UK Government Does NOT “Spend Over a Quarter of its Procurement Budget with SMEs”

Last week the UK government finally released the figures for procurement spend with SMEs (smaller firms) for the financial year 2013/14 - some 11 months after the end of the year. Perhaps it was the Freedom of Information request we submitted a couple of weeks back that finally provoked the release? Probably not, but I wonder why we didn’t get an invite to the launch event for the re-vamped Contracts Finder website, where the figures were released? I can't imagine.

The headline about the figures that the Cabinet Office is using here on its website is, I'm afraid, a bare-faced lie. (Are government organisations allowed to lie on their websites?)

"Government spends over a quarter of its procurement budget with small and medium-sized enterprises.”

That is simply not true. The data shows only 10.3% of government spending goes to SMEs, which is actually marginally down on 2012/13 (10.5%). Nine departments showed a decrease in direct spend and eight an increase; most of the movements were small. MOD showed a small decrease, which given their relative size pretty much explains the overall drop in itself.

But then there is an estimate of spend through the supply chain i.e. money that the government's first -tier big suppliers themselves spend with SMEs. Including that takes the number up to 26.1%. But that is clearly not “government spend ..." It is IBM spend, Capita spend, BAE Systems spend.

When we get into the detail, there is an admission that the data on spend through the supply chain is dubious at best. “These figures are indicative and have not been supplied by Departments,” it says – the numbers have come from suppliers. Now we know that few large firms collect data on spend with SMEs. Why would they? So basically, under pressure from their government customer, they have come up with their estimates of the SME spend.

And would it be cynical to think that someone might have hinted at what a suitable number might look like? And much of the data reported by suppliers “has no departmental association” – so they think they spent it with SMEs but they can’t actually relate it to their work on particular contracts. Actually, on reflection we don’t have a problem with that. An SME supplying IT services to Capita’s head office would fall into that category. But it just shows how flaky this whole idea of spend through the supply chain really is.

This creative work is all of course to dig Cabinet Office out of the hole they got into by declaring the 25% target – sorry aspiration – early in this parliament before the politicians understood the difficulty of the task. (I bet Sally Collier warned Ministers way back that this would be a problem but politicians always like a “target”). So having set it at 25%, they had to make it an "aspiration", then introduce the “through the supply chain” idea, then find some way to get the numbers up to 25%. Why has it taken 11 months from the end of the financial year to publish this? A few iterations perhaps before the numbers added up?

Actually there have been some positive steps taken around SMEs during this government’s reign. For instance, we will come back to the changes in Contract Finder another day. But there are some big debates that need having. How do the huge, aggregated, often single source contracts driven by CCS (see our articles last week here and here) sit alongside a supporting SMEs policy – are those issues irreconcilable? Should government drive major suppliers more aggressively to use SMEs in the supply chain? Should huge Departments split up contracts to favour SMEs? The EU directives allow countries to mandate dis-aggregation of contracts – the UK has chosen not to implement that. Should that be reviewed?

A final question. How did Her Majesty’s Opposition, the Labour Party, respond to this? With reasoned discussion and new ideas of their own? With a forensic demolition of the data? Nope. With nothing at all (that I can find). If they were to win the election in just 70 days’ time, do they have any ideas or clue about public procurement? They have shown little evidence of any real interest or understanding for the last five years, that’s for sure, which does not bode well if by some chance they come out on top in May.

Voices (5)

  1. Secret Squirrel:

    And let’s not even go there on SME as prime, large supplier as sub…..

    Like all that SME spend on the travel contract. Which was spend with major railways, airlines, hotels…..

  2. Little acorn:

    I agree Ian a KPI on contracts targeting SME spend and their value would be very interesting especially when the difference between when the prime contractor/first tier provider is getting 2, 3 and even 4 times the what the actual delivering supplier is paid. Perhaps the use of lots, paying the actual service providers ‘on the ground’ and investing time and money on contract management would shorten the supply chain and better ensure the achievement of this 25% target/ aspiration …..

  3. Ian R:

    And because SME spend through prime / first tier contractors has probably never previously been measured we don’t know if this isn’t a decrease in spend from 2012/13 (if indeed it has been actually measured this time, and CO haven’t just said “we need you to declare you spend £x with SME’s so we can say we have reached >25%).

    An FOI worth submitting is “how many of your contracts have KPIs which target SME spend”?

  4. Paul wright:

    I think the whole SME debacle has been a classic example of the use of language for spin. You probably know better than me but hasnt it been progressively downgraded from a committment to a target to an aim to an ambition to an aspiration? And now an aspiration for the supply chain- if you want to include the supply chain why not target 125% (taking into account all tiers). The Pickles/maude wars over pile it high vs smes seem to have been won by Mr Pickles.
    And sadly the last time I talked to a (relevant) Labour MP about this (a year ago) they didnt seem to recognise what I was talking about. Things may have changed….

  5. Dan:

    The problem is that there is no public procurement strategy. There have been several documents with this title in the past, but calling them a strategy is being generous. A more apt title would be ‘policy’. There is no clear objective, or even prioritisation of different objectives. Is it possible to state in a single sentence what public procurement is for? The closest answer you’re likely to get is ‘everything’. Each department, priority or flavour of the month tries to use procurement as a vehicle to drive their own agenda, and procurement (either as a profession or as a specific team) doesn’t have the power to push back against this.

    Austerity measures indicate that cost savings are the priority. Economic growth requires more spend with SMEs. Then there’s equality and diversity, tax compliance, local employment, health and safety, sustainability, bribery and corruption, whistleblowing, the list goes on.

    The lack of political interest should be an opportunity for procurement to push its own agenda and set its own objectives. Why is this not happening?

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