Progress on SME suppliers ‘is stalling’ say MPs

Initiatives to increase the amount of money government spends with small and medium-sized enterprises have stalled and do not appear to have increased competition for public sector contracts, MPs have warned.

In 2010 the government set a target for 25% of government procurement to go to SMEs by 2015. This target was met in 2014-15, when Cabinet Office reported that 27% of spending went to SMEs. Government then set a new target for 33% of spend would be with SMEs by 2020.

Despite this reported progress, MPs on the Public Accounts Committee use their latest report to say they are “not persuaded that the government’s approach so far has resulted in substantially greater competition for government business”.

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The report said: “We continue to see larger providers dominating; for example, the government’s top five IT providers received over half of government’s total spending on contracted out IT.”

Committee chair Meg Hillier said: “We are sceptical about just how much progress has been made on increasing spending with SMEs.

“The fact the government has changed its approach to measuring such spending in four of the last five years makes it impossible to properly assess performance.”

The committee found that various initiatives introduced to increase government spend with SMEs have stalled or stopped, particularly those focused on voluntary and community sector enterprises (VCSE).

The SME panel set up to advise government on how to help SMEs has not met since January 2015, and the SME and VCSE crown representative posts — introduced to promote these sectors in government — have been vacant since July 2015 and October 2014 respectively.

The report says: “We were not given any convincing reasons for the delay in filling these positions; the CCS [Crown Commercial Service] has taken six months to refine the SME crown representative job description but could not explain what had actually changed as a result.”

MPs want the Cabinet Office to fill these posts and re-establish the panel “as a matter of urgency”.

They also want the Cabinet Office to show stronger leadership in promoting work with SMEs across government. Responsibility for hitting the 33% target lies with departments, but MPs say they are “not convinced that increasing spending with SMEs is being given sufficient priority across government” nor that “the centre of government is doing enough to understand whether the rest of government treats this target as a priority for their own procurement spending”.

The report says the CCS, which is responsible for co-ordinating work in this area, should report back to PAC by March 2017 on how it is increasing competition, and re-establishing momentum towards the 33% target.

Hillier said: “We will expect to see a new and more focused approach that properly considers the role of SMEs. Government should identify where these enterprises can best add value and ensure they have the knowledge they need to compete.

“The government’s pledge to increase SME spending will have been welcomed by those who stand to benefit but without new and concerted action there is a real risk it will not be honoured.”

The committee also questioned government’s decision to include both indirect and direct spend with SMEs in the overall target.

Indirect spend with SMEs reflects not government’s choices but the actions of large contractors, the report says. Therefore, the MPs argue that increasing indirect spend cannot be seen as “ a meaningful measure of the government’s success in making it easier for SMEs to do business with government.”

The report adds: “It is not apparent why the government cares equally about direct and indirect spend, and the Cabinet Office was not prepared to say what an appropriate split might look like.”

Responding to PAC’s report, a Cabinet Office spokesperson said: “We welcome the committee’s recognition of our efforts, including reaching 27% of spend going to SMEs last year, exceeding our target.

“We now want to go further, and are determined to reach our goal of spending £1 in every £3 with small businesses by 2020.

“Whilst this target is a challenging one, we are confident that we are putting in place the right actions to further open up government business and ensure we get the best value for the taxpayer.”

Colin Marrs

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