Can Maude deliver billions of pounds of revenue to small businesses?
by WIN Admin — published in Press Releases
The coalition government's programme for government includes an "aspiration" that a quarter of government contracts should be awarded to small and medium sized business.
Now according to the report carried out for the Cabinet Office by Sir Philip Green on waste in government, what he called an "efficiency review", public sector procurement on IT, travel, consultancy and so on amounts to £166bn a year.
So if a quarter of this was channelled to small and medium sized businesses, that would amount to a colossal £41.5bn of turnover for them. Which, to use the ghastly management cliché, would be transformative.
To be clear, the programme for government isn't exactly clear on the definition of "government contracts", so I am not sure whether the aspiration applies to the whole £166bn.
I asked the Cabinet Office how much government business would become available for smaller businesses. This is what an official said:
"We don't have accurate data to show the current value of spend with small companies, but we can say for certain that moving towards 25% of government contracts being awarded to SMEs will open up billions of pounds worth of contracts to these companies.
"And to make sure the government can be held to account, every department will publish accurate data by April which can be used to measure progress."
The Minister for the Cabinet Office, Francis Maude, seems pretty fired up about it all. He complains that there is a "procurement oligopoly, where innovative small businesses and organisations are too often shut out of contract processes early on because of ridiculous rules and unnecessary bureaucracy".
He describes the dominance of big companies in supplying government as not only bad for small businesses but "bad for government as it stifles competition".
So what is he actually proposing to do to break the big company oligopoly?
Well later today he will announce three reforms which may make something of a difference - and which are a response to a large number of the complaints made directly by businesses to the government here.
The changes all relate to the forms which businesses have to fill in, a so-called pre qualification questionnaire or PQQ.
Small businesses hate these because they are time-consuming and onerous to complete. And some of the stipulations in these questionnaires - for certain levels of indemnity insurance, for example - are simply too expensive for the small businesses to take out, unless and until they win the contract. But they are not allowed to bid for the contract unless they've already met these legal and financial conditions (a classic bureaucratic Catch 22, which delivers enormous advantages to big incumbent providers of goods and services).
So for central government procurement worth less than £100,000, PQQs will be abolished altogether - allowing government purchasers much more freedom to determine the most efficient way of buying stuff.
If this, for example, were to end the practice highlighted by Philip Green of civil servants paying £2000 for laptops that can be bought commercially online for £500, all taxpayers should cheer.
The second reform is create a central database of PQQs, so that for so-called commodity goods and services, a supplier would only have to fill in a PQQ once and forever, rather than having to submit a new PQQ for every single government tender.
Finally, there will be moves towards more open bidding procedures in general, giving government purchasers more flexibility to talk to a range of potential suppliers - small and big - about what they can offer, without eliminating all the small suppliers right at the outset because of the financial and legal hurdles imposed by too-rigid PQQs.
It all sounds a bit like common sense - although whether it will lead to the kind of cultural and commercial revolution desired by Francis Maude cannot be taken for granted.
Apart from anything else, it will work only if the civil servants involved in procurement become comfortable taking greater personal responsibility for their purchases. Because the great advantage for bureaucrats of PQQs is they automate the decision-making process to a large extent, by screening out all sorts of small, young, interesting businesses with little track record.
So if the government really wants to deliver contracts to smaller businesses, it is going to have to somehow persuade civil servants to be more comfortable taking risks and exercise personal judgement when awarding contracts. Which won't happen overnight.
One final thought. Mr Maude has already squeezed the profit margins of many of the big companies which supply government by renegotiating their contract terms. Those companies have persuaded themselves that the pain is worth it, because of the potential growth promised by the government in outsourcing and privatisation of public-sector services.
But if much of these new contracts go to smaller companies, then perhaps there isn't a Con-LibDem silver lining after all for the likes of Serco, Capita and the rest.
Source: Robert Preston, BBC News