PAC highlights stalled progress on SME contracting

18 May 16

Government efforts to spend more money through small and medium-sized enterprises (SMEs) have lost momentum and cannot be reliably measured, the Public Accounts Committee has found.

The parliamentary spending watchdog’s report concluded that, despite government claims of progress, “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”.

MPs on the committee were “not persuaded that initiatives to remove barriers to SMEs have resulted in substantially greater competition for government business”, with larger providers continuing to dominate.

In 2010, the government set itself a target that 25% of its £45bn annual procurement spend should be through SMEs.

In 2014-15, it reported that 27% of this reached SMEs and last year increased the target to 33% by 2020, though the report said it was unclear why this proportion was chosen.

But the committee said these figures were not reliable measures of performance because “the government has changed its approach to measuring SME spending in four of the last five years.

“Consequently, we cannot tell whether government spending with SMEs has truly increased.”

A further complication is that the government target includes indirect spending – work passed to SMEs by larger government contractors – and “while increasing this may be welcome, it is not clear how this can be considered a meaningful measure of the government’s success in making it easier for SMEs to do business with government”.

All government contracts are supposed to appear on the Contracts Finder website, but the PAC report noted that only 80% did so. The committee said: “We are concerned that the government is leaving itself open to potential legal challenge by not advertising all available contracts.”

The committee also highlighted that the government’s 24-strong SME panel had failed to meet since January 2015 and that the Cabinet Office was “not actually sure why the SME panel stopped”.

PAC chair Meg Hillier 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.”

A Cabinet Office spokeman said: "We welcome the committee’s recognition of our efforts, including reaching 27% of spend going to SMEs last year, exceeding our target.”

He added that the 33% target by 2020 was “a challenging one, [but] we are confident that we are putting in place the right actions to further open up government business and ensure we get the best value for the taxpayer”.

Did you enjoy this article?