comparison to explain the apparent change. The different methods applied in each year may have caused some of the increased difference in identification and if so, could suggest that we were previously under-reporting SME spend.

For financial year 2009/10, the 4% figure which was reported, although it represented the best figure available at the time, was dependent on a range of manual inputs. Our adoption of Government Procurement (GP) methodology will produce a more automated process with improved statistics from 2011/12.

The GP Service has been working with their specialist contractors to produce a comprehensive list of suppliers who have been contracted to provide goods and services to Her Majesty’s Government. This includes an SME indicator. For 2011/12, in support of the GP agenda of publicising SME data during the year, an SME listing provided by the GP Service was mapped against the Department’s first two quarter’s spend. This produced the 14% figure published by GP.

The Department is working with the GP Service to verify the SME listing and going forward, the resultant updated SME indicator will be used to identify SME spend for our future quarterly spend returns. We plan to complete this work by July 2012 at which point we will re-map the 2011/12 data to produce a figure for the year against which like for like comparisons will be possible in future years.

The techniques used for previous years’ SME spend data do not provide any information about spend with individual suppliers. I am therefore unable to provide you with a list of the top 50 SME suppliers by value for financial year 2009/10.  As we are still in the process of verifying SME listings for financial year 2011/12, I am also not currently able to provide you with the top 50 SME suppliers by value for the first three quarters of financial year 2011/12. It is, however, expected to be able to provide this type of information from July 2012”.

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We’ll have part 2 of their response, where MOD tell us about their SME initiatives, tomorrow. But this does obviously bring a few doubts about the published “increase” into the picture. The data has been calculated using two quite different methodologies; and it’s clear that MOD themselves don’t really understand the reason for the apparent growth in business going to SMEs. The measure now relies on the GPS list of SMEs – that might also be interesting to look into!

It doesn’t mean the numbers quoted are incorrect of course; but it does mean that we can’t be totally sure we’re seeing a genuine growth.  But tomorrow we’ll have part 2, where the MOD outline what they’re doing to support SMEs – and that is interesting.

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Comments

  • Final Furlong:

    Why don’t they (and GPS) simply put up their hands (fly the white flag) on this one and admit that it’s complete bollocks. They’re still making it up as they go along.

  • Andrew:

    I do have a great deal of sympathy for the MOD, and other departments subject to the same influence (whilst trying to gain the best deal for the taxpayer). It can’t be easy trying to do your job whilst being subject to political bravado, often without an understanding of the consequences. The big question has to be how these types of statements/ initiatives actually impact the outcome i.e. of a tender – do you award to the best placed supplier against the evaluation criteria or succumb to the pressure of making greater use of SME’s? And how does this then sit with a landscape where the outcomes of public tenders are increasingly being challenged by losing bidders? Not a pleasant experience I suspect.

  • More from MOD on promoting SMEs in the supply chain — Spend Matters UK/Europe:

    [...] UK Ministry of Defence’s response to our questions on their use of smaller suppliers (SMEs) on Tuesday. Here’s part 2 of their FOI [...]

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