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Five suppliers get 51% of all UK government IT spending, says PAC

Public Accounts Committee (PAC) report questions government progress on growing the volume of public-sector business it gives to SMEs

Just five IT suppliers receive 51% of all central government IT spending, despite Whitehall attempts to spend more money with smaller businesses, according to MPs.

A report published by the Public Accounts Committee (PAC) says that, five years after the government set a target of putting 25% of all public purchasing through small and medium-sized enterprises (SMEs), it is still not clear that smaller suppliers can better compete with larger providers or whether they are actually getting any more government business than before.

The MPs highlighted the success of the Government Digital Service (GDS) G-Cloud initiative, which has seen 51% of its £1bn spend go to SMEs since 2012 – but pointed out that this represents only 5% to 7% of all government IT contracts.

A National Audit Office (NAO) report in March 2016 said that government claims of increased spend with SMEs may not be correct. The NAO said that, due to government changing the way it estimates SME spending four times over the last five years, there is no way of knowing if the figures are right.

“We are not persuaded that initiatives to remove barriers to SMEs have resulted in substantially greater competition for government business, citing evidence of larger providers continuing to dominate,” said the PAC report.

“Government has not yet identified areas of spending where SMEs could bring the most benefit and it remains too difficult for SMEs to know what bidding opportunities are available.”

Read more about government SME spending

Cabinet office review

On IT spending, the report cites Cabinet Office officials as saying government is “only in the early stages of disaggregating the big monolithic IT contracts” that have dominated Whitehall IT for the past 10 years.

Computer Weekly revealed in January 2016 that the Cabinet Office was conducting a review of IT contract strategy after acknowledging that many existing outsourcing deals proved of poor value for taxpayers. The review – dubbed “Ocean liner” – aimed to establish new principles to help manage the move away from the many long-term outsourcing contracts that are due to expire during the current parliament.

The PAC report noted that in August 2015, the government increased the target for SME spending from 25% to 33% by 2020 as a result of a manifesto commitment, but concluded that "it is not clear how the government decided on 33% as a target or how achievable it is".

Whitehall focus on SME benefits

The MPs recommended that Whitehall needs to move from a generic approach of lifting barriers to SMEs doing business with government, to a more focused approach that helps departments identify areas where SMEs can bring the most benefit.

“We are sceptical about just how much progress has been made on increasing spending with SMEs. The advent of G-Cloud has been a success but this needs to have further reach and there must be an attitude change in Whitehall for SMEs to get the chance to contribute more,” said PAC chair Meg Hillier, MP.

“The government's pledge to increase SME spending will have been welcomed by those who stand to benefit but without new and concerted action there is a real risk it will not be honoured. There are many areas of government business where there is an opportunity for UK small business to contribute to better performance. Too often they are still locked out by complex and lengthy procedures.”

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