Government ICT procurement policy: opening up greater opportunities for SMEs

The government’s Information and Communication Technology (ICT) Strategy, published in 2010, set out the way in which the government ICT landscape would change over the current spending review period: it included 30 points of action which it believed would lay the foundations for achieving the Strategy’s core objectives of reducing waste and project failure and stimulating economic growth, creating a common ICT infrastructure, using ICT to enable and deliver change and strengthening governance.

Announcement made on government ICT at Tech Procurement Briefing

The government has consistently maintained that all of these changes were crucial if the UK’s ICT structure was to be cost-effective and fit for purpose in the Twenty First Century. Two years on the strategy is on track to deliver its stated targets. However, Cabinet Office Minister, Francis Maude, believes that government can do far more. Speaking at the Technology Procurement Briefing 2013 – ‘Transforming Technology Procurement through SMEs’, Mr Maude announced that government was about to enter into a whole “new world” by opening up greater procurement opportunities to SMEs:

“There was for too long a misguided conviction in Whitehall that big was beautiful. And so, for the most part, long-term, exclusive contracts were consistently awarded to a limited number of very large suppliers. The result was IT projects that were too big, too lengthy, too expensive, too risky and complex – plagued by overruns delays and failures. Meanwhile more innovative and cost-effective solutions from smaller suppliers were never getting anywhere near Whitehall. This was bad for the taxpayer and service users, and bad for businesses and growth.”

“SMEs are a crucial engine for growth: 99.9 per cent of the UK’s businesses are SMEs. They are responsible for almost half of our private sector output and create two thirds of new jobs. ICT companies in particular are essential for growing our economy: recent research shows British internet companies are growing at a rate more than 50 times faster than the rest of the country, with online start-ups booming. This expansion is being driven mainly by small and medium-sized firms; most high-growth businesses have fewer than 100 employees, while average revenues are £8.9million. In the past these very firms would have been ignored by government. When we came into office only 6.5 per cent of government business by value was going to SMEs.”

Areas of focus are needed to move into 21st century

To address these issues Mr Maude proposed that government needed to focus on improving efficiency in government technology procurement, open up the sector to greater SME participation, and bring in new ideas and technologies to bring government services into the 21st century:

“The UK is competing in a global race; to succeed we need to support entrepreneurial businesses to invest and grow. This government is determined to make the UK one of the best places in Europe to start, finance and grow a business; to this end we have cut corporation tax, boosted tax relief to start ups and cut red tape.”

“We have launched radical reforms to increase opportunities for SME suppliers and to give the government access to SMEs creativity and innovation. Our aspiration is for a quarter of our business to go – directly or indirectly – to SMEs by the end of this Parliament. However, this is not about giving SMEs a free pass to win business. These are tough economic times and the urgent need to reduce the deficit means public resources are much scarcer. We owe it to the taxpayer, now more than ever, to spend their cash better.”

“Relentlessly pursuing efficiency allowed us to make then unprecedented savings of £3.75 billion in our first 10 months in office. In 2011-2012 we saved a further £5.5billion and I recently announced savings of £10 billion last year. Better procurement has and will continue to be a huge part of this drive. And the whole way government procures and delivers technology is being radically overhauled to ensure we get the best value for money.”

“Since coming into office we have identified and knocked down a number of barriers that were previously preventing SMEs from winning work. We have introduced much greater visibility of opportunities through the Contracts Finder website. We have also published procurement pipelines in 18 sectors, including IT, covering nearly £79 billion of public sector spend so that suppliers get a much better picture of the contracting landscape over the next five years.”

“We are also making the procurement process faster, less bureaucratic and more open. The pre-qualification questionnaire, so often used as unfair short-listing tool that invariably put the bigger companies through, has been abolished for low value contracts and simplified elsewhere. And new technology such as e-Auctions is enabling quicker procurements. We’re breaking down the length and size of contracts. I have set out that for any ICT programmes not being displaced by digital solutions; no project, framework or contract can be over £100 million.”

“We have also introduced Open Standards to allow government to interoperate, so that we don’t have to build the same thing 30 or 40 times. What’s more these standards will improve competition for government contracts, allowing us to open up to a larger number of suppliers and encourage innovation in government IT.”

“We have a long way to go but there are signs these reforms are working. Overall government has increased its direct spend with SMEs from 6.5 per cent in 2009-10 to 10 per cent in 2011-12, and in 2011-12 figures from government’s top suppliers shows that SMEs had benefited from a further 6.6 per cent of spend in the supply chain. One of our most successful innovations is the delivery of the G-Cloud framework, which embraces open procedures. This is a step change in the way government buys ICT. It’s quicker, cheaper, more competitive and more accessible to SMEs. As a result, of the 700 successful suppliers on the framework, 83 per cent are SMEs.”

“To ensure the government is maximising the benefits of this approach, central government departments are now mandated to consider Cloud options first in any ICT procurement, and the wider public sector is also strongly recommended to adopt the same approach.”