UK government and SMEs (part 3) – the new ideas

Along with the headlines on spend with SMEs announced the other day (we featured the topic here and here), Cabinet Office also talked about some further ideas and plans to help smaller suppliers. We’ve laid them out here as explained in the Cabinet Office announcement, followed by our comments on each.

As you will see, we’re pretty positive about most of them and a couple are excellent ideas. All in all, as always, the bright ideas need to be delivered, but there's some very good stuff here.

  • New commitments from large private sector players. Nine companies: Hewlett Packard, Airwave, Amey, Balfour Beatty, CapGemini, Capita, Level 3, Logica and Serco are the first to sign up to publish their government subcontracting opportunities on the Government’s searchable and transparent website, Contracts Finder.

Spend Matters comment - Good stuff, let’s see how much business they actually advertise, but a very positive move.More suppliers will follow we suspect.

  • A new approach to IT contracts – in future, Government IT contracts will be more flexible, starting with two areas (application software and infrastructure IT). The Government is introducing set breakpoints in IT contracts so there is less money locked into large lengthy contracts. The Government will look to disaggregate future contracts and deliver flexible, cheaper solutions. This opens up opportunities for SMEs and reduces the cost to taxpayers.

The “set breakpoints” sounds good but will it push up initial costs, as suppliers are basically taking more risk? The “flexible cheaper solutions” idea is hard to argue with – proof is in the pudding though, and many departments are just not set up to get rid of their monolithic IT contracts very easily. 

  • Prompter payment for SMEs. Timely access to cash is critical for the survival of many SMEs. The Minister will announce that new ways of paying SMEs are being explored to ensure SMEs within the supply chain receive payment at the same time as the prime suppliers. This will include rolling out Project Bank Accounts, which are already being used successfully in the construction sector to sectors such as defence and considering the role of structured finance to facilitate faster payments.

There’s been so much talk about this over the years… good intentions, need to see action.

  • Greater transparency. Departments will be judged by smaller businesses and given a star rating to show how effective they are at working with smaller players. The first department to be rated by smaller businesses will be the Cabinet Office in May.

Excellent! What a good idea! But this should be managed by an independent body. Suppliers have to be confident they can be anonymous.

  • Extending the investigative Mystery Shopper service. Following the success of the Cabinet Office’s Mystery Shopper service where SMEs can complain about procurements and trigger an investigation, the Cabinet Office will now investigate complaints about unfair practices in the supply chain of government contracts. By mid-February 2012 the existing system had received 151 cases, of which 111 had been closed with 75% of them resulting in a positive outcome.

I hope the Supplier Feedback Service is prepared to be bombarded with complaints (about issues in the supply chain of government contracts). The question is of course what will SFS be able to do about the issues raised, so we need to see how this goes, but conceptually this could be a genuinely transformational idea.

  • Better dialogue between Government and smaller businesses. From April, a new online tool will help government buyers to engage earlier with SMEs by allowing them to put informal postings about what they need to buy in future online and for SMEs to respond and explain what they can offer.

Sounds good, let’s see how it actually works. This gets over some of the issues and fears we raised about Francis Maude’s ideas on engaging early with suppliers. Engagement is a good idea but needs to offer equal access to all potential suppliers, not just the “insiders”.  This addresses that issue in a positive manner.

Not that Ministers worry too much about what we think, but we give four of these ideas a full five stars, and two a hopeful 3 stars with a "not proven" proviso!  Good stuff.

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Voices (3)

  1. Independent School Caterers:

    Peter, this is a great blog post, I certainly enjoyed reading it. I too am interested to see whether this will work for SMEs but I guess only time will tell. Look forward to seeing more information on it in the future.


  2. Julian Trent:

    It’s time to look at this from a different perspective altogether! Why cap what SMEs can win which is implied by the 25% target? Surely some of the route cause has been driven by how much the larger national and multi-national suppliers win. So wouldn’t a more useful and disruptive target be one where there is a cap on how much business one supplier can win over a discrete market? We may even see additional benefits like increased UK manufacturing and employment as a direct result!
    If more significant opportunities are made available you will see more SMEs encouraged to invest in establishing consortia thus genuinely creating an environment where SMEs can operate at both ends of the spectrum – this is how you create a positive disruption to the status-quo, through Market development!
    What are SMEs contending with? Mainstream national and multi-national suppliers invest heavily on marketing and business development activity. This is done with the fundamental purpose of keeping their brand in the front of buyers minds. This is often reinforced through well thought through customer and relationship plans and tactics that are there to influence buying decisions. This is not to say that these relationships aren’t good – indeed in my own experience it was relationships such as these that can produce major innovations! But let’s be real here. The tens of millions invested by suppliers in these activities do have the single purpose of winning more business.
    Now, consider this. On the one end of the spectrum you have huge investments in ‘the relationship’. Combine this with the real and prevalent issue that the majority of Government buyers do not have the time or resources to source comprehensively so will rely on supplier and product information obtained as a consequence of running a tender – rather than better practice where the buyer has a comprehensive understanding of the market, the players, quality, pricing and where the market is heading etc. well in advance of any tender process starting.
    So, even with more opportunities being offered to SMEs under the new 25% target are they or the buyers better equipped to work together? I think the answer is unlikely until you can turn the tide and even up the information flow. Rather than Government just posting opportunities and seeing what SMEs come forward SMEs need to feel and be part of a Market – they need to be able to present what they offer through a ‘shop-window’ that buyers can research continually – increasing the exposure of the SME as well as the buyer’s understanding of the whole market.
    The internet has enabled this in many other B2B and B2C markets. It’s now the turn of ‘business to Government’ markets to become information rich!

  3. Final Furlong:

    Minor adjustments, rather than transformational ‘break-through’ initiatives.

    And they want to implement one of the new systems by rating the most insignificant ‘purchaser’ in Central Government (circa £300m?): Cabinet Office.

    Hysterical. It will take little more than a 5 minute meeting with Cabinet Ofiice’s ‘Head of Group Commercial’ (sounds like they’ve given themselves a job title which is similar that of a CPO in a PLC…) to identify their current SME-base…by quickly trawling through their government procurement card, no doubt…

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