The National Audit Office has today published a report setting out the progress made so far and the challenges faced by the government in its efforts to increase its spending with SMEs by 2020.
The Cabinet Office has estimated that 27% of government’s procurement spending or £12.1 billion reached SMEs in 2014-15, surpassing its target of 25%. The UK government now aims to increase its spending with SMEs to 33% by 2020.
The Government has tried to harness the potential benefits of involving SMEs in the public sector marketplace for many years. The departments that the NAO spoke to agreed that SMEs can offer a number of benefits to the public sector, compared with other providers, including more flexibility and innovative approaches.
Over the last five years, the Government has had a clear and sustained focus on the involvement of SMEs in government contracts. Government has introduced initiatives to reduce the barriers faced by SMEs when bidding for public sector work. SMEs have reported, however, that they still face barriers as government initiatives are, in practice, not sufficient to ensure that more work flows to SMEs.
The NAO has advised that the government will be more likely to realise the potential benefits of using SMEs if it takes a more focused approach to improving access for SMEs.
It currently bases its approach on the assumption that more SMEs will win work with government if there are fewer barriers to SMEs being able to bid. However, wider trends in government contracting mean that, although SMEs can bid for work, they are often not suitable to deliver it.
Government needs to take a more concerted effort not only to remove barriers to bidding, but to ensure that what and how government procures achieves the desired benefits of using SMEs. Government must also balance its aspirations for using SMEs with other potentially conflicting priorities, such as pressures on departments to make savings.
National Audit Office head Amyas Morse 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 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, government will need to think carefully about the full range of risks and opportunities that contracting with SMEs presents, compared to working with larger providers."
UK tech trade body techUK has welcomed the report saying that it reflects its own report on SMEs.
techUK associate director of public sector Naureen Khan said: "The NAO’s conclusions echo the findings and recommendations of our SME report. To continue to make progress against the Government’s target, a focus on opening up the market and creating a level playing field is critical."
According to the trade body, barriers remain despite initiatives like G-Cloud making a difference. According to its own SME report, the top three barriers for SMEs accessing the public sector market are onerous procurement process (64%), risk averse culture(59%) and onerous Terms and Conditions (33%).
The TechUK report also found that where Government has invested in tools, poor awareness has resulted in limited take up. 86% had never used Mystery Shopper Scheme, representing a clear missed opportunity. Even more worryingly, SMEs that had used the tools haven’t found them useful – 62% did not think Contracts finder has helped small businesses access opportunities in the public sector.
Khan added: "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."
"A more diverse and vibrant public sector supply chain which includes large and small is critical to delivering the end to end transformation that is urgently needed."
