Better deal for smaller businesses

Marking the one year anniversary of the Government’s new approach to doing business with smaller companies, the Cabinet Office has published a new report on progress showing the amount of business going to SMEs across central government is on track to double from 6.7% to 13.7% by the end of the financial year.

The public sector currently spends £230 billion on goods and services a year – roughly 15% of the UK economy and £1 for every £7 spent in Britain. Today’s package of new measures will drive faster and deeper progress in opening up this business to smaller companies, which are vital to the growth of the economy and can save money for taxpayers.

Francis Maude, said: “We said we wanted to improve things for smaller businesses and today we have shown that the measures we introduced a year ago are making a difference.

“Governments might be able to print money but it is SMEs who make it – successful SMEs are crucial to the future of this country and can save taxpayers’ money with innovative new ideas. Doubling the amount of business going to these companies is no small feat but we will now go further. We are determined to shake up public buying so radically that there is no turning back to old days of SMEs being shut out.”

Key measures announced today include:

• New commitments from large private sector players. Nine companies: Hewlett Packard, Airwave, Amey, Balfour Beatty, CapGemini, Capita, Level 3, Logica and Serco are the first to sign up to publish their government subcontracting opportunities on the Government’s searchable and transparent website, Contracts Finder. This gives SMEs more visibility than ever before on the government subcontracting work available.
• A new approach to IT contracts – in future, Government IT contracts will be more flexible, starting with two areas (application software and infrastructure IT). The Government is introducing set breakpoints in IT contracts so there is less money locked into large lengthy contracts. The Government will look to disaggregate future contracts and deliver flexible, cheaper solutions. This opens up opportunities for SMEs and reduces the cost to taxpayers.
• Prompter payment for SMEs. Timely access to cash is critical for the survival of many SMEs. The Minister will announce that new ways of paying SMEs are being explored to ensure SMEs within the supply chain receive payment at the same time as the prime suppliers. This will include rolling out Project Bank Accounts, which are already being used successfully in the construction sector to sectors such as defence and considering the role of structured finance to facilitate faster payments.
• Greater transparency. Departments will be judged by smaller businesses and given a star rating to show how effective they are at working with smaller players. The first department to be rated by smaller businesses will be the Cabinet Office in May.

• Extending the investigative Mystery Shopper service. Following the success of the Cabinet Office’s Mystery Shopper service where SMEs can complain about procurements and trigger an investigation, the Cabinet Office will now investigate complaints about unfair practices in the supply chain of government contracts. By mid-February 2012 the existing system had received 151 cases, of which 111 had been closed with 75% of them resulting in a positive outcome.

• Better dialogue between Government and smaller businesses. From April, a new online tool will help government buyers to engage earlier with SMEs by allowing them to put informal postings about what they need to buy in future online and for SMEs to respond and explain what they can offer.

The Government will also pilot new approaches to make it easier for SMEs to form consortia to successfully win government business and will appoint new SME champions in every government department to drive further change.

Stephen Allott, Crown Representative for SMEs, said: “Having been in post as the voice of SMEs in government for a year, I’m pleased to be able to say I’ve seen real progress. Today’s announcements show that the level of commitment to the whole agenda is going even further – the Government is committing to a range of innovative policy ideas, including getting SMEs to rate buying departments and hold their feet to the fire. Having such a spotlight on the agenda will help us make even more progress this year.”

Further information
www.cabinetoffice.gov.uk/resource-library