Policy paper

Cabinet Office Small and Medium Enterprises (SMEs) Action Plan

Published 26 January 2023

Forewords

The Rt Hon Jeremy Quin MP, Minister for the Cabinet Office and Paymaster General

Our Cabinet Office Small and Medium Enterprise (SME) Action Plan highlights the measures we are taking to ensure SMEs can better access new opportunities to supply government.

Central government currently procures more than £70bn of goods, works and services every year from third party suppliers. We will ensure that SMEs have a greater ability to bid for and win government contracts and that we increase spend with them directly and through our supply chains. This will strengthen the platform for SMEs to continue to drive economic growth, provide increased employment opportunities, open new markets and offer innovative solutions.

We are in the process of shaking up and transforming our procurement system by overhauling existing procurement rules, cutting red tape and making it easier for smaller businesses to win government contracts.

The new Procurement Bill will create a simpler and more flexible commercial system that better meets our country’s needs and will open up public procurement to new entrants such as small businesses and social enterprises so that they can compete for and win more public contracts.

I am delighted to publish this Action Plan which sets out how Cabinet Office will continue to work with SMEs across the commercial lifecycle, aligning to our responsibility for growing the economy in a sustainable manner. The Action Plan outlines how we will improve visibility and accessibility of contract opportunities for SMEs; enhance our MI and data to better understand and boost SME participation in the supply chain; and ensure engagement with SMEs to help shape requirements, improve understanding of tender processes and promote future opportunities.

Will May, Commercial Director

As the Cabinet Office’s Commercial Director, I am committed to ensuring SMEs can access and win Cabinet Office contracts. Working with SMEs in our supply chain will positively impact our ability to deliver on policy commitments and provide important services across government through innovation, customer focus and agility.

Our aim, through this Action Plan and the work of the SME Advisory Panel, is to ensure that we continue to remove any unnecessary barriers and create new opportunities for SMEs to compete for Cabinet Office contracts where they have sufficient capability and capacity to meet our requirements.

I will regularly review and track progress against the key priorities set out in this plan to ensure we deliver on our commitments.

Martin Traynor, Small Business Crown Representative

As the Small Business Crown Representative, I very much welcome the publication of this Action Plan. The Cabinet Office not only plays a critical role in providing strategic direction for public procurement in the UK, but also procures goods and services to carry out its day to day functions.

In my role, I am the advocate for SMEs in the government’s commercial activities. I also work to communicate the many opportunities that SMEs have to supply the government, either directly or through the supply chain. The Cabinet Office has been actively supporting this agenda and continues to find new and innovative ways to reach out to smaller businesses to get them involved in supplying the government.

I very much look forward to seeing this Action Plan delivered and the many opportunities flowing to SMEs across the country.

SME Context

The UK government definition of SMEs used for SME Spend purposes is the European Commission definition.

SMEs make up 99% of the business population and are the lifeblood of the economy. We are committed to supporting the key government agenda of increasing growth for SMEs which will drive forward the national economy.

How are we supporting the commitment?

We are supporting SMEs through a range of measures:

Paying suppliers on time in accordance with the government’s prompt-payment policy:

• Government has a target of paying 90% of invoices within 5 days and paying all invoices within 30 days;

• Suppliers bidding for central government contracts over £5 million a year need to demonstrate effective prompt payment systems in place to support their supply chain.

Increasing visibility of tenders and contracts:

• All opportunities over £10,000 are published on Contracts Finder.

Working with businesses to remove barriers

• The Cabinet Office Small Business Advisory Panel, made up of entrepreneurs and leading business figures, boasts a wide range of experience to remove barriers and level the playing field for SMEs;

Measuring Success and publishing SME data

• We are improving the way we collect data on direct and indirect spend with SMEs and using this to make effective decisions;

• Central government spend with SMEs is published on GOV.UK on an annual basis;

• Cabinet Office and other Departments work together to share case studies about how they are working with SMEs. These are published on the Small & Medium Business Hub

SME Champions

• Departments, including the Cabinet Office, have appointed SME champions to lead on supporting SMEs. Their role is to lead on implementing and developing the departments SME Action Plan, detailing the steps they plan to take to make it easier to do business, how to become a supplier to Government and how they are increasing spend with SMEs;

• Together, the SME Champions act as a proactive solution-based group by providing the opportunity to share best practice experiences on how to embed the small business commitment requirements into operational business; challenge and stimulate improvement of commercial routes and procurement processes.

What we do

The Cabinet Office supports the Prime Minister and ensures the effective running of government, coordinating delivery and driving change to provide world-class public services, delivered with maximum value for UK citizens.

Supporting SME growth aligns to our responsibility fvor growing the economy in a sustainable manner. This plan highlights the measures we are taking to ensure SMEs can access new opportunities to provide goods and services to the Cabinet Office and other government departments. The plan is intended to be used by the Cabinet Office over the longer term and will be refreshed regularly to reflect progress and new actions.

Sourcing Arrangements

The Cabinet Office’s procurement function was outsourced in 2013. Since then, Crown Commercial Service (CCS), an executive agency and trading fund of the Cabinet Office, has managed the procurement activity of the department in line with its standard processes and procedures. CCS is the procurement arm for the significant majority of goods, works and services which are sourced by the department. We work collaboratively with CCS to look at ways in which we can promote and make SMEs aware of opportunities to bid for Government business. This includes the provision of advice and guidance on applying to join frameworks and making sure that any specific requirements are set out in a clear manner.

We continually look at ways in which we can improve our mode of operation and set firm foundations from which we can proactively increase collaboration and spend with SMEs. This has included:

• Appointing an SME Champion who acts as an advocate of small businesses across the Department;

• Establishing a Commercial Policy Committee which oversees our performance on the implementation of all commercial policies including SMEs;

• Publishing a commercial pipeline which details opportunities to work with the Cabinet Office;

• Setting up the Cabinet Office Small Business Advisory Panel to oversee our commitments to SMEs. The members of the group are actively encouraged to challenge existing ways of working and put forward ideas on improvements which can be made to meet our commitments to SMEs;

• Procuring and actively using a new Contract Management System to allow us to track existing contracts with SMEs and to identify new opportunities going forwards;

• Taking a wider role in working across Government to capture and improve the quality of spend data, oversee and publish SME Action Plans, ensure effective performance management, share best practice on SMEs and ensure effective stakeholder management with SMEs.

Why we use SMEs

We understand the benefit and value that using SMEs can have in supporting us to achieve our aims and objectives:

Improved customer engagement

SMEs:

• have flatter management structures and can be more responsive to client needs, as decision makers are frequently in direct contact with operations / delivery;

• bring an understanding of local culture in the areas in which they work, together with a bespoke, specialist service;

• are often seen as more relatable to customers, particularly those in the wider Public Sector;

• offer more personalised customer service with a ‘hands on’ approach;

• have the speed and agility to respond and engage with customers.

Pricing

• SMEs have lower overheads and may deliver more competitive pricing than larger companies.

Specialist Expertise

SMEs:

• are often subject matter experts with niche industry knowledge and specialist expertise of their sector and/or markets;

• can offer better support for customers with bespoke needs;

• have the potential to be more agile and adept at driving innovation;

• are often flexible, open to discussing alternatives, and able to provide rounded advice on the direction of the market and how different customer industries operate in the category.

Diversity

SMEs:

• offer a wider choice of suppliers, locations and culture;

• offer a diversity of product and service, with innovation often present.

Social Value

• Environmental benefits - locality of SMEs, together with regional framework lots, localisation and other delivery models, can help with carbon reduction;

• Many regional customers strongly prefer working with local companies and SMEs in order to support their own social value commitment;

• SMEs provide value in local communities by creating jobs.

Our spend with SMEs

The table below illustrates our total contracted expenditure with SMEs between 2014 and 2021. The data also includes a breakdown of direct and indirect SME expenditure during this period:

Financial Year	Total Procurement Spend £m	SME Direct Spend %	SME Indirect Spend %	Total    SME Spend  %
2014/15	£210	8.6%	9.0%	17.6%
2015/16	£216	8.3%	11.7%	20.0%
2016/17	£266	9.1%	7.9%	17.0%
2017/18	£192	7.3%	13.9%	21.2%
2018/19	£380	6.3%	20.9%	27.1%
2019/20	£457	9.3%	6.3%	15.6%
2020/21*	£1,093	16.9%	4.8%	21.6%

*Spend increased significantly in 2020/21 in response to the COVID-19 Pandemic, with increased procurement transactions and additional spend through existing contracts and CCS Framework Agreements being the main contributors to the increase, in areas such as Communications (£367m), Professional Services (including consultancy and contingent labour) (£181m), and Information Technology (£173m).

Action Plan

This section sets out how Cabinet Office will continue to work with SMEs across the commercial lifecycle. Our aim is to build on the progress from the action we have already taken.

Our 2022-23 activity will be focused on a number of key enablers and associated improvement actions, with the key objectives of making it as easy as possible for SMEs to work with us through simplifying processes, increasing engagement with the SME community and maximising outcomes throughout the supply chain.

We will focus actions across three fronts:

• Visibility & Accessibility: Improved visibility and accessibility of contract opportunities for SMEs

• Data & MI: Improving our MI and data to better understand and boost SME participation in the supply chain

• Engagement: Better engagement with SMEs to help shape requirements, improve understanding of tender processes and promote future opportunities

Each focus area incorporates a set of targeted actions. This Action Plan will be reviewed and updated on a regular basis by the Policy Sub Committee and progress against actions will be reported.

Visibility & Accessibility: Improved visibility and accessibility of contract opportunities for SMEs

Our Commitment:

• We will publish an updated Commercial Pipeline every quarter on GOV.UK;

• We will take action where appropriate to make requirements and specifications more accessible to SMEs;

• We will use lotting strategies and routes to market that will attract more SME participation;

• We will actively consider opportunities to ringfence selected scopes of work for SMEs, in line with policy and regulatory requirements.

Actions:

• To improve the quality of the current Commercial Pipeline and increase the scope to include items which are under £1m and potentially suitable for SMEs – by September 2023;

• To undertake an early review of pipeline opportunities to identify the most appropriate route to market and contractual structure. Through this process, we will ensure appropriate opportunities are structured in a way that allows for increased SME participation. For example, by disaggregating contracts into smaller procurements and / or making it a requirement for a Tier One supplier to appoint one or more SMEs as a key subcontractor;

• We will also work with our stakeholders to identify opportunities to utilise the provisions set out under Procurement Policy Note (PPN) 11/20 - Reserving Below Threshold Procurements which entitles procuring organisations to run a competition and specify that only SMEs and VCSEs can bid.

Data & MI: Improving our MI and data to better understand and boost SME participation in the supply chain

Our Commitment:

• To develop ways to measure our engagement with SMEs to aid understanding and measure progress;

• To make better use of the data and information we hold to understand our supply chains and the subcontracting opportunities for SMEs (both at a local, regional and national level).

Actions:

• We will implement a new data and contract management system by March 2023 with the aim of improving the data quality and scope from which SME data can be gathered and managed;

• To undertake a review by the end of March 2023 on how we collect, analyse and report our overall SME spend (direct and indirect) with recommendations being put forward for improvements where required. This will include consideration of whether any additional data is required to track SME activity and spend on our contracts;

• To review our data and management information by September 2023 to identify any requirements, including those below threshold, which can be ringfenced to particular areas and / or regions;

• To continue to work with large tier one organisations to provide improved MI on their subcontracted SME spend;

Engagement: Better engagement with SMEs to help shape requirements, improve understanding of tender processes and promote future collaboration

Our Commitment:

• We will increase our direct engagement with suppliers, particularly SMEs, to better understand how we can shape requirements and engage the market in a way that will maximise SME participation;

• We will also engage with SMEs to gather lessons learned to inform future procurement activity;

• We will look to set up SME Networks for Digital and Technology category spend within Cabinet Office.

Actions:

• We will continue to work collaboratively with the Small Business Crown Representative, capturing successes and sharing best practice with business units and Heads of Commercial across the department;

• To increase our market engagement over the coming 12 months using improved commercial pipeline data, focussing on areas which are likely to be more beneficial for SMEs and increase our spend with them – particularly within the digital / technology categories. This will include building this area of focus into our business case approval process;

• To promote the use of Contracts Finder website with Tier 1 suppliers as a platform they can use to advertise subcontracting opportunities where SMEs can easily find them;

• To set up SME networks for different spend category areas, including Digital and Technology and trial their effectiveness between now and September 2023.

Useful links

• CO GOV.UK

• CO procurement

• CO eSourcing tool

• CCS public sector procurement guidance

• Contracts Finder

• Find a tender

• Government spend with SMEs

• CO Outcome Delivery Plan

• Procurement Policy Notes

• Small and Medium Business Hub

• CO Commercial Pipeline

• Tenders Electronic Daily (TED)

Contact

commercial@cabinetoffice.gov.uk