How government is opening up public sector contracts to small businesses
Posted: Thu 12th Nov 2015
Cabinet Office minister Matthew Hancock was the opening speaker at Enterprise Nation's Government Exchange event on Thursday where he outlined how the government is attempting to open up more public sector contracts to small businesses. Here is a transcript of his speech.
It's a pleasure to be back in front of a small business audience.
Before I got into politics I worked for my family's own small business, a software firm near Chester, employing just under 40 people. That's why I'm so passionate about making Britain the best place to start and grow a business.
Now I help run a rather larger business - the UK Civil Service - an organisation employing just over 400,000 people.
In 2 weeks time we'll be setting out our plans for the future of that organisation. Departments will have to deliver ambitious savings without foregoing any ambition as to what government should deliver.
And that requires a new operating system. I've said before that instead of seeking to direct, prescribe and control, the modern British state should see its goal as unleashing human ingenuity.
And of course, as government delivers for citizens, it spends a huge amount buying goods and services on the taxpayers' behalf: from submarines to software fixes, paperclips to prisons.
Part of my job is to ensure we buy in a way which allows the taxpayer to get the best possible value for money by tapping the extraordinary ingenuity of our smaller firms.
In our manifesto we said a third of the government procurement budget would go towards small and medium-sized enterprises.
I want to tell you why we've set it. It's because we know that being small forces you to think big, to innovate, to have an edge. And because vigorous competition between a wide range of suppliers is the best way to secure value for money.
So today I want to talk about how we're going to deliver on that target. I want to focus on 3 areas. Enhancing our commercial capability, tackling the barriers to entry, and third: the new platform approach to government procurement.
Building commercial capability
First, capability. Right across Whitehall we need civil servants who have the skills, the knowhow and the confidence to deal with smaller firms.
Five years ago we set up the Government Commercial Function, so we can be confident that our people are making good commercial decisions, making the most of suppliers and delivering value for money.
Now the focus is on embedding this behaviour across Whitehall. This includes bringing senior hires with deep commercial expertise and experience into the function, and setting up a new commercial fast stream programme, to recruit civil servants with top-flight commercial skills. The first cohort began training this year.
We're also using the Crown Commercial Service to drive forward a diverse marketplace, supporting departments from the centre and challenging where necessary.
Crucially, CCS are also encouraging departments to push boundaries, including innovative new approaches like the sharing economy. The new deal for vehicle hire includes a car share solution for example.
So this is my first point, building our commercial capability. New skills and a new mindset are both essential if we're going to grow out of old contracting habits.
Next we need to use that enhanced capability to tackle barriers to entry wherever we find them.
And this is my second point. My principle is clear: smaller firms should not be penalised for being small. We shouldn't be putting extra hoops and hurdles in your way.
That's why we've developed the lean procurement process, requiring departments to engage early, with a wide range of suppliers, and to break contracts down into lots where possible.
It's why contracting authorities can no longer include a pre-qualification stage in any procurement where the value falls below the EU threshold. And I don't want to see unreasonable barriers, like the need for 3 years of accounts, to slip through the pre-qualification questionnaire to the tender itself.
For those procurements above the EU threshold, contracting authorities now have to use a standardised approach, cutting the red tape involved in bidding.
We're also determined to tackle late payment.
30-day payment terms are now mandated throughout the supply chain. And to hold feet to the fire, public bodies will have to publish an annual late payment report.
And we know that suppliers themselves are often best placed to identify where we're going wrong.
It's why we set up Mystery Shopper, a CCS service allowing suppliers to flag up poor practice throughout the public sector. The Mystery Shopper team have investigated nearly 1000 cases since 2011, 80 per cent of which are resolved positively.
I'll give you an example of their work. In August a small firm got in touch with Mystery Shopper, to say they'd invoiced a London council in mid-June and hadn't yet been paid. Mystery Shopper contacted the procurement team at the council, asking why payment was late and sending a link to the Public Contract Regulations 2015, stressing that they require payment within 30 days.
The result? The council's procurement manager immediately put the payment through, reminded the finance team of the importance of prompt payment, and asked for the suppliers' details so his team could sort out any interest due.
So if you find unfair barriers to supplying government, I want to know about it, and I'll send my Mystery Shoppers in to sort it out.
But paring back bureaucracy is a never-ending battle, and I know as well as you that there's still a lot more to do.
This brings me onto my last point, which is about how we use technology to really tackle those barriers at scale.
For the last 5 years we've been building digital platforms to make it easier to be a small supplier to government.
When you sell on Amazon, you the seller don't have to do the heavy lifting of hosting customer data, or providing a payments service. The platform does it for you.
Platforms are all about maximising the amount of work that doesn't have to be done by individuals. It means you can concentrate on what really matters, running and growing your business.
Our Contracts Finder service is an obvious example. The site brings together current and future public sector contracts above Â£10,000 for central government and above Â£25,000 for the wider public sector, as well as information on what contracts are awarded and to what kind of business. It's free to use and easily accessible from smartphones and tablets.
Earlier this year we launched a new and improved version. It's gained over 14,200 registered suppliers and over 3000 buyers, offering Â£2.1 billion worth of open tender opportunities. Nearly 3 quarters of these have been identified as suitable for small businesses and over a quarter were for less than Â£100,000.
As you'd expect, platform-based procurement is most advanced in the digital space. Working together, CCS and the Government Digital Service have built the world-beating Digital Marketplace: one easy point of access that essentially allows Whitehall to go online shopping for digital goods and services.
Like all our digital services, it's been designed around the needs of the people who use it. We've made it easier for suppliers to apply, contracts are written in plain English, and we regularly iterate to make it better.
This approach is working for small businesses.
On the G-cloud framework - which deals with commoditised digital products - 50% of contracts by value are going to smaller suppliers. On the new improved Digital Services framework 77% of suppliers are small firms. And the business they've won has jumped from 36% to 60% in the last 6 months.
Now I want to extend the lessons of the Digital Marketplace across government procurement, introducing a Crown Marketplace to find innovative suppliers and the savings they unlock, in digital and beyond.
We will tilt power away from established players and towards the upstarts and challengers. Because that is the way of the future.
So improving our capability, tackling the barriers, building platforms: these are all mission critical to delivering for small businesses and so delivering for the taxpayer.
But what I've outlined isn't just a roadmap, it's happening on the ground right now.
In the last Parliament we set a target to award 25% of central government procurement spend to small and medium enterprises.
This was actually achieved in 2013 to 2014 when we hit 26% of overall spend. That's 10.3% of direct spend and 15.7% of indirect spend.
We're now well on our way to hitting our new target of a third.
I know we'll get there, but I want to end by saying that the most important thing of all can't be done by government. Instead, it's down to you.
Because ultimately, the best way to win our business is to be the best at what you do. So keep innovating, keep discovering, keep searching for that edge and we'll back you every step of the way