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Government Digital Marketplace spend with SMEs exceeds £1bn but declines in 2017

Spending with SMEs through Cabinet Office Digital Marketplace framework goes over £1bn, but figures suggest SMEs getting smaller proportion of sales

Public sector spending with small to medium-sized enterprises (SMEs) providing digital and cloud services through the Cabinet Office’s Digital Marketplace has exceeded £1bn, according to the latest figures.

However, a comparison with historic spending suggests that the proportion of sales going to SMEs is falling.

The Digital Marketplace is a web-based purchasing catalogue used for buying a range of services to support digital projects across government and local authorities.

Launched in 2012 as G-Cloud, the marketplace has been heavily promoted by the Government Digital Service (GDS) as the first port of call for sourcing cloud services and digital expertise. It was designed to increase access to SME suppliers and help reduce the dominance of big systems integrators.

The marketplace now includes a number of frameworks targeting particular services, including G-Cloud, Digital Outcomes and Specialists (formerly known as Digital Services Framework), and Crown Hosting. G-Cloud remains overwhelmingly the most popular, accounting for 92% of all spend through the system.

The latest update on Digital Marketplace spending from the Cabinet Office – the first since January this year – showed that cumulative spend since 2012 has reached £2.6bn, with £1.2bn of that going to SMEs, representing 46% of the total.

However, the previous set of figures showed that up to the end of 2016, SMEs had accounted for 56% of all spending on G-Cloud, and 54% of Digital Services sales, suggesting that the proportion of sales to SMEs during 2017 has fallen.

This decline may partly be down to the first iteration of the Digital Outcomes and Specialists framework attracting just 32% of its £72m sales through SMEs.

The Cabinet Office said the Digital Marketplace helped to deliver £725m in savings to taxpayers during the 2016/17 financial year.  

“Small businesses have an important role to play in helping government to spend taxpayers’ money wisely,” said Caroline Nokes, minister for government resilience and efficiency.

“That is why we continue to find ways of improving how the public sector, schools and hospitals, for example, puts money back into services for those they look after.”

Read more about the Digital Marketplace

Warren Smith, director of the Digital Marketplace, added: “We are continually focused on breaking down the barriers to entry for SMEs to do business with government, for example, by simplifying the application process.”

Despite the success of the Digital Marketplace in helping SMEs to win public sector business, it remains a small proportion of total government spend on digital and technology. According to the National Audit Office, 94% of such spending still goes to large IT suppliers.

When GDS was created by then Cabinet Office minister Francis Maude in 2011, it set a target of 25% of IT spending through SMEs – later revised up to 50% in 2013. While G-Cloud and subsequently the Digital Marketplace have come close to that target, total procurement remains well behind.

The Cabinet Office claimed in 2015 that it had achieved the 25% target for IT spending – but of that figure, only 10% was from contracting directly with SMEs. The remaining 15% was for contracts with large suppliers where a proportion of the deal was subcontracted to SMEs. The Cabinet Office figures relied on unaudited estimates provided by those large suppliers.

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