UK public procurement spend with smaller firms – lies, damned lies and statistics

The UK Cabinet Office published full year figures last week for spend with SMEs (small and medium enterprises) across central government departments.  They were slipped out without  a lot of fuss, which is always an interesting indicator that something maybe isn’t great (political) news. And that is proved to be true again in this case.

They’ve managed to get some data for 2010/11 which was previously missing, but we’re still almost a year behind reality, in that it is now the last month of 2012/13 and we’re just getting full year 2011/12 data.

In any case, it is clear that the policy objective of increasing central government spend with SMEs to 25% of the  total is unlikely to be achieved in this government.  I wasn’t really in favour of the 25% target in the first p[lace, as it did not really look at what was or is feaisble, although I got the logic that it was something to focus attention.  But the 10% achieved in 2011/12 is still a very long way away from the target, and even that figure is not to be trusted.

Let’s explain why. If you look at the numbers by Department, the total growth in SME spend over the year - from 2010/11 to 2011/12 -  is claimed to be £1.24B. The growth in SME spend just for the Ministry of Justice is £1.20B.  So 97% of the growth was accounted for by that one department.

But as we discovered when the previous figures were released, that growth is made up of two elements. The first is better classification of Legal Aid providers, many of whom are small legal firms but were previously not classified as such. The second is that apparently – as we were told after previous FOI questions - Dun & Bradstreet classifies the providers of PFI (Private Finance Initiative) contracts to the MoJ as “SMEs” for some reason.  So we have these special purpose vehicles, with assets in the hundreds of millions of pounds, and backed by huge firms like Laing, classified as “SMEs”.

Perhaps we should blame the definition rather than MoJ for this, but it all adds up to very dodgy data. MoJ and Cabinet Office know about this - I told them - but clearly they’d rather put out misleading data because otherwise there would probably be no growth at all in the business with SMEs.  Outside MoJ, around half the Departments show increases, around half decreases, over the period in question.

I have sympathy for some Departments to be honest – you can’t run huge national IT programmes or build aircraft carriers with SMEs. But there is also a problem in that the government’s centralisation, consolidation and cost cutting objectives are all working against SMEs. I know there are exceptions (please don’t quote the Government Procurement Service Travel contract AGAIN), but in general, SMEs are not benefiting from current policies. Perhaps that just shows that you can’t use procurement to fulfill every conflicting public policy objective.

What really surprises me to be honest is that Labour aren’t making a bit more of this politically. In truth, they’ve shown no real appetite for thinking about public procurement, whereas at least in Francis Maude we have had a Minister with a real interest, even if we don't always agree with him.  Perhaps as the next election approaches, we’ll see a change in the Labour approach, which might make matters more interesting.

First Voice

  1. Final Furlong:

    Hi Peter, I have absolutely no intention of quoting the travel contract again, other than to remind everyone that, through this SME travel booking company, thousands of bookings are made with with, erm, the world’s largest corporate hotel groups, airlines, train companies, car rental companies….some of whom have ‘tax efficient’ supply chains and group entities…

    Just wanted to remind everyone…

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