Government’s spending claims with SMEs are brought into question

A report from the National Audit Office questions whether smaller firms are really getting a larger slice of the Whitehall pie.

Claims the government beat its target to pump more than 25 per cent of its largesse through SMEs in the last Parliament have been critiqued by the NAO, which says “it cannot be certain” spending increased at all over that period.

In a new report on government spending with SMEs, it expresses caution over the government’s claims and points to a need for measures to support the Cabinet Office’s campaign to raise the proportion of business going to the sector from 27 per cent in 2014-15 to 33 per cent by 2020.

However, the report said reaching that target will be dependent on the Ministry of Defence, which is currently responsible for 44 per cent of central government procurement. Last year 19 per cent of the MoD’s procurement spend reached SMEs.

In February 2015, the government reported that it had met its 2010 SME spending target a year early, with 26 per cent of government spending reaching SMEs.

The latest spend figure on SMEs across government is 27 per cent of total procurement spending, with £4.9bn of that going directly to SMEs in 2014-15 and a further £7.3bn spent on SMEs indirectly through supply chains.

However, the NAO said it is not possible to know how much of the reported increase is due to the changes in approach and how much is an actual increase in SME activity.

The NAO said the Government needs to 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 must also balance its aspirations for using SMEs with other potentially conflicting priorities, such as pressures on departments to make savings.”

Amyas Morse, the head of the NAO, said: “If the Government is serious about increasing its use of SMEs, it will need to focus on those areas where they can deliver real benefits.

“The Government’s direct procurement spending with small and medium-sized enterprises was £4.9 billion in 2014-15. As it seeks to increase this further, it will need to think carefully about the full range of risks and opportunities that contracting with SMEs presents, compared to working with larger providers.”