A small challenge – procurement spend on SMEs in big Government departments is “tiny or declining”

We featured here the excellent analysis carried out by Susannah Brecknell of Civil Service World. She looked at the quarterly performance data now produced by all central Government Departments, and the cost of procurement functions in particular.

We’ve taken a quick look at the spend going through smaller suppliers (SMEs) which is another published metric. The Government target (or aspiration) is that 25% of spend should go to SMEs. We have so far only looked at 6 – generally the bigger Departments, excluding MOD who apparently don’t know what their figures are for SME spend on a quarterly basis.

Q4 2010/11

Q1 2011/12

SPEND (£M)

SME SPEND

%

SPEND (£M)

SME SPEND

%

Revenue & Customs

286

2.0

0.7

390

2.9

0.7

Home Office

676

57.9

8.6

699

41

5.9

Work & Pensions

936

159

17.0

892

140.8

15.8

Justice

778

125

16.1

1287

300

23.3

Transport

754

13

1.7

670

11.6

1.7

Business

48

?

?

156

3.9

2.5

The table above shows the numbers. The only Department that looks SME positive is Justice and we believe that is misleading – we understand Legal Services Commission (LSC) figures have been included this last quarter for the first time. And £300 million SME spend is a suspiciously round figure!  LSC does use a lot of smaller law firms for Legal Aid contracts, but even there the signs are not good. As the Times said last week in terms of the current changes in the legal aid contracting strategy: “price competition..  will reward large firms who do high-volume work at the lowest price but jeopardising quality”. So the future looks less positive for SMEs there.

Other than that, Transport and Revenue & Customs only spend a tiny proportion of their total with SMEs and it is pretty flat; Home Office and (particularly) DWP start from a higher base but the percentage has declined in the quarter. The Department of Business have only just started measuring but again it is tiny.

Now we shouldn’t get too excited or worried about this – it is only comparing one quarter’s data with the previous after all. But it shows the challenge Government faces to achieve their 25% target. Personally, I don’t think they have a cat in hell’s chance of achieving it by the next election without some major Sir Humphrey type scheme (see below)...

But what would be very difficult is if there’s not even any clear movement in the right direction, which is the danger that is presenting itself based on this limited information.

And on this topic, we try and avoid having a go at Supply Management – but really, they and Colin Cram should read Spend Matters. Their feature on Monday about confusion over whether the target is 25% of contracts or 25% of spend was something we wrote about six months ago (and even earlier).  We asked Cabinet Office back in May formally through an FOI request and featured their answer here – which was that it is 25% of spend.

Supply Management then talk about the use of the word “aspiration” instead of “target”.

It’s straight out of  [the TV show] “Yes Minister”, the word ‘aspiration’”, says Colin Cram.

Yes indeed it is.  And we wrote our “Yes Minister” spoof on Sir Humphrey introducing the word “aspiration” (and other clever manoeuvres) here in June.  Perhaps a little acknowledgement, guys..

LATE NEWS

Government Procurement Service has awarded one of its national travel framework 'lots' to Redfern Travel - an SME. That's upset some big firms of course..!  You can't keep everyone happy. More on this to follow.

Voices (4)

  1. colin cram:

    Have just come across this article and comments. No, I hadn’t read Peter’s article before writing mine. My interest started January last year when I gave evidence to a House of Lords Select Committee. I then discovered that there seemed to be a difference in government policy between that given by (I presume BIS) in evidence to the select committee and the response in September to the select committee’s report. That led me to looking through manifestos and BIS/Treasury documents. Peter’s analysis of departmental spend is one I didn’t replicate or mention and is very interesting.

  2. huhh?:

    It’s a total joke. Even though the TMCs will be booking the travel and supposedly responsible for driving savings, the payment mechanism will be separate. Why?

    In many other countries round the world they combine the aggregation of ONE supplier of travel with ONE supplier of travel payments – what do they get? Huge aggregation on spending and huge aggregation on rebtes?

    What will our government get? HRG & Redfern negotiating their own discounts on THEIR spend (and will ALL gov depts conform to this new approach??) and all the payment providers, Barclays, Amex, RBS, Airplus, JPMorgan & Citibank also offering their own rebates.

    Why didn’t they aggregate ALL the spend? They’d get better rates and better rebates.

    It’s like the government is run by amateurs!

  3. Final Furlong:

    Indeed Peter, Mr Cram’s article was clearly (in my view) influenced by your blog (if not a direct ‘lift’!

    On the subject of SMEs, the original objective was to ‘award’ 25% or more of spend, erm, no, contracts, no, erm, spend, erm, no, contracts, erm, no, spend to SMEs (they couldn’t make up their minds so….) – it’s now ‘an aspiration to do 25% of its business with SMEs’ – meaning that they can count any SMEs found within their ‘existing’ supply chains (2nd, 3rd tier etc). (Complete tosh of course.)

    It’s outstanding (honestly!) though that GPS has awarded a £1billion contract to a £37m turnover company.

    I noted that they have picked up awards for their technology and have fairly strong alliances (Late Rooms etc) and that they even have existing contracts with the likes of DCLG – so they can even find a late room with a huge double bed which would accommodate the equally huge Eric Pickles…(see links below).

    Still, I couldn’t help mentioning this to some best practioners in procurement within the private sector who describe how they negotiate deals (often global) directly with the hotels, airlines and rail companies – with the TMC acting as the booking solution only. And yet, unless I’ve misunderstood this, Redfern, this £37m SME, will be the one negotiating these ‘deals’ in the £1billion ‘second tier’ commodity spend (with airlines, hotels, rail etc). Let’s hope that they (GPS) have negotiated a clause with Redfern to identify and extract some of those end of year rebates…

    http://www.whatdotheyknow.com/request/redfern_travel_limited_bradford?unfold=1#incoming-195214

    http://www.travolution.co.uk/articles/2011/07/29/4904/redfern-travel-signs-deal-with-laterooms.html

  4. Ian Makgill:

    My feeling is that Government have got their focus on SMEs wrong. It is very difficult for SMEs to make a persuasive argument when they are dealing with such large organisations as these.

    It would be better to free Local Government to deal with local suppliers, where there is £50bn of spend on goods and services and a much more direct impact on the local economy when they do.

    That would mean side-stepping the OJEU regulations of course, but at least the policy might get more than just lip service.

Discuss this:

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