Press release

A better deal for smaller businesses

The government has announced further measures to support SMEs to win government business.

CAB 13-12

The government has announced further measures to support SMEs to win Government business, Minister for the Cabinet Office, Francis Maude, announced today. Read Francis Maude’s full speech here.

Marking the one year anniversary of the Government’s new approach to doing business with smaller companies, the Cabinet Office has published a new report on progress showing the amount of business going to SMEs across central government is on track to double from 6.5%* to 13.7% by the end of the financial year.

The public sector currently spends £230 billion on goods and services a year - roughly 15% of the UK economy and £1 for every £7 spent in Britain. Today’s package of new measures will drive faster and deeper progress in opening up this business to smaller companies, which are vital to the growth of the economy and can save money for taxpayers.

Francis Maude, said:

We said we wanted to improve things for smaller businesses and today we have shown that the measures we introduced a year ago are making a difference.

Governments might be able to print money but it is SMEs who make it - successful SMEs are crucial to the future of this country and can save taxpayers’ money with innovative new ideas. Doubling the amount of business going to these companies is no small feat but we will now go further. We are determined to shake up public buying so radically that there is no turning back to old days of SMEs being shut out.

Key measures announced today include:

  • 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. This gives SMEs more visibility than ever before on the government subcontracting work available.
  • **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.
  • 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.
  • 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.
  • 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. 
  • 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.

The Government will also pilot new approaches to make it easier for SMEs to form consortia to successfully win government business and will appoint new SME champions in every government department to drive further change.

Stephen Allott, Crown Representative for SMEs, said:

Having been in post as the voice of SMEs in government for a year, I’m pleased to be able to say I’ve seen real progress. Today’s announcements show that the level of commitment to the whole agenda is going even further - the Government is committing to a range of innovative policy ideas, including getting SMEs to rate buying departments and hold their feet to the fire. Having such a spotlight on the agenda will help us make even more progress this year.

John Collington, Government’s Chief Procurement Officer, said:

Our reforms are working, as reflected in the progress reported today. SMEs are at the forefront of all our procurement activity and we’re pleased to see that all Departments are now able to accurately measure and report the volume of spend being awarded to SMEs. We are now working with the top suppliers to Government to ensure they too are opening up Governments supply chain to SMEs. 

We are achieving these impressive results through improving civil service procurement across Government, where we’ve invested significantly in simplified processes, training staff and deploying best in class technology.

*Please note this press notice was edited on 12/03/12 to revise the figure of 6.7% to 6.5%.

Notes to Editors

Read the progress report online here.  

The Government’s new policy commitments are:

1. 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 more flexible, cheaper solutions. This opens up opportunities for SMEs and reduces the cost to taxpayers.

2. Building on the success of the Mystery Shopper service, from today, suppliers can use this service anonymously to escalate issues about problems in government supply chains to the Cabinet Office.

3. To further open up sub-contracting opportunities for SMEs,  today we can announce that nine suppliers have signed up to advertise their government sub-contracting opportunities on Contracts Finder.  Airwave, Amey, Balfour Beatty, CapGemini, HP, Capita, Level 3, Logica and Serco are the first major suppliers to government to sign up to advertise their public sector sub-contracting opportunities in this way.

4. From April 2012 we will pilot a new online service for procurers to invite the SME market to respond, in advance of a formal procurement, to emerging opportunities to deliver government business more efficiently. In parallel, SMEs will be able to use the service to pitch their own innovative, cost saving, proposals direct to government.

5. The SME Panel will work with us to pilot approaches to make it easier for SMEs to form consortia to win government business.

6. Recognising that timely access to cash is critical to the survival of many SMEs, we will explore extending the use of Project Bank Accounts (PBAs), beyond the Construction Sector across government procurement, commencing with FM and Defence. In addition, we will also explore the role for structured finance to enable faster payments within our supply chains.

7. Today we are announcing the appointment of a senior SME Champion in every major government department to drive through change.

8. To see how effective our measures have been in really changing our relationship with SME we will ask SME suppliers to rate departments on how ‘SME friendly’ they are according to the criteria that matter to them starting with the Cabinet Office in May.

9. We will introduce new transparent feedback mechanisms so that public bodies can rate the performance of companies delivering procurement contracts. This will help high performing companies win a greater market share of government projects.

Facts on SME progress:

1. In 2010, SMEs accounted for 50% of turnover in the UK economy but winning only around 6.5% of the value of Central Government’s procurement spend. This is on track to double to 13.7% by the end of the financial year. Government spend to SMEs was tracked at £3bn in 2010 and is on track to double to £6bn by the end of 2011/12.

2. The 25% aspiration includes the spend directly with SMEs and in the supply chain.  We will be working in all sectors to pursue the right level of supply chain participation from SMEs. For ICT we are confident that this can exceed 25%.
 
3. The new Contracts Finder website, announced by Francis Maude in February 2011, gives businesses a single place to survey everything on offer from government and has 97,000 viewings per week. Of the 5,768 contracts posted to date 2,025 have been awarded to SMEs.
 
4. Mystery Shopper - the Cabinet Office’s innovative new system for SMEs to raise complaints about procurement practices. By mid-February 2012 there had been 151 cases received, of which 111 had been closed with 75% of them resulting in a positive outcome - for example a live procurement or future procurement was adjusted, or increased the supplier’s understanding of the procurement process. The majority of cases received so far relate to wider public sector procurement.
 
5. Stephen Allott, as the Crown Representative for SMEs, is pushing for SMEs at the top table, challenging government and championing smaller businesses.

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