Speech

Francis Maude spoke on technology procurement and SMEs

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

Minister Francis Maude described how government is moving into a 'new world' of technology procurement by opening up opportunities to SMEs.

The words ‘government IT project’ have not inspired a great deal of confidence over the years.

This wasn’t for a lack of spending taxpayer cash – past governments pumped as much as £20 billion a year into government IT based on some estimates.

And you’d expect investment like this to have delivered much faster, more efficient, user-friendly services.

But quite the reverse. IT suppliers and integrators increased their costs. Services remained patchy at best. And people who were doing their shopping, banking and social networking online - continued to interact with government on paper, on the phone or in person.

What went wrong?

There was for too long a misguided conviction in Whitehall that big was beautiful.

And so, for the most part, long-term, exclusive contracts were consistently awarded to a limited number of very large suppliers. The result was IT projects that were too big, too lengthy, too expensive, too risky and complex – plagued by overruns, delays and failures.

Meanwhile more innovative and cost-effective solutions from smaller suppliers were never getting anywhere near Whitehall.

This was bad for the taxpayer and service users. And bad for businesses and growth.

I don’t need to tell this audience that SMEs are a crucial engine for growth – 99.9% of the UK’s businesses are SMEs, they are responsible for almost half of our private sector output and create two thirds of new jobs.

IT companies in particular are essential for growing our economy – recent research shows British internet companies are growing at a rate more than 50 times faster than the rest of the country, with online start-ups booming.

This expansion is being driven mainly by small and medium-sized firms - most high-growth businesses have fewer than 100 employees, while average revenues are £8.9 million.

Yet in the past these very firms would have been ignored by government. When we came into office only 6.5% of government business by value was going to SMEs.

Today (27 June 2013) I will set out how this is changing:

  • how we are entering a new world for government technology procurement
  • how we are opening up to SMEs and what smaller, more innovative firms can offer
  • how we are opening up to new ideas and new technology – and bringing our services into the 21st century

Pro-business government

I want to stress that this is a hugely important agenda for this government.

The UK is competing in a global race - to succeed we need to support entrepreneurial businesses to invest and grow.

This government is determined to make the UK one of the best places in Europe to start, finance and grow a business – to this end we have cut corporation tax, boosted tax relief to start ups and cut red tape.

We have launched radical reforms to increase opportunities for SME suppliers and to give the government access to SMEs creativity and innovation.

Our aspiration is for a quarter of our business to go – directly or indirectly – to SMEs by the end of this Parliament.

Make no mistake however – this is not about giving SMEs a free pass to win business. These are tough economic times and the urgent need to reduce the deficit means public resources are much scarcer. We owe it to the taxpayer, now more than ever, to spend their cash better.

Relentlessly pursuing efficiency allowed us to make then unprecedented savings of £3.75 billion in our first 10 months in office. In 2011-2012 we saved a further £5.5 billion and I recently announced savings of £10 billion last year. Better procurement has and will continue to be a huge part of this drive.

And the whole way government procures and delivers technology is being radically overhauled to ensure we get the best value for money.

We are moving away from legacy IT and our reliance on a few large system integrators – the days when a major service integrator could charge us £30,000 to change a logo on a webpage.

Instead we are creating a more competitive and open marketplace for buying technology services and solutions – and this will open up opportunities to all kinds of businesses and business models.

Level playing field

What has this meant in practice? Since coming into office we have identified and knocked down a number of barriers that were previously preventing SMEs from winning work.

We have introduced much greater visibility of opportunities through the Contracts Finder website. We have also published procurement pipelines in 18 sectors, including IT, covering nearly £79 billion of public sector spend so that suppliers get a much better picture of the contracting landscape over the next 5 years.

We are also making the procurement process faster, less bureaucratic and more open. The pre-qualification questionnaire – so often used as unfair short-listing tool that invariably put the bigger companies through – has been abolished for low value contracts and simplified elsewhere.

And new technology such as e-Auctions is enabling quicker procurements.

We’re breaking down the length and size of contracts. I have set out that for any IT programmes not being displaced by digital solutions, no project, framework or contract can be over £100 million.

We have also introduced Open Standards to allow government to interoperate, so that we don’t have to build the same thing 30 or 40 times.

What’s more these standards will improve competition for government contracts, allowing us to open up to a larger number of suppliers and encourage innovation in government IT.

Our focus isn’t just on direct spend to SMEs - our 25% aspiration also includes spend in the supply chain.

And we are working hard in all sectors to open up the supply chain and ensure the right level of participation from SMEs. For IT we are confident that this can exceed 25%.

Where we have long term existing contracts, such as Capgemini’s ASPIRE contract with HMRC, we are removing the exclusivity deals that stop SMEs from competing for additional work, opening up the supply chain.

We have made prompt payment of subcontractors a key focus. All new contracts require the prime contractor to pay its subcontractors within 30 days, so that no supplier is disadvantaged by being in government’s supply chain.

And we’re building closer relationships with suppliers to ensure we can tap into the best innovation on the market. I’ve heard time and time again from small companies that one of the hardest things about winning government contracts is breaking into government in the first place – it can feel like Whitehall is full of faceless procurers who are unaware of what smaller firms can offer.

But this is changing. Last summer we piloted the Solutions Exchange website which enabled businesses to pitch their innovative goods and services directly to government buyers. Taking the results of that pilot we are now developing a new tool to be rolled out later this year.

Finally, we have also created an SME panel where SMEs engage directly with me and senior officials in Cabinet Office over procurement reforms from prompt payment to pre-procurement engagement.

And I’d like to take this opportunity to thank those panel members, some of whom are represented today, for your hard work - your feedback and challenge is vital to ensuring these reforms really deliver for SMEs.

Benefits of reform

We have a long way to go but there are signs these reforms are working.

Overall government has increased its direct spend with SMEs from 6.5% in 2009-10 to 10% in 2011-12, and in 2011-12 figures from government’s top suppliers shows that SMEs had benefited from a further 6.6% of spend in the supply chain.

One of our most successful innovations is the delivery of the G-Cloud framework, which embraces open procedures. This is a step change in the way government buys IT. It’s quicker, cheaper, more competitive and more accessible to SMEs.

As a result, of the 700 successful suppliers on the framework – 83% are SMEs.

For example, the Home office saved 83% on a hosting contract by contracting with Skyscape. Skyscape is an SME providing hosting and other IT support services – and were one of the first accredited suppliers on G-Cloud. They started as a small start-up with 6 people - and now employ over 30 as a direct result of the business they get through G-Cloud.

There are other positive examples - SME software provider Kahootz now sees around 80% of its public sector business coming through G-Cloud – and the company is now looking to take on new staff and export to overseas markets.

To ensure the government is maximising the benefits of this approach - central government departments are now mandated to consider cloud options first in any IT procurement, and the wider public sector is also strongly recommended to adopt the same approach.

Digital by default

We will continue to work closely with SMEs to ensure we’re getting the best the market has to offer.

And with the onset of our ‘digital by default’ agenda, the opportunities for innovative companies wanting to work with government have never been greater.

This is a transformative programme. At the moment half of our transactional services don’t offer a digital option at all – and apart from a handful of services, if there is a digital option few people use it because it’s not a sufficiently fast or convenient option.

We know this is inefficient. For some government services, the average cost of a digital transaction is almost 20 times lower than the cost of a telephone transaction, about 30 times lower than the cost of postal transaction and about 50 times lower than a face-to-face transaction.

And it’s not user-friendly - it’s our responsibility to go to people where they are – not wait for them to come to us and over 80% of the population are online.

We are determined to build fast, clear, simple digital services that are so good that people who are online will choose to use them. This process has started.

Two years ago, there were an incredible 2,000 government websites. We’ve streamlined those into a single, central domain, GOV.UK, that is built entirely around the user’s needs.

Not only is the result simpler, clearer and faster, it will also cost taxpayers up to £50 million less per year than the services it replaces.

But this is just the start. We are determined to make everyday transactions digital. This process is being kicked off by the 7 main transactional departments, DfT, HMRC, Defra, DWP, BIS, Home Office and MoJ, who handle around 90% of all central government transactions.

It will soon be easier for people to do things like pay their car tax, book driving tests, complete tax returns or apply for their state pension online.

And we estimate that by shifting the transactional services offered by central government departments from offline to digital channels we can make £1.2 billion of potential annual savings from now until 2015 and £1.7 to 1.8 billion a year beyond 2015.

Open government

I want to finish by talking about another way in which government is opening up for the benefit of SMEs: through our commitment to transparency and open data.

Open data is an untapped resource. It puts information in the public domain and with that comes huge potential. The benefits are enormous, the disadvantages are few, the risks can be managed.

So why is this relevant to you here today? The possibilities of freely available government data are endless. Open data is a catalyst for innovation in the private sector, supporting the creation of new markets, businesses and jobs. From the release of NHS data to promote life sciences research to the publication of data from all 5,000 weather stations in the UK - we are creating an information marketplace by releasing vast amounts of open data into the public domain for entrepreneurs and businesses to work with. We want you to get involved.

And in support of this movement, today we are publishing for consultation a draft National Action Plan which will set the direction for the UK on open data and transparency. The plan will define how the UK uses transparency and open data to help businesses and charities grow, to increase citizen participation, and improve the accountability of public services.

Businesses, civil society organisations and members of the public now have the opportunity to give us their views and help shape the final plan in advance of October’s international Open Government Partnership Conference, of which the UK is currently co-chair.

Conclusion

Government is changing: we are opening up, we are grasping new technology, we are bringing our skills and our services into the 21st century.

This will mean greater efficiency for the taxpayer. It will mean services designed around the user’s needs not the administrator’s.

And by opening up opportunities to SMEs we will also stimulate growth and jobs.

This kind of change won’t happen overnight – it requires a whole new way of working across Whitehall. We need to embed digital skills into our organisational DNA as set out in the Civil Service Reform plan. But we will get there - we are determined to buy, borrow and build the capability we need.

And we also need businesses to continue to engage with us – tell us where barriers remain and where reforms aren’t delivering on the ground.

If you come across an overly bureaucratic procurement, report it to our mystery shopper service so Cabinet Office can investigate.

And if you have an innovative idea that will save money and improve public services – we want to hear it. This government is listening – we are open for business.