Budget boost for SMEs is welcome - but ...

In the budget speech today, the Chancellor Alistair Darling said:

“Building on the recommendations of the Glover review, I will increase by 15 per cent the proportion of central government contracts that go to SMEs.

“This could mean new business worth an extra £3bn from central government alone and up to £15bn across the wider public sector.”

Martin Rice, CEO of IT company Erudine and co-founder of the UK Innovation Initiative, welcomes Darling’s statement that more Government contracts will go to SMEs, but he says it won’t necessarily help small innovative companies in winning bids.

Martin Rice said:

“Clearly it is a positive step to increase the amount of Governmentbusiness going to SMEs, but this target will not address the fact thatin reality few small businesses can afford the huge cost of engagingwith the vast machinery of Government procurement.

“Where wemost need innovation, for example in Government IT projects, the supplychain is managed by prime contractors and at present SMEs are held backand squeezed by larger companies in the chain.

“This means the value of innovative ideas and entrepreneurial SMEs isoften crushed, with the smallest companies bearing the brunt of pressureto deliver reduced costs.

“This new target will do nothing tobring innovation into Government from the SME community or improvesupply chain professionalism. Unless major obstacles are removed, itwould appear talk of embracing innovation is simply pre-electionrhetoric.”


It’s also unclear, to me at least, how Darling will award more contracts to companies of aspecific size – by ruling out major bidders?

Budget2010 brings tax breaks for SMEs and computer games industry -ComputerWeekly.com


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Did Darling specify whether these were UK SMEs or Indian ones? Given the scale of this government's taxpayer-subsidised offshoring of public sector IT work (e.g. the recent award of the pension system contract to TCS), and its reliance on ICTs for onshore work, I suspect Martin Rice is right to doubt the government's commitment to the UK IT industry in general and SMEs in particular. And when you factor in the government's cosy relations with a handful of bloated consultancies whose stranglehold over IT projects has cost the taxpayer yet more billions, not to mention the whiff of scandal allegedly surrounding former ministers responsible for commissioning major IT projects, it's hard to see how any SME could find the resources to buy their way onto this particular gravy train.

Martin is right innovation is quite different from a service driven SME that might bid for a contract. Unfortunately the Glover Report was fundamentally flawed in this respect - an opportunity missed but a political boxed given a tick!?

The key to innovation being adopted in government contracts is to become the intelligent buyer. A team of experts in the related field should be able to look at proven innovation that is ready for exploitation. They should approve and be able to articulate the new outcomes and expectations for suppliers and then distribute such knowledge to all government procurement officers.

There are a number of benefits that flow from this.

• Will not breach any silly EU rules!

• The government moves from being the dumb buyer to the intelligent one

• This is a simple but effective way of supporting our home grown innovators who often struggle to gain traction.

• Government lead by example to encourage the private sector to support innovation

• Keeps vendors on their toes as old technologies will no longer be used!

• Creates real economic wealth

Get this right it is a good old fashioned “win win”?