UK Government announces increase in procurement spend going to SMEs

There were major announcements on progress and new initiatives from Cabinet Office last week around supporting smaller (SME) suppliers to government. We’ve got three posts on the topic to come; an overview today, then a look into the data in more detail , and finally a review of the new initiatives announced.

At first sight, the numbers on the increase in business going to smaller suppliers to central government look very impressive.

“... the proportion of central government direct spending with SMEs is on track to double, from 6.5% of direct spend in 2009/10, to 13.7% (year to date) for 2011/12”.

That’s great news. For SMEs at least. And we don’t want to be anything other than positive about many of the initiatives that this government has introduced in the procurement arena, both generally and to help SMEs specifically. The Supplier Feedback Service is something we’ve recommended often, although it was introduced by the last Government and has its limitations as we've reported; Contracts Finder after a slow start is proving a valuable tool;  and there’s no doubt that there is a genuine desire in many quarters to promote SMEs.

On the less positive side, we've written about the inclusion of “spend though the supply chain” as a metric. It seemed like a classic manoeuvre to move the goalposts once it was clear that an initial target would not be hit. At least in the data released last week the Cabinet Office is explaining it clearly as a separate topic, but our doubts remain about the meaningfulness of this.

“In addition, when we factor in indirect spend being tracked through the supply chains of DWP, Home Office and HMRC, this figure increases to 14.5%".

But overall the news looks positive.

"In summary we are confident that over £6bn of Government spend will be channelled to SMEs in the 2011/12 financial year an increase from the £3bn awarded in 2010/11. It is a positive signal for Central Government achieving its 25% aspiration by 2015”.

Increasing from 6.5% to 13.7% is impressive, even if the 25% aspiration (remember, it’s an aspiration, not a target) is still some way off. If the percentage can be doubled over the last two years, clearly that 25% looks achievable within this parliament if the trend continues, in which case I will have to eat my recent words (see here and here).

But..  (you just know there’s a “but” coming), I’m afraid as a mathematician / statistician by training, I can’t help asking questions when I get presented with lots of numbers used to support a political point. So in part 2 we’ll be digging into the numbers a little deeper and asking a few questions.  And yes, Freedom of Information requests have already been despatched through the ether to the appropriate recipients...

To whet your appetite...

One question that immediately springs to mind is;  what has happened to 2010/11? It’s a bit strange that these comparisons are the first three quarters of 2011/12 mapped against 2009/10. Now maybe 09/10 is being taken as a baseline as it was (largely) before the present government came to power. But even so, we might usually have expected to see the trend through 09/10, then 10/11, then 11/12.

Any other peculiarities? We'll tell you in the next installment...

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First Voice

  1. Final Furlong:

    There is still far too much spin.

    Let’s take some examples out of the GPS/ERG report….and some lines of enquiry for you Peter…

    GPS has awarded a domestic travel contract to a (33 person, £37m turnover) SME that could be worth (according to the provider’s website) up to £2 billion. It’s a travel booking solution – where 99% of the actual business (spend) will be placed with Europe’s largest hotel groups, airlines, rail companies and car rental firms.

    “where 260 suppliers, across 1,700 services, are SMEs”
    (extract from the GPS report…)

    “is a framework that is projected to be worth £60m in total”
    (extract from the G-Cloud framework guidance booklet…)

    And what about the one that’s missing from the report?
    The Legal Services Commission spends over £2 billion annually with law firms, over 90% of whom are SMEs. The LSC spends circa £70m per annum on ‘disbursements’ through these law firms as payments to individual ‘experts and witnesses’ in their own supply chains (more SMEs?)

    Contracts Finder
    “Of the 5,768 contracts posted since February 2011, 2,025 (c. 35%) have been flagged as awarded directly to SMEs.”

    Looks good, but upon looking at this statement on the Contracts Finder website… “Live opportunities with central government departments including their agencies, non-departmental public bodies, NHS bodies and local authorities, prime contractors to government departments as well as the wider public sector.” …how many of 5,768 contracts were placed by Central Government Departments versus ‘other’ (ie: local government, NHS etc)?

    And one very significant observation, upon reading the GPS report:
    “We have had full responses from 27 suppliers which suggested that, between them, they passed approximately 13% of their Central Government revenue to SME subcontractors.”

    Did you notice the footnote directly related to this sentence (footnote ‘5’) “Four suppliers were able to provide partial data only. Six suppliers were unable to provide usable data. Eleven suppliers are yet to provide data but have promised to do so. Two suppliers are due to meet the Chief Procurement Officer to discuss further.”


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