Policy paper

D5 London: open markets

Published 8 December 2014

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

© Crown copyright 2014

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This publication is available at https://www.gov.uk/government/publications/d5-london-summit-themes/d5-london-open-markets

1. Introduction

Using ‘right sizing’ in government IT contracts and getting full value from SME suppliers help to build digital government by

  • reducing project delivery times
  • enabling innovation
  • cutting costs

1.1 Right sizing

EU Commission research (2010) shows that contract sizing is the only variable with a significant impact on SME share of public procurement. Moving away from large IT projects that rely on large outsourcers requires ‘right sizing’. This means:

  • buying in parts of contracts at the best level of aggregation
  • using agile delivery where appropriate
  • buying cloud services
  • building in-house engineering and operations capability

1.2 Value for money

Getting full value from SME suppliers means buying from an SME every time they are the best value for money. In the past governments might not have bought from an SME that could provide the best value for money, due to large contract sizes, lack of interest from good bidders and procurement process barriers eg frameworks.

Find out more about how the UK government procurement is supporting SMEs.

1.3 Government buying

The UK government is making their procurement process fairer for SMEs, getting the best bidders to bid, helping new bidders learn how to bid and encouraging government officials to consider new SMEs.

UK procurement reforms to remove barriers to SME bidders, together with our Mystery Shopper complaints service have also been essential.

1.4 Buying digital services

Finally, using a digital marketplace like the G-Cloud has completely changed SME access to public procurement. 53% of the £340 million spend through the G-Cloud goes directly to SMEs.

With 1,500 suppliers currently registered, the G-Cloud allows fast and easy access to suppliers that offer the best value for money.

2. Progress in other D5 countries

2.1 New Zealand

New Zealand is building a Government Cloud programme to make government buying IT from SMEs easier, and is committed to using ‘as a service’ products to open up the market.

2.2 South Korea

The South Korean government has developed an ‘e-procurement’ system to increase opportunities for SMEs to win government procurement contracts. SMEs gained 75% of the business available via this system last year, worth $17.9 billion, compared to 27% in 2006. It saved transaction costs around $8 billion annually and made a reduction of 7.8 million pages of paper documents per year.

Bids take less than 2 hours for the whole process compared to 30 hrs previously.

3. Discussion points

These include:

  • G-Cloud has created an open, transparent and competitive UK market. What have other D5 nations achieved and what is best practice in digital marketplaces?

  • approaches to ‘right-sizing’ contracts – how does it vary when you are buying products, projects and outsourced services, and when should you insource or outsource project management?

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