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NAO dampens claims of SME success

09/03/16

Report from the National Audit Office questions whether smaller firms are really getting a larger slice of the Whitehall pie – and says that often they are not the best option

iStock_Whitehall_Linda-StewardCentral government may not have done as well as claimed in encouraging small and medium-sized enterprises (SMEs) to win a larger share of its procurement, according to the National Audit Office (NAO).

In a new report on government spending with SMEs, it expresses caution over the Government's claims and points to a need for measures to support the Cabinet Office's campaign to raise the proportion of business going to the sector from 27% in 2014-15 to 33% by 2020.

While the report does not place a special focus on the procurement of IT services, this has been one of the areas that the Government has highlighted in recent years. It has had a policy against contracts worth over £100 million, partly to give SMEs a better chance in the market.

Uncertainty

The NAO says that, while the Cabinet Office has claimed that the 25% target for the SME share in procurement for 2014-15 was surpassed, it cannot be certain that government has spent more with smaller firms. There was no reliable baseline figure at the beginning of the previous Parliament, and the reported annual increases happened in parallel with the work by CCS on improving its data.

It also calls for a more focused approach on how using SMEs could bring the benefits it wants to achieve. There are suggestions that in many areas smaller firms are not well placed to provide what government organisations need for a procurement, and they often cannot provide the savings possible when using larger suppliers.

This contrasts with the prevailing approach of trying to reduce the barriers to SMEs being able to bid for government business.

Amyas Morse, the head of the NAO, said: “If the Government is serious about increasing its use of SMEs, it will need to focus on those areas where they can deliver real benefits.

“The Government's direct procurement spending with small and medium-sized enterprises was £4.9 billion in 2014-15. As it seeks to increase this further, it will need to think carefully about the full range of risks and opportunities that contracting with SMEs presents, compared to working with larger providers.”

techUK position

The point has won support from IT industry association techUK. Its associate director of public sector, Naureen Khan, said: “The NAO rightly points out there is a clear issue with civil servants' understanding of SMEs' capability, and where they can have the most impact.”

She said this was supported by a survey conducted for techUK's SME report, which found that 96% of respondents did not think civil servants had a good understanding of how SMEs could meet their needs. Also, it showed that the onerous procurement process and risk averse culture in government was seen as a problem by the majority of smaller firms.

Among the NAO report's suggestions for improvements are the creation of a digital platform for policy teams to procure without the support of commercial chains, and the consolidation of supply chains through the use of prime contractors. The latter point reflects the fact that government has relied on prime contractors for years, and that they often provide a share of the market for SMEs as subcontractors.

It also indicates a need for a digital procurement platform that would integrate information on contracts, payments and contractor performance. While the Contracts Finder database holds information on contracts, it depends on public bodies uploading information from more than 200 procurement portals. Because of this, the CCS does not have a comprehensive view of the data.

An integrated platform would make it easier for the Crown Commercial Service (CCS) to bring together information on cross-government spending and identify areas in which SMEs are contributing to government services.

techUK said it planning to publish an action plan for working with the Government to deal with the barriers highlighted in its report.

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