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Cabinet Office delivers progress report on SME involvement in government contracts

09 March 2012

Cabinet Office minister, Francis Maude has reported on the progress of the government's plans to open up more of its business to SMEs. The Contracts Finder website now gives businesses a single place to survey everything on offer from government and has 97,000 viewings per week. Latest figures show that of the 6,132 contracts posted to date, some 2,133 have been awarded to SMEs.

Cabinet Office minister, Francis Maude
Cabinet Office minister, Francis Maude

On the question of bureaucracy, the pre-qualification questionnaire – an unfair short-listing tool that invariably put the bigger companies through – has now been abolished for low value contracts and simplified elsewhere. This means that SMEs do not have to answer questions on whether they have got a diversity policy or a demand for ‘catastrophe’ insurance if they want to bid for government work.

Mr Maude also announced that central government’s direct spend with SMEs is on track to double since the coalition took office from 6.5% to 13.7%. In monetary terms this means a doubling from £3bn to £6bn by the end of the financial year, at a time when overall spending on goods and services is on track to reduce by 14%.

ICT has become then the first sector to introduce specific caps to limit the size and duration of contracts to give SMEs a better chance. Government IT contracts will be more flexible, Mr Maude said, starting in two areas - application software and infrastructure IT. Set breakpoints are being introduced so there is less money locked into large, lengthy contracts. Other sectors will explore whether similar value or length caps will drive greater value for money and encourage new players into the market.

Nine suppliers have now signed up to opening up their supply chains to greater competition by advertising their sub-contracting opportunities on the Contracts Finder website. These include Airwave, Amey, Balflour Beatty, CapGemini, Capita, Hewlett Packard, Level 3, Logica and Serco - more are expected to follow. The SME Panel has also been asked to work with government to pilot approaches and make it easier for SMEs to form consortia and win government business.

An SME ‘dating agency’ service is to be trialled to help departments to identify and engage with innovative SMEs at the earliest stage of the procurement process. In turn, departments will continue to be held under the spotlight on how 'SME friendly' they are. A new rating service will give SMEs the ability to rate government departments on a number of criteria, starting with the Cabinet Office itself.

On the thorny subject of late payment, the use of so-called Project Bank Accounts (successfully piloted by the Highways Agency) is to be extended beyond the construction sector, initially to defence and facilities. Other options are to be explored, such as the role of structured finance, which could also enable faster payments within the supply chains.

CBI Head of Enterprise and Innovation, Tim Bradshaw welcomed the announcement. “Winning a contract to supply goods and services to the government can provide a vital springboard for businesses looking to expand their operations," he said. "It is positive that the government is becoming more open to the potential for innovative ideas and delivery from companies of all sizes."

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