EXCLUSIVE! Government Spend with Smaller Suppliers is Going Down

Government spend with smaller firms is going down, according to the latest figures quietly published by the Cabinet Office. Three weeks ago, data was published showing spend with smaller firms (SMEs) went down from 27.1% in the previous year to 24.0% in 2015/16.  Here is the document.


In past years, this data has been accompanied by press releases and ministerial statements but this year it was quietly issued with no fanfare, hidden away on the government.uk website with the other 50 or so items published every day. The document itself does not even give any narrative mention to the decline - you have to study the table to spot it. That lack of publicity is not surprising, as the numbers are a blow to the stated ministerial ambition of seeing a third of central government spend going to smaller firms by 2022.

The government has been hoist by its own petard really. We have written before about the flaws in the measurement process (so has the National Audit Office) and in particular the use of “indirect spend” as part of the measurement. That means government departments ask their large suppliers to estimate what they spend with smaller firms, and include that as part of the government numbers.  Of course, virtually none of the large firms have a clue in reality because they don’t have the data, so they just make a guess, which then becomes “fact”.

But this year, that tactic has rebounded, as the direct spend with SMEs actually went up marginally – from 10.9% to 11% . But the indirect spend dropped from 16.2% to 13%. That was driven by a huge drop in 29.5% to 12.8% in the Department for Transport  (probably an issue of measurement, not reality, we suspect), and a drop in MOD indirect spend from 15.2% to 13.4% – significant because that department accounts for almost half of the total spend under consideration.

It would be good to think that this might make government re-consider its whole approach to SMEs. It is ridiculous for instance to think that MOD can ever spend a third of its budget with small firms. We would also question why the focus is even on SMEs – there is arguably more logic behind looking to support innovative firms, social enterprises, or minority owned businesses. As we have said before, some firms are small because they aren’t very good or because they don’t want to grow. There is also no real evidence that supporting SMEs has any effect in terms of measurable policy outcomes.

Finally, we might also ask why it has taken until October 2017 to issue data relating to 2015/16 – so it is almost 18 months out of date. But I suppose we should be grateful this was eventually released, despite the bad news.

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