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Following Carillion’s collapse, government procurement shift is gathering momentum

Whilst the high drama of Brexit politics rage around us, we need government to continue taking the message to all corners of the UK that it wants a strong economy underpinned by a diverse supplier marketplace. Elizabeth Vega reports from Newcastle on how SMEs are starting to take notice.

In the heart of Newcastle, in a packed meeting room at the City Library, we’re witnessing a decisive government policy shift in procurement.  Less than 10 minutes’ drive away from where Carillion’s Managed Legal Services Division used to be based in Gosforth, Government is sending a clear and strong message that it wants to do more and better business with SMEs.  Following the construction giant’s collapse, this message is resonating strongly and SMEs are listening.

“We’re looking to diversify our supplier base because the collapse of Carillion showed us that we simply can’t have all our eggs in the same few baskets.  That’s why we’re here in the North East today,” explains Stephen Tokley from the Crown Commercial Service. “We want to make sure that small and medium sized companies have a chance to meet government buyers and know what government contract opportunities are out there.”

This is the first time a cross-government Meet the Buyer event has taken place in the North East.  The event is significant, not just because SMEs are considerably underrepresented on government contracts in the North East region but because senior procurement and commercial officials from major government departments have travelled from across the UK to attend in force.

Over the course of the day, SME champions from Her Majesty’s Revenue and Customs, Department for Education, Department for Transport and Ministry of Defence take to the stage to address around 200 SME business owners.  Each outlines their Department’s efforts to level the playing field for SMEs and support them in fairly competing for Government contracts.

When you consider that over £200billion is spent by government on purchasing goods and services every year, it’s clear there are serious opportunities being opened up for SMEs.   In the first quarter of 2018 alone, some 5,000 SMEs were awarded government contracts.  Government is making genuine and substantial, if admittedly for many not large or fast enough, progress towards doing more business with SMEs.

This commitment has been strengthened by a number of recent government policy announcements that further level the playing field for SMEs.  For example, policy changes which prevent large companies being awarded government contracts if they cannot demonstrate fair payment practices towards SME sub-contractors.  Another new measure is improving the on-line Contracts Finder service and extending the influence of the Social Value Act, to facilitate more SMEs competing for national as well as regional contracts.

That momentum looks to continue with nominated Ministers acting as SME champions in every government department.  This proposal originated earlier this year as a recommendation from Cabinet Office’s SME Panel and was further highlighted by techUK’s recent Procuring the Smarter State report.  Ministerial engagement and accountability at department level is vital to driving the necessary cultural change across government procurement practices and buying behaviours.

As a long serving member of the SME Panel, I recognise how critical it is for these changes to have political drive and we seem to be getting that. We've seen in the past how important that is, for example the reforms driven through by Francis Maude during the Coalition years.

Back at Newcastle City Library, it’s clear that the small businesses in attendance are increasingly scrutinising and interested in government contract opportunities.  Many of the SMEs are keen to ask questions of the Government SME champions on stage.  Some of the issues raised in lively and candid Q&A sessions include the complexity of the tendering processes, engrained biases against SMEs, unrealistic company turnover requirements and onerous, disproportionate commercial terms requested by government buyers.

Chair of the event, Emma Jones, the Small Business Crown Representative, acknowledges that while significant progress had been made in delivering procurement reforms, there is still work to do to eliminate artificial barriers and old, engrained buying practices.

 

“There is plenty to be positive about but we still have a lot of work to do to reach a cultural tipping point where more SMEs can access and seize these opportunities,” she said. “We still have some anomalies to tackle where procurement is not currently fair to SMEs and we also have a big job to win hearts and minds.”

As the domino effect of Carillion’s collapse continues to be felt with ongoing customer, debtor and supplier insolvencies, there is a greater appreciation and renewed urgency to reach that cultural tipping point.  If Government is serious about meeting its target of spending one in three pounds with SMEs by 2022, then it needs to look at what it is currently doing well, as well as not so well.  These insights will enable government to become more systematic and continue moving the needle in the direction of its declared target.

Sometimes, we lose sight of why we started a journey and its worth remembering that a diverse supplier marketplace provides a number of golden shared opportunities for government, the UK economy and UK business.  This includes creating a more aspirational, innovative and balanced supplier ecosystem, where previously the status quo maintained a very small number of the largest corporations which entirely dominated the marketplace.  With greater supplier diversity, come more partnering options, enabling both government buyers and SMEs to better choose who they do business with.  Right sizing contracts and allowing fair competition enables consortia of capable SMEs to ally together, as well as medium and large (not just the very largest) businesses to act as lead contractor.  These alternative contracting options create other viable, more innovative and cost effective options for government buyers and suppliers alike.  Perhaps the days of large contractors like Carillion abusing their overly dominant commercial position, with both buyers and the SMEs in their supply chains, are finally numbered.

Those ambitions are definitely worth senior government officials making the effort to do a few more 600 mile round trips to attend Meet the Buyer events.  It would also be good to see the newly appointed Department SME Champion Ministers there too!!

Elizabeth Vega is a longstanding member of the Cabinet Office SME Panel.

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