A transcript of a speech given by Prime Minister David Cameron in London on 11 February 2011.
Well, good afternoon to you all, very good to see you all here. I was going to say welcome to the Treasury, but as I don’t belong in the Treasury it’s slightly out of place, and it’s not often that people feel welcome in the Treasury, but that’s part of the nature of it. It’s very good to see you. This is a really important event and about the future of SMEs in our economy and in the supply chain to government.
This is, I’m told, the biggest, at this level, summit held of this community by any government and I’m delighted that we’re doing this. The importance we attach to it is illustrated by the fact the Prime Minister is here launching these new proposals, this new way of doing business.
When we took office not yet a year ago we said we were going to do business in a different way and we have - this is one example of that - and that includes doing business with business. The way we have changed a lot of things so far has enabled us, through the controls we’ve set out through the Cabinet Office and the Efficiency Reform Group, to save £3.5 billion in the course just of this truncated financial year alone. We think there’s much more to do and I’m delighted to welcome the Prime Minister to outline the changes we’re going to make.
I should quickly introduce the top table here: John Collington, who’s the government’s Head of Procurement; Sally Collier, who’s Head of Procurement Policy; Baroness Eaton, who’s Chair of the Local Government Association; the Prime Minister I think needs no introduction; Ian Watmore, who’s the government’s Chief Operating Officer; and Baroness Hanham, Minister in the Department of Communities and Local Government.
But without further ado, let me hand over to the Prime Minister.
Thank you. Thank you very much, Francis. Well, as First Lord of the Treasury, it’s good to come and have a look at see what they get up to and, as far as I can see, the Treasury’s in far better nick than Number 10 Downing Street.
Now, I was telling a joke yesterday at the introduction of a speech. I won’t retell all of it because most of it’s now appeared in the Sun newspaper, but the first bit of it was to say one of the things I’ve learnt over the last nine months is that when you hear your private secretary say, ‘Yes, Prime Minister’ you often find out later that what they really meant was ‘No, not yet, Prime Minister’ or sometimes ‘Not at all, Prime Minister’. But actually, in this case, something that I’ve long believed needs to happen is going to happen and that is to make government procurement much more small-business friendly. So I’m genuinely delighted to be here today to launch this initiative and to try and get it off to a good start.
Because today, we are announcing, if you like, big changes to the way government does business, and by that I mean what I say: literally, the way government does business. The contracts it signs, the goods and services it purchases and the way it purchases them. We need to make the system more open, more competitive and more transparent and I don’t want anyone to doubt how important this is, because it’s important for getting to grips with our deficit, as it will help us to tackle waste and to control public spending, as Francis has just set out.
It will be important for helping to light the fires of enterprise in our country, because it should provide billions of pounds worth of new business and new business opportunities for smaller companies. It’s also important for modernising our public services, as it should open them up to the forces of choice and competition and innovation, and it’s also important for building the Big Society, as it will give our great charities and social enterprises - and it’s good to see them represented here today - the opportunity to deliver services and to receive new sources of income.
So, today I want to explain what the problems are with the system we inherited, how we’re going to fix them, and the vital role I see each and every one of you in this room playing in delivering that change.
First, the problems with the system we inherited. Put simply, it was and, frankly, in some cases still is, hugely wasteful and inefficient. Too many public bodies end up spending money on stuff they don’t need and paying too much if they do. In his efficiency review for government, Sir Philip Green found examples of departments paying anything up to £73 for a box of paper and £1,400 for a laptop.
Now, I don’t happen to think that this waste is intentional, but I do think the system encourages it. To begin with, too many of these contracts are signed off behind closed doors, with little or no public scrutiny. That can be good for the contractors, who can charge over the odds without being properly challenged, but it is not good for the taxpayer, who is being short-changed and denied value for money.
At the same time, the system hasn’t encouraged small and medium-sized businesses, charities and social enterprises to come forward and compete for contracts. These are the very firms who can provide a lot of competitive pressure to drive down costs. Actually, it can be worse, because it actively discourages them.
When we came to office, one of the things we did was we put a portal on the Number 10 website and we invited these smaller organisations to let us know what the problems with the system were, and I think some of the people who accessed that portal are here today and you’re very welcome. The responses were overwhelming: start-ups were told they had to provide three years of audited accounts despite the fact that, yes, they had actually only just started up. Other organisations were told they could only compete for government contracts if they’d sold to government before - difficult one to get round. And firms with new products and innovations were told to wait for the right tender opportunities to come up, despite the fact that being an innovation, no one knew the product existed and so there wasn’t really any chance of a tender.
At the launch of Tech City in East London last November, I heard from one young entrepreneur called Glenn Shoesmith who had this very problem. He had invented a very clever, low-cost system to allow people to book slots online at their sports centres. When he pitched it to the Olympics team he was told to find the relevant tender document and fill it in, but the system of course didn’t know about the product, so there was no tender, so there was no way for this young man to sell his product to the government.
And quite apart from these counter-productive rules, there’s been a lot of bureaucracy too: small businesses and charities have complained to us that there’s no one single place where they could go online and see what contracts are on offer, and they found it difficult to cope with the different sets of forms and documents from different public bodies.
And all of this helps explain one very important fact: despite accounting for 50% of the turnover of the UK business economy, we estimate that SMEs only win 5-10% of the billions of pounds of public-sector business. So we asked departments to tell us what proportion of contracts were awarded to SMEs in a single month last year and many didn’t know at all those figures and some of the figures that came in were pretty appalling.
So that’s what wrong with the system. This is how we’re going to fix it: to begin with, we’re making the whole system much more transparent. Last month, we took an unprecedented step, we started to publish every government contract worth over £25,000 in full. I think this will make a huge difference. Procurement managers will have to make sure they are not subject to over-the-top provisions or penalties, existing suppliers will know they have to offer the best price, and new contractors looking online will be able to see the deals that have been done and will be able to say ‘Well, I could do that for the same or for half or a quarter of what they are charging.’
At the same time, we’re going to make the whole system a lot more welcoming to small and medium-sized firms, to charities and to social enterprises. All those problems people raised in the portal we set up, we are sorting them out. We’re sweeping away ridiculous rules and bureaucracy and seeking to eliminate, for smaller contracts, the assessment hurdles at the beginning of the process. Where we do need to ask questions about your company’s capability we’re introducing a simple, straightforward pre-qualification form. Fill it in once and then you can use it as your route to bid for any government contract. This is something that I’ve been hearing from small businesses over the last five years at small-business conference after small-business conference and I’m delighted to say that we are going to deliver that.
And to help you to find those opportunities we’re going to go another step further and I can also announce today we’re going to be launching a new online tool - Contracts Finder. It goes live today; it’s a one-stop shop which will display every central government tender opportunity. And what’s more, wherever possible, we’re going to break up the large contracts into smaller elements, so that SMEs can make a bid and get involved. How many times have we heard from the small business community ‘some of these contracts are just too big, I can’t get involved, break them up and I could’? We’re delivering on that ask. Where that’s not possible, we’ll also work proactively with our large suppliers to directly increase opportunities for smaller organisations in the supply chain.
And we’re also today announcing a series of innovation and product surgeries, with the first one in April in Birmingham. These events should give companies with innovative products and services the chance to actually pitch their ideas directly to the government rather than wait for government to play catch up and issue a tender. A big change taking place here. All you need to be considered is a prototype and a business plan.
Now, I think all of these changes will go a long way to help us fulfil one of the coalition’s key ambitions and that is that 25% of all government contracts are awarded to small and medium-sized enterprises. If we meet this goal it will mean billions of pounds worth of new business for SMEs and I think it is absolutely essential that we do.
So that’s what we’re doing. What I need in return from everyone in this room is a similar commitment from all of you who think you can provide a great service to government, the commitment to go online to start looking for new contract opportunities. And from the procurement managers in the government I want the commitment from you to open up opportunities to new providers, including SMEs and voluntary organisations.
Now, I understand your concerns. In the private sector, there’s an old adage ‘No one got sacked for hiring IBM’. I remember this when I worked in the private sector. I was responsible for contracting for a business I was working for and sometimes the big option seems like the safe option. You know when you go up and see the chief executive and you say, ‘It’s alright, I’ve got Accenture to do it or IBM’ you know it’s all going to be okay. But I want you to feel empowered. I want you to know that as long as you follow the right channels, I will stand by you if you take risks with young, new, dynamic companies. I want you to really feel you are playing your part in helping to turn the country around in cutting the deficit, in boosting enterprise and growth, and in building the Big Society.
Mike Lynch of Autonomy, one of Britain’s most fast-growing and successful businesses, once said the reason his company is a massive global success story is because one maverick government contract manager defied the rules and gave him a tender, and one of you in here today could make the same difference and help build that world-beating company that Autonomy is today, so be bold.
Let me end by saying this: I know that a lot of this won’t be easy. There will be opponents, there’ll be vested interests that benefited from the old system and they will line up and try to stop what we’re doing. And, yes, there will be mistakes along the way, because when you open up billions of pounds of contracts it will not go smoothly or easily, I know that. But I wouldn’t be standing here today making this case for change if I didn’t think it was important.
It is about making our country less wasteful and more accountable. It’s about opening up opportunities to new, small organisations as well as the old, bigger ones. And it’s about being more dynamic in our economy and in our public services. So, together, let us say today that we are going to make this happen together.