1. NATIONAL FEDERATION OF BUILDERS PRINCIPAL CONTACTORS’ GROUP CONFERENCE Government Procurement from SMEs 23 October 2012 Stephen Allott Crown Representative for Small and Medium Enterprises

2. The Coalition Agreement UNCLASSIFIED “ We will promote small business procurement, in particular by introducing an aspiration that 25% of government contracts* should be awarded to small and medium-sized businesses and by publishing government tenders in full online and free of charge. “ May 2010 Chapter 2 – Business * Central Government, by value including both direct spend and in the supply chain

3. Getting Full Value from SME suppliers UNCLASSIFIED We must find instances where SMEs deliver better value for money than current suppliers We cannot spend more taxpayers’ money to increase the SME % The goal therefore is to Get Full Value from SME suppliers to reach the 25% aspiration

4. UNCLASSIFIED Introduced the SME Crown Representative for SMEs – they have a voice at the top table Easier to find opportunities to do business with Government – Contracts Finder, Dynamic Marketplace Reformed the procurement process ‘removing barriers’ – abolished PQQ below £100k services threshold. PAS 91 above threshold SMEs given new channels of comms. including Mystery Shopper Focus in departments and reporting spend with SMEs Big is not always beautiful – starting in ICT contract length and size will be reduced. Goal is optimal contract size for VFM SME Programme: Getting full value from SME suppliers

5. What does the Construction strategy say about SMEs? UNCLASSIFIED “The industry is highly fragmented with over 300,000 businesses employing 2m workers, over 99% of which are SMEs” “The Government has investigated, jointly with industry, the use of frameworks and concluded that well managed frameworks which add value and are correctly sized are beneficial. On the other hand, “lazy frameworks” which are unmanaged and wrongly sized can be problematic. “Fair payment down the Supply Chain has been made a contractual requirement on all new Central Govt. construction..... Project Bank Accounts... will be monitored as a model for the future” “Enable / encourage a genuinely integrated supply side proposition...” “To seek and deliver product and process innovation at all levels of the supply chain.”

6. Update on SMEs in the Construction Sector UNCLASSIFIED SMEs are an integral part of the industry and its supply chains After 7 years of work, Project Bank Accounts are now the default in Central Government. Payments via PBAs will be £2b this year rising to £4b next year. There are pockets of take-up of PBAs in local Government with central Government providing advice reactively. In both local and central Government, frameworks are increasingly awarded by value bands and geographic location. The focus of Government Construction Strategy has been to level the playing field enabling SMEs to compete. Getting Full Value from SME suppliers requires going further. Examples of proactive SME supplier development are starting to happen; Canary Wharf being a good example. Prime contractors are being encouraged to publish opportunities on Contracts Finder.

7. Feedback I have had from the industry over the past year Late payments are a very big issue The SME procurement agenda is really crucial for SME contractors Larger contractors now picking up smaller work which they then sub-contract. PAS 91 (standard construction PQQ) is still not ubiquitous and needs to be pushed further Some SMEs are concerned that the required technology investment in Building Information Modelling (computerised drawings) is a barrier for SMEs “Death by accreditation” Local authorities are the most important area. Some local authorities are still creating very large frameworks. Note that Central Government does not have direct influence over local government procurements 7

8. Supplier Feedback Service – “Mystery Shopper” UNCLASSIFIED

9. What are the key issues raised? UNCLASSIFIED Cases per category Total cases – 276 (31 Aug 2012) Breakdown of PQQ issues Total cases – 85 216 cases have been resolved. 77% of those with a positive outcome

10. Procurements below EU threshold (£100,000) and above £10,000 are now published on Contracts Finder 10 UNCLASSIFIED Additional data feeds: - Bit Delta Solutions - Due North - Bravo Solutions From Jan 2011 to Nov 2011; of 4259 contracts published, 1478 were awarded to SMEs.

11. Next steps 3 key success factors for the SME programme overall:  Ensuring each department delivers – with a particular focus on the largest spenders  Prototyping the breakdown of larger direct procurements into smaller contracts which enables getting full value from SME suppliers so that we have some successful examples on which to build.  ICT is the most promising area.  Working with Primes to design and deliver programmes to increase their SME % UNCLASSIFIED

12. Reaching out through social media UNCLASSIFIED