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Government’s spending with SMEs NAO report: Government’s spending with SMEs March 2016

Government’s spending with SMEs National Audit office Introduction

Government’s spending with SMEs

Our role The National Audit Office (NAO) scrutinises public spending for Parliament We help to hold government departments and the bodies we audit to account for how they use public money Our work helps public service managers to improve performance and service delivery, nationally and locally

Government’s spending with SMEs The accountability process

Government’s spending with SMEs Findings from our report:

Government’s spending with SMEs Our report Cross-government report Published: 9 March 2016 Context: Central government spends around £45bn each year on goods and services supplied by private and third sector organisations. In 2010, it committed to spend 25% of this with SMEs by In 2015, it extended the target to 33% by Target covers both direct and indirect spending through the supply chain. Public Accounts Committee will take evidence from the CCS and Cabinet Office on Monday 21 March Currently accepting written evidence submissions.

Government’s spending with SMEs What has the government achieved so far?

Government’s spending with SMEs Central initiatives

Government’s spending with SMEs Government’s reported progress

Government’s spending with SMEs Looking ahead: the 2020 target

Government’s spending with SMEs Government’s reported progress (2)

Government’s spending with SMEs we cannot be certain that the amount government spends with SMEs has increased since 2010 NAO recommendation: Stop changing the basis for estimating SME spending. The CCS should settle on a methodology for and ensure that any subsequent years’ data can be compared with this baseline. Governm ent does not know how many SMEs were awarded contracts directly in Likely that prime contractors estimate spending with SMEs on an inconsistent basis Data in Bravo (spend analysis tool underpinning direct figures) known to be incomplete Government does not have data on SMEs within supply chains It is better than before, but …

Government’s spending with SMEs Reported barriers

Government’s spending with SMEs Central initiatives

Government’s spending with SMEs What is the outlook for the next 5 years?

Government’s spending with SMEs Looking ahead: the 2020 target

Government’s spending with SMEs Spending in

Government’s spending with SMEs So will SMEs win more business? YesNo 60% supply chain (growing) Greater use of government’s collective buying power Reductions in commissioner capacity Pressure on departments to make savings PCR 2015 coming into effect Departments recognising need for action (even MoD) Focus on SMEs

Government’s spending with SMEs Spending in

Government’s spending with SMEs NAO conclusion Over the last five years, the Government has had a clear and sustained focus on the involvement of SMEs in government contracts. Government reported that over 25% of its spending reached SMEs in It now aims to increase this to 33% by However, we cannot be certain that the amount government spends with SMEs has increased since it set its original target in As it seeks to increase it further, government needs to think carefully about the full range of risks and opportunities that contracting with SMEs presents, compared to working with larger providers. Government will be more likely to harness the potential benefits of using SMEs if it takes a more focused approach. It currently bases its approach on the assumption that more SMEs will win government work 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. 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. This will 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’s spending with SMEs NAO recommendations Taking a more focused approach to achieving the benefits of using SMEs  Stop changing the basis for estimating SME spending  Identify those areas of government where different providers can bring the most benefits  Use best practice to inform future decisions  Identify where government needs to have oversight of the relationship between prime contractors and their subcontractors Ensuring greater visibility and transparency of government’s procurement  Assess the feasibility of an integrated cross-government procurement platform to support its commercial strategy  As a first step, improve the quality of data in Contracts Finder.

Government’s spending with SMEs Our report Cross-government report Published: 9 March 2016 Context: Central government spends around £45bn each year on goods and services supplied by private and third sector organisations. In 2010, it committed to spend 25% of this with SMEs by In 2015, it extended the target to 33% by Target covers both direct and indirect spending through the supply chain. Public Accounts Committee will take evidence from the CCS and Cabinet Office on Monday 21 March Currently accepting written evidence submissions.

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