The government is trying to woo SMEs..

Will it work?

Amid all the heat and light of the changes this government is implementing, one has received surprisingly little mainstream coverage. And that is the big pitch it is making to small and medium-sized enterprises (SMEs) as part of efforts to woo them into bidding for government work.

When it came to power, this government announced an aspiration for 25 per cent of central government procurement spending to go to SMEs. Indeed, this goal was even set in stone in the Coalition Programme for Government, which is peppered with references to start-ups and small firms.

The government claims that funnelling more of its money to SMEs will provide it with access to the latest innovation, stimulate growth and jobs, and perhaps most importantly, reduce the amount spent on public sector contracts.

Aside from the stated reasons, there are other sound motives for championing SMEs in a recession, suggests market-watcher Stephen Roberts of Kable. "The SMEs which politicians dream of as replacements for giant global IT firms are British as well as innovative. Procurement is restricted by European legislation, but championing SMEs is the acceptable face of protectionism."

And, true to its word, the government –in particular the Cabinet Office- has been beavering away at the policy ever since.

It has pushed the adoption of "lean" procurement practices across Whitehall, set up a "Mystery Shopper" scheme where businesses can raise concerns if they notice unfair practices in public procurements and launched "Contracts Finder", a website which lists past, current and future contract opportunities in the public sector.

Indeed, it even recruited someone whose sole job is to focus on championing SMEs in government- with the rather grand title of "Crown Representative for Small and Medium Enterprises".

But how successful has it been?

Figures released last week show that the central government departments spent a total of 20 per cent of their budgets with SMEs last year.

However, of that 20 per cent, only just over half (10.5 per cent) went to SMEs directly. The remainder- 9.4 per cent - filtered down to them indirectly (via larger companies subcontracting some of their work to smaller companies).

And the indirect figures do come with a health warning- they are estimated numbers taken from quarterly supplier surveys, and only started being collected in the last couple of years- so we have virtually nothing to benchmark them against.

So looking at just direct spending with SMEs, this increased from 6.5 per cent in 2009/10 to 10.5 per cent in 2012/13. By that measure, Whitehall has increased its direct spending with SMEs by a respectable 4 per cent, with 0.5 per cent of that increase being achieved last year.

So if you do choose to include indirect spending, the government spent 20 per cent with SMEs last year and it sounds like it is indeed, as it claims, "on track" to hit its 25 per cent target by 2015. If you don’t, it has rather further to go.

And it is not an easy task. Departmental resistance is strong, warns Roberts. "The Civil Service is risk-averse, and SMEs carry risks that larger suppliers do not. The collapse of IT services firm 2e2 this year left a number of public sector clients in difficulties. Pragmatic concerns like this can trump political pressures."

However, there is no denying the level of aspiration, and it seems the government is stepping up efforts to advance the SME cause, for example by appointing lead ministers and senior civil servants to drive the agenda forward across the 17 government departments.

And nowhere has the push to buy from SMEs been more pronounced than in the area of technology where a new aspiration is for 50 per cent of spending on new government IT to go to SMEs.

The government has admitted that it doesn’t actually know how much of its IT budget goes to SMEs at the moment, but considering a report in 2011 found that 80 per cent of central government IT work was undertaken by 18 suppliers- all large multinational firms- it’s safe to say the 50 per cent goal is highly ambitious.

Those working on achieving this transformation are keenly eyeing up a tranche of the biggest IT contracts due to expire in the next two years, viewing this as an opportunity to break them up into smaller, more SME-friendly contracts, a process known as "disaggregating".

In addition, the government is keen to push a programme called G-Cloud, which promotes public sector adoption of cloud computing, as a vital route for smaller companies trying to get into bidding for government work.

At the heart of G-Cloud, which was launched in 2011, is the "CloudStore", an online catalogue (think of it as Amazon for government contracts) containing details of each of the suppliers on the framework, and their services. The list is updated at least twice a year with the aim of making sure the content is kept fresh and accommodate the rapidly-changing pace of technology.

The programme has seen its sales gradually tick upwards, from £4m in December 2012 to £11m in March 2013, £18m in April, £25m in June and £31m in July.

And it can boast some pretty impressive statistics, with SMEs winning 56 per cent of total sales by value, and over 60 per cent of contract wins.

With less than two years to go until the next election, many in government are aware that time is running out for them to cement SMEs into the government procurement mix.

The bottom line is that there can only be one winner. If SMEs are to gain more business, the government’s traditional suppliers will have to cede some of their Whitehall territory.

Indeed, some SMEs are rubbing their hands in glee at the prospect of long-term, inaccessible government contracts running out over the next few years. Already the Cabinet Office, led by Minister Francis Maude, has weighed in with rhetoric saying contracts will not be renewed.

The government is preparing to go to battle on SMEs behalf- whether they will win remains to be seen.

The government is wooing SMEs. Photograph: Getty Images

Charlotte Jee is a Reporter at Government Computing

 

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.