As agencies across government outline their specific goals for how much procurement money to invest with smaller firms, the tech department has set the bar far higher than its peers
The Department for Science, Innovation and Technology has set an objective of directly spending two in every five pounds with SMEs – comfortably more than any other department, and seven times higher than the targets set by some.
Government has this week published a policy paper “setting out a long-term plan for government support for small and medium-sized businesses”.
As part of the strategy, each department has set a target for the proportion of spending that will go directly to SMEs by 2028.
DSIT has set the bar at 40% – seven percentage points higher than any other department, and many multiples more than the least SME-friendly agencies.
The tech department does not currently have a reliable baseline of small business spending levels, after several years of ongoing machinery-of-government changes that have resulted in “changes [that] affect how our commercial, finance and operational teams are set up and how we collect and report data”, according to DSIT’s dedicated SME action plan.
The plan sets out a variety of measures the department will take in the coming months and years to help better support SMEs. This includes a plan to “reduce procurement complexity”, including efforts to “increase the use of challenge-led and demo-based procurements”.
DSIT will also “publish and promote our three-year spending review pipeline” to give potential providers greater insight about possible commercial opportunities. Lead suppliers will also be required to “advertise qualifying subcontract opportunities”. The department also intends to ensure that “pre‑market engagement for major projects actively targets SMEs”.
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Some SMEs will also be offered access to supercomputing capacity via government’s new AI Research Resource facility.
DSIT has also committed to “maintain prompt payment timescales and continue to meet or exceed 90% within 10 days and 95% within 30 days with performance data published quarterly”.
The action plan says: “Increasing SME participation supports DSITs focus on improving people’s lives by maximising the potential of science and technology. SMEs: accelerate adoption of emerging technologies in DSIT priority areas (AI and compute, life sciences, quantum, semiconductors, digital security); increase supply chain resilience and competition; drive place-based growth by creating high value jobs across the UK.”
Other departments set the following proportional SME spend targets for 2028:
- Department for Culture Media and Sport – 33%
- Cabinet Office – 30%
- Department for Energy Security and Net Zero – 29%
- Ministry of Housing, Communities and Local Government – 27.5%
- HM Treasury – 22%
- Ministry of Justice – 22%
- Department for Environment, Food and Rural Affairs – 20%
- Department for Business and Trade – 18%
- Department for Health and Social Care – 15%
- Foreign, Commonwealth and Development Office – 14%
- UK Export Finance – 12%
- Department for Education – 10%
- Home Office – 10%
- Department for Work and Pensions – 8%
- HM Revenue And Customs – 8%
- Department for Transport – 5.75%
The Ministry of Defence has pledged to “increase direct and indirect spending by £2.5bn with SMEs to £7.5bn by May 2028… [which] would equate to a 50% increase in spend by MoD with SMEs compared to FY 23/24”, according to the government-wide plan. The ministry will put forward a percentage target in due course, following the publication of a wider Defence Investment Plan.
While the DfT has the lowest target for direct spending with small firms – equating to less than one pound in every 17 – the government said that the department “has set a combined SME spend target of 33% [including] direct and indirect” spending.
The cross-government plan says that “winning public contracts can be a game-changer for SMEs, offering cash, credibility, and capability-building opportunities”.
“Government, in turn, benefits from the innovation and agility of smaller firms, especially those pioneering new technologies,” it adds. “However, many SMEs have said they find procurement processes overly complex, burdensome, and discouraging, often receiving little to no feedback after unsuccessful bids. Past efforts, like the unmet 33% SME spend target, failed to drive real change. While direct SME spending rose to £3.52 billion in 2023/24, the overall share of procurement going to SMEs has declined over the past five years, highlighting the need for a different, more SME-focused approach to truly make the most of procurement opportunities for business and government alike.”
