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09.03.16

Government SME procurement is improving but needs more focus – NAO

Government efforts to support small and medium-sized enterprises (SMEs) through direct procurement needs more focus to succeed, the National Audit Office (NAO) has said in a new report.

The report found that the role of SMEs in government procurement is growing, as they accounted for 27% (£12.1bn) of procurement spending in 2014-15, which the government aims to increase to 33% by 2020.

However, 25% of central government’s spending is still with a small group of just 10 providers, and the report warned that these efforts could be limited by reductions in commissioner capacity, greater use of the government’s collective buying power to drive down prices, and pressure on departments to cut costs and make savings.

Amyas Morse, 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 SMEs can deliver real benefits.”

The NAO recommended that the Crown Commercial Service (CCS) should identify areas of government spending where SMEs can have the most impact to ensure that the government’s approach to SME procurement is focused, and that the government makes a concerted effort both to remove barriers for SMEs bidding and to ensure that the desired benefits of using SMEs ensue.

Dr Adam Marshall of the British Chamber of Commerce recently criticised the government for putting multiple requirements on SMEs to receive contracts, such as a clear commitment to apprenticeships.

Many SMEs also told the NAO that they were reluctant to work with public sector providers because of concerns such as payment issues.

Last year Margaret Hodge MP, the then head of the Public Accounts Committee (PAC), criticised public sector clients for failing to pay a third of SMEs within 30 days of receiving an invoice.

The NAO pointed out some positive steps, such as the introduction of the digital procurement platform G-Cloud making procuring from SMEs easier by allowing government departments to purchase from any G-Cloud provider instead of tying them into long-term contracts.

In a report, think tank Centre for Cities said that giving cities greater control over the needs of SMEs should be a top priority in the government’s devolution agenda.

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