BEIS select committee urges the government to act ‘at the earliest opportunity’ to get back on track

The government’s efforts to drive a third of its procurement spending to SMEs have “moved in the wrong direction” in the last few years, MPs have found.

In a newly published report, members of the Business, Energy and Industrial Strategy Committee said that “the government deserves some credit for the various steps it has taken to make it easier for SMEs to bid for public-sector contracts”. 

But headway made towards the goal of spending one pound in three with smaller firms has slipped of late, MPs said. The government is now “in danger of missing” its long-held ambition of achieving the 33% target by 2022 – despite this date having already been shifted back by two years.

“Progress in recent years has moved in the wrong direction in terms of central government contracts,” the report said. “In addition, it is not clear what progress is being made in terms of the percentage of local authority procurement spend assigned to SMEs.”

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It added: “We recommend that the government, at the earliest opportunity, needs to bring forward fresh and realistic proposals on how it will get back on track to meet its 33% target by 2022. The government also needs to explain how it will make more progress on wider public-sector procurement, for example ensuring that local councils are increasing SME involvement in their procurements and measuring and reporting their progress.”

Among the major initiatives to make government procurement more SME-friendly in recent years have been the launch of technology frameworks such as G-Cloud and Digital Outcomes and Specialists. These procurement vehicles – which are iterated much more regularly than traditional IT frameworks – have been supported by the Digital Marketplace platform for posting contract notices focused on problems to be addressed, rather than products required.

Elsewhere, the report found that “poor payment practices” remain a major blight on small businesses. MPs said that government measures such as the Prompt Payment Code – a voluntary agreement in which businesses commit to certain payment targets – have proved “ineffective”.
The report recommends that the government creates new legislation to “introduce a statutory requirement for companies to pay within 30 days”.

Spending figures published earlier this year showed that, during the 2017 fiscal year, the proportion of government procurement money going to SMEs dropped for the second year in succession, while also falling in value by more than £1bn.

In FY15, 27.1% of procurement spending went to SMEs; in the two years since, this figure has dropped to first 24%, then 22.5%.

During FY17 the government spent £11.14bn with smaller firms – down from a high of £12.24bn in the prior year.