Government to award 25% of IT contracts to SMEs

The coalition government has set a policy objective of placing 25% of government IT external expenditure with SME suppliers.

Achieving the scale of savings demanded by government requires moving from the status quo and deploying innovative ideas, products and services. While government appreciates that small and medium-sized enterprises, (SMEs), are best placed to provide that innovation, the barriers to using them are huge.

Blockers include: perceived risk of SMEs, complexity of UK interpretations of EU procurement rules, self interest from gatekeepers to preserve lucrative status quos, and an underlying belief that big is safe.

Aside from the government's self-imposed objective, there are a number of other key drivers that should prompt more support for SMEs:

•Looming job losses in the public sector may not be soaked up by large companies.
•SMEs are a vital part of the UK economy and employ 51% of those working in the private sector. They are also the key to innovative step-change savings and efficiencies.
•SMEs are disadvantaged in bidding for and securing government work by the structure of public sector procurement and the UK interpretations of EU procurement regulations. In the current IT supply chain to government, 70% of the revenue goes to just over a dozen large organisations - those gatekeepers often have the most to lose from innovation.
•There is an urgent need to create more jobs in the private sector.
•An effective mechanism for government to give contracts to SMEs (and become "anchor clients") would make step-change savings, create the new jobs, and provide customer references to help those SMEs to export, and help reduce the deficits for the Exchequer.

The coalition's policy objective of placing at least 25% of external government spending to SMEs is feasible in the IT marketplace and does not necessarily require changes to EU procurement legislation. It can be done if the public sector takes a creative approach, using the legislative requirements as a constraint rather than a driver for procurement.

David Chan, Computer Weekly