Government Spend with Smaller Suppliers is Going Down Again – But Does Anyone Care?

Let's talk about UK government spend with small suppliers – although in all honesty it is tempting to just republish the article we wrote back in October 2017, with a few small changes.

But, let’s try to be original … The UK government has published figures for procurement spend with smaller firms (SMEs) for the 2016/17 period, finishing at the end of March 2017. So it is only 15 months after the event, as opposed to the 2015/16 figures which were published 18 months late! The figures were released again with no fanfare – hence the fact we missed them initially (that and being distracted by a wedding).

The reason for the lack of haste and the low profile is obvious. The numbers are even worse than last time, which saw a decline in spend from 27% to 24%. This time, spend is down again, to 22.5%, but both direct and indirect spend is down whereas last time it was the indirect number which drove the overall fall.

Indirect spend is money spend by the large suppliers to government with smaller firms in their supply chain. We’ve always argued that is a close to meaningless measure, mainly because it is impossible to measure! But in 2016/17 direct spend with small suppliers dropped from 11% to 10.5% of the total, while indirect also dropped from 13 to 12%.

So the overall result was 22.5% as against 24% in 2015/16 and 27% in 2014/15.

It would be easy to criticise a succession of “procurement ministers” as well as Gareth Rhys Williams, the government’s Chief Commercial Officer, and a few departmental CPOs too. There aren’t many public policy targets for government procurement, so missing this one and in the private sector actually seeing performance going in the wrong direction would at the very least lose a CPO a cut of her bonus. But really, we can’t summon up the energy to criticise the current incumbents of those roles or their teams.

In truth, this was always a silly target, made even more ridiculous when someone decided to increase it from 25% to 33% of spend in August 2015, purely to have something that sounded vaguely impressive in the Conservative election manifesto. So blame Francis Maude and maybe Bill Crothers initially and then whoever decided to up the target in 2015 – that really was deeply stupid.

The core problem is that central government spend figures are dominated by the Ministry of Defence and DfT (the Highways Agency in the main). Between them, those two departments account for some 60% of the total spend – around 40% and over 20% respectively.

Now unless, you are going to get Smith and Daughter (Camberley) Ltd. – “all those little construction jobs you never get round to, done with a smile” – to take on the M25 widening project, Highways really has to award contracts to larger firms. And of course Smith & Daughter is even less likely to take on construction of the new Navy Frigates or re-furbishing a few Trident submarines.

So even if all the other Departments doubled their direct spend with SMEs, we would still be well short of the target because of the  dominance by those two organisations.

In any case, as we have also said many times before, why SMEs? Apart from the fact that their owners have votes, there is no real reason to promote firms who are simply “small”. What about social enterprises, organisations that employ ex-offenders or disabled people, charities, or indeed firms that have great ideas, are innovative, and could really increase the wealth of the UK, if only they could get that first contract … All arguably more worthy than SMEs of government procurement attention.

So we’ll avoid the easy blame game, and just respectfully suggest that as it is ten years since the Glover Review into SMEs and public procurement, it really is time to review the policy - and the strategy to execute it - rather than just pretending that an impossible target can ever be met.

Frankly, I have my doubts as to whether anyone important really cares about this. But if anyone really does, Ministers or officials, then for goodness sake let’s take a fresh look at this issue.

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First Voice

  1. Sophie Pope:

    Why SME’s over all others? Exactly what I was thinking! Yet another example of measuring for measuring’s sake, without any commitment or consideration to the value or behaviours driven! If we are measuring spend with SMEs via a spend analysis tool, surely the same data should be available for classification by a few more for parameters. We would also be hung up to dry by our customers if we took 18 months to produce this kind of basic analysis! Great article. Thanks Peter.

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