Francis Maude is the Minister for the Cabinet Office and Paymaster General.
Every year, central government spends a staggering £44 billion on goods and services. At the time of the last General Election, the Civil Service didn’t even know who its biggest suppliers were – nor how much it was spending with them. The process for applying for a contract was so complex that it almost seemed as if smaller businesses were being deliberately excluded.
So we set an aspiration that, by the end of this Parliament, a quarter of our spend by value would go directly and indirectly (through the supply chain) to SMEs, the lifeblood of our economy. And, as part of our long-term economic plan, we set about overhauling the whole way Whitehall runs its procurement. I’m pleased to announce today that, last year, 26 per cent of central government spend went to SMEs. That’s a huge, and probably unprecedented, £11.4 billion.
Five years ago, too, many small businesses would not even bother trying to win a contract from the public sector. Who could blame them? Why was government requiring all businesses to show three years of audited accounts? Why were departments insisting on bidders for small contracts submitting long-complex forms? Why did firms need to show they had insurance cover for a bid before it was even considered? Why were civil servants told that they weren’t allowed to exercise judgement in procurement decisions?
Reforming procurement is a key part of our civil service reform programme. My mission was to wrestle control away from the ‘procureaucrats’ and concentrate on getting the best possible outcomes. Taxpayers rightly expect us to spend their money very carefully. But that doesn’t just mean looking for the cheapest deals. Value for money is about a blend of price and quality.
What we need is a truly vibrant and diverse market of suppliers. A broader ecosystem of suppliers is good for our economy – smaller, innovative companies are based right across the country. We also want the voluntary sector to win more contracts, as well as public service mutuals. Already there are over a hundred such mutuals combining a public service ethos with entrepreneurial innovation.
Within government, we are working to address the long-standing shortage of procurement and commercial skills. Officials across Whitehall are now working more closely with the Chief Commercial Officer in the Cabinet Office, and his boss, the first-ever Chief Executive of the Civil Service. Our Crown Commercial Service will buy common goods and services on behalf of Whitehall and some of the wider public sector, so that we can leverage our purchasing power to get the best possible deals.
It’s designed to be a commercially savvy organisation at the heart of government – with offices in Liverpool which I’m visiting today. Its experts know the supply market and can make intelligent decisions about suppliers. We’ve started from a low base, but government commercial capability and confidence is on the rise. Last year alone, commercial reforms helped save taxpayers £5.4 billion compared a 2009-10 spending baseline.
Transparency is key, so in 2011 we launched the Contracts Finder site, at gov.uk/contracts-finder. The site, which we have just refreshed, now covers every single opportunity over £10,000 in central government as well as those over £25,000 in the wider public sector. It now offers more details including a search by location function. It’s free to use, and works on smart phones and tablets. To date around 240,000 contracts have been placed with SMEs through Contracts Finder. Put quite simply: SMEs can’t win contracts they don’t know about.
We have done a huge amount already in central government. But the wider public sector – including local authorities and police forces – is responsible for an even larger chunk of spending. Today, new legislation comes into force to ensure that 30 day payment terms will be mandated right down the supply chain. Cashflow is crucial for SMEs and paying promptly must not just be a boost to primary contractors.
Our new changes will require all public bodies to publish an annual late payment report to sharpen accountability. We will ensure that complex forms, such as the Pre Qualification Questionnaires, are abolished for all low value contracts, while high value contracts have a simplified, standard questionnaire.
I’m proud of our reforms. A lot of them are due to the tenacity of many of my brilliant officials and the hard work of the Crown Representative for SMEs – Stephen Allott. In the past, no one even bothered to count how many SMEs were doing business with us but now they’re winning one pound in every four. And in the digital space we have done even more. Around half of the companies on our G-cloud and digital marketplace – a sort of app store for the public sector – are startups and SMEs.
But I’m under no illusion that we are finished. It’s precisely because we want honest feedback on what’s still going wrong that we introduced a mystery shopper scheme. Suppliers can raise any concerns they like about poor processes – anonymously, if they prefer. We will name and shame poor performers.
We probably won’t ever get to a world where every single potential supplier is happy. There are always going to be disappointed bidders. But there’s still a tremendous amount to do and we need to stick to our plan.