News Analysis

The obstacles facing SME suppliers in government IT procurement

Kathleen Hall

The government's aim to widen public sector IT procurement to include more small businesses has been widely welcomed - but many of those smaller suppliers still report that the reality is very different from the intent.

Computer Weekly has talked to a range of SME IT firms - often on condition of anonymity - about the obstacles they face winning government contracts against the major suppliers that dominate the sector. Common problems cited include the conflicting demands of the drive to centralise procurement following Topshop chief Philip Green's efficiency review last year; the entrenched interests of systems integrators [SIs]; unspecified project aims; and filling out forms the size of phone directories.

While it's still relatively early days since Cabinet Office minister Francis Maude announced plans to raise levels of SME procurement to 25% of all contracts, some small businesses remain sceptical about the drive for change in government. Part of the problem, they say, is creating the required cultural change in Whitehall.

Bad forms

Ella Romanos, director of digital production company Remode Studios, was recently down to the last two companies bidding for a public sector project, but lost out due to undefined specifications during the application process.

"We were told that we were the best company, but that the other business beat us on price. Had this been defined at the beginning then we would have created something more suitable to their budget, but instead we wasted a lot of time. We were perfectly happy to lose to another company, but the reasons did not seem fair," she said.

Part of the problem is wading through the application process, which involves filling out the same generic document regardless of the project in question. "We hired a tender writing company for this, which I think is one of the reasons we got as far as we did. Clearly there are certain buzz words they are looking for," said Romanos.

Following her experience, Romanos saidthe company is unlikely to bid for public sector work again: "We just don't have the time and resources."

Clouded plans

The G-Cloud project has been hailed as a key to breaking up the SI oligopoly and bringing in multiple, smaller suppliers. But one SME cloud provider, who asked not to be named, said there has been immense frustration among small suppliers that government isn't including them in the process.

"The rumours are that the government is only talking to existing SIs and is enamoured with Google and Amazon, which is very frustrating because there are cloud offerings we can deliver at a much cheaper price," said the provider.

"They need to have a list of pre-certified providers in the app store available for the government to use on a pay-per-use basis. But this is such a paradigm shift for them the idea at the moment seems to be falling flat," they said.

"There does seem to be a bizarre unwillingness to buy British, even though there is a thriving home-grown cloud industry which could create jobs in Britain."

Since the General Election there hasn't been much open engagement with industry, says the firm's executive. "I know in the short term the focus is on datacentre consolidation and for that they do need to be talking to existing suppliers. But they could also be experimenting with the cloud at almost no cost. Maybe it is just that the Cabinet Office doesn't have the bandwidth at the moment and maybe next year it will be talking more openly. But for scalable cloud infrastructure solutions it does appear to be talking to the usual suspects."

Green issues

While there's no denying that the government must save money, one SME told Computer Weekly that the Cabinet Office's adherence to the Philip Green review, which recommended a centralisation of government procurement, is freezing small businesses out the market.

The SME, who also asked not to be named, said it has consequently lost work to much larger companies. The Green review could be countering the government's good intentions, they say.

"Taking the view that everything can be bought as a commodity means the government will go to a large company rather than a smaller business that can provide innovative services and help with real change. The government needs to allow for a pluralistic market," said the SME.

"The naive view of Philip Green is that the government is running a simple supply chain, but to assume that model readily applies to central government departments as complex as the NHS and Ministry of Justice is false."

The government risks losing out on cost savings that some SMEs can provide, they ssaid: "Of course the government needs to save money, but it is the context of the situation which the solution is being applied to that is key."

The old guard

Trevor Pegley, director of IT consultancy Visionhall, said the dominance of SIs over government contracts creates the impression of a closed-shop: "If there was more transparency around how procurement decisions were made it would avoid any suggestion of profiteering."

Pegley said his company has more success winning contracts in other countries due to the arduous and time-consuming process involved in UK government procurement.

"We are not after any preferential treatment or positive discrimination. If there was a level playing field where contracts were awarded based on value for money and proven track record we would be happy. Under those circumstances we and other SMEs would win a lot more government work," he said.

"In our limited experience we have seen how the current procurement process results in bespoke projects costing five to 10 times that of a proven off-the-shelf alternative. If the government is serious about cutting costs without affecting front-line staff then they should take another look at IT procurement."

Free lunches

Rachel Andrews, owner of IT company Andrews Computer Services, decided to stop supplying to local government because too much of the process was about knowing the right people.

"It was more than just a matter of form-filling, you also needed to woo the necessary people by taking them out for meals - at least that was the situation when we were selling to local government. If you didn't play the game then others would, and you wouldn't move up the preferred bidders list," she said.

"The problem is people who work in local government procurement don't have the same pressures as the private sector when it comes to buying, so are less concerned about how the money is spent."

Andrews agrees with Remode's Romanos that filing out bulky forms acts as a big deterrent for time and cash-strapped small businesses. "Some of the questions, such as what equal opportunity policies you have in place, don't always seem relevant and make the process much more difficult for SMEs, who have very few staff anyway," she said.

"I would like to see some common sense about the bidding process. If you are bidding for a £100m software project to re-write an entire system then a lot of due diligence is required. But if someone is just supplying the basics such as laptops, ink cartridges and back-up tapes, do we really need to go through such a huge process? Surely all that is needed is that you are in the premises you say you are, have a good credit rating, and your VAT numbers check out."

Read more stories on the challenges of implementing government SME IT procurement policy:

Bristol website launch highlights limitations of government SME policy >>

Computacenter gags Bristol City Council over anti-open source 'bias' >>

Buying from small businesses is crucial to government cost cutting, says Cabinet Office SME advisor >>

Opinion: It is time for new IT suppliers for government >>

Government cancels SME contracts and hands IT services deals to Capita >>

Demise of IT supplier highlights challenges facing government plan to support SMEs >>

Will MPs' accusations of 'rip-off IT' be enough to change government-supplier relationships? >>

Government trials e-marketplace for offering more contracts to SMEs >>

Are small IT suppliers ready to serve public sector? >>

Cabinet Office turns to agile SMEs to reform Whitehall IT development >>


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