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Government commitment to SMEs at risk without new approach

18 May 2016

The Public Accounts Committee report says that Government has lost momentum in its efforts to spend more with small and medium-sized enterprises (SMEs).

Report findings

The Committee concludes that while the Government reported progress against its target for SME spending from 2010–15, "it is not clear that SMEs are better able to compete with larger providers or whether they are actually getting any more government business than before".

The Committee is not persuaded that initiatives to remove barriers to SMEs have resulted in substantially greater competition for government business, citing evidence of larger providers continuing to dominate.

Government has not yet identified areas of spending where SMEs could bring the most benefit and it remains too difficult for SMEs to know what bidding opportunities are available.

Not clear how achievable spending target is

The Committee questions whether "the voice of SMEs is being heard in government" and says it not convinced that increasing spending with SMEs is being given sufficient priority.

In August 2015, the Government increased the target for SME spending from 25% to 33% by 2020 as a result of a manifesto commitment.

The Committee concludes "it is not clear how the Government decided on 33% as a target or how achievable it is" and urges the Crown Commercial Service (CCS) to report back by March 2017 on what it has done to re-establish momentum towards hitting this target.

New approach needed to measure performance of SME spending

It calls on the Cabinet Office and CCS to 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".

The Committee recommends the adoption of a new and consistent approach to measuring year-on-year performance for SME spending.

It also calls on the Government to set out how it will make it easier for SMEs "to be aware of all direct contracting opportunities, subcontracting opportunities, awarded contracts and what opportunities may be in the pipeline".

Chair's comments

Meg Hillier MP, Chair of the PAC, 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.
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.

The Government's pledge to increase SME spending will have been welcomed by those who stand to benefit but without new and concerted action there is a real risk it will not be honoured.

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."

Report summary

In 2010, the Government set itself a target for 25% of government procurement spending to reach small and medium-sized enterprises (SMEs) by 2015.

It has reported progress against this target each year since then but it is not clear that SMEs are better able to compete with larger providers or whether they are actually getting any more government business than before.

The centre of government, led by the Cabinet Office and the Crown Commercial Service, has introduced numerous initiatives to remove barriers to SMEs doing business with government.

SMEs need a strong voice in government

However, momentum has been lost with some initiatives stalling or stopping altogether and the centre needs to reinvigorate its approach.

To do so, the centre needs to move from a generic approach of lifting barriers, to a more focused approach, by helping departments to identify particular areas of government business where SMEs can bring the most benefit.

It needs to fill key posts so SMEs have a strong voice in government to raise concerns about barriers and making sure that all public sector contract opportunities are communicated properly.

The Cabinet Office needs to provide clear leadership to departments and convince us that achieving the higher target of 33% by 2020 is indeed a priority objective across government.

Further information

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