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‘Attitude change’ needed to involve SMEs in contract bidding, says PAC

Despite efforts and reports of progress against its target, central government is still failing to remove competition barriers for SMEs, including by not identifying areas of spending where these businesses could bring the most benefit and not making public sector bidding opportunities clear.

In a report yet more scathing than the National Audit Office’s findings from March, the Commons Public Accounts Committee (PAC) argued that the government has lost momentum in its quest to spend more with small and medium-sized firms, with some initiatives stalling and others stopping altogether.

The PAC said it is not convinced that initiatives to remove barriers to SMEs have “resulted in significantly greater competition” for government business and still questions whether “the voice of SMEs is being heard” across Whitehall, with SME spending still not being given enough priority.

Central government announced in August last year as part of its manifesto that it would increase its SME spending target from 25% to 33% by the end of the decade, just a week after a Nesta analysis found that less than 3% of its procurement spend goes to small start-up companies.

But that ambition has not materialised and it remains unclear “how the government decided on 33% as a target or how achievable it is”, the PAC said.

Meg Hillier MP, the committee’s outspoken chair, said: “We are sceptical about just how much progress has been made on increasing spending with SMEs. The fact the government has changed its approach to measuring such spending in four of the last five years makes it impossible to properly assess performance.

“The government has now committed to an ambitious, higher target for SME spending and there is clearly work to be done if that target is to be achieved. It's a simple point, but launching initiatives is not the same as delivering results.”


Echoing the NAO’s recommendations from this year, the PAC called on the Cabinet Office and the Crown Commercial Service (CCS) to take on a more focused approach, help departments identify the areas where SMEs can “best add value” and how it will “structure contracts and procurement to enable them to compete accordingly”.

There must also be a “new and consistent” approach to measuring year-on-year performance for SME spending, as well as more information on how central government will make it easier for small firms to “be aware” of all direct contracting and subcontracting opportunities, awarded contracts, and opportunities that may be in the pipeline.

Currently, for example, data held in Contracts Finder, an online portal for advertising public sector contracting opportunities, remains incomplete, with just 80% of eligible contracts listed on it, PAC found. As well as hindering the involvement of SMEs in contracts, this could even open the government to “potential legal challenge”.

“We will expect to see a new and more focused approach that properly considers the role of SMEs. Government should identify where these enterprises can best add value and ensure they have the knowledge they need to compete,” Hillier added.

“There are many areas of government business where there is an opportunity for UK small business to contribute to better performance. Too often they are still locked out by complex and lengthy procedures.

“The advent of G-Cloud has been a success but this needs to have further reach and there must be an attitude change in Whitehall for SMEs to get the chance to contribute more.”

The Cabinet Office – which defended its record on SME spending to the committee and said it was convinced its work had a positive impact – today repeated what it had told the NAO in March: “We welcome the committee’s recognition of our efforts, including reaching 27% of spend going to SMEs last year, exceeding our target.”

The department’s spokesman also acknowledged that the 33% target by 2020 was “challenging” but was adamant that the Cabinet Office is “putting in place the right actions to further open up government business and ensure we get the best value for the taxpayer”.

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