Procurement · 29 August 2017

Tech startups win public sector contracts worth over £1bn as overall targets fall short

Overall, the number of small businesses winning public contracts is in decline
Overall, the number of small businesses winning public sector contracts is in decline

Almost half of government spending on public sector digital services is now with small technology businesses, according to official statistics, despite overall SME procurement opportunities seemingly in decline.

Providing an update of its digital spending budget, the government announced that public contracts won by small tech companies offering services to the public sector have reached over £1bn in value since 2012.

The Crown Commercial Service (CCS), the procurement arm of the Cabinet Office, attributed the increased share of spending with small tech firms to opportunities made available through the Digital Marketplace, a joint development between the Government Digital Service (GDS) and the CCS.

It also claimed the Digital Marketplace has helped deliver £725m in savings for taxpayers in the last year, with small tech companies offering innovation and value for vital services.

In a statement, Caroline Noakes, minister for government resilience and efficiency, highlighted the “important role” small firms play in spending taxpayers money wisely.

“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.

“Smart procurement can make a real difference to people’s lives.”

However, while the share directed to digital businesses has increased to £1.39 in every £3, a recent report from the Federation of Small Businesses (FSB) exposed the failure of government to fulfil its wider procurement targets for small firms.

The current target, set in August 2015, is to spend one pound in every three with small businesses by 2020. While tech firms now take almost half of digital spending, the FSB’s findings showed just 23 per cent of all small business owners had worked for the public sector – down four per cent since 2014.

With the number of small business owners serving the public sector in decline, FSB chairman Mike Cherry urged policy makers to respond by improving the access to contracts for all small firms.

“Opening up the public service market is a win-win for everyone involved in the supply chain because when small businesses are used effectively, they are able to create jobs and growth,” he said in a statement.

The FSB urged government rethink its strategy and address the imbalance that saw two-thirds of public spending worth £200bn go to large companies in the last year.

Championing the availability of public sector contracts for small firms via the Digital Marketplace, Warren Smith, the marketplace’s director, said: “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.

“We are also breaking down the traditionally large contracts into smaller ones, which favour a more diverse range of suppliers and help Government to buy services more efficiently.”

Meanwhile, Niall Quinn, director of technology for CCS, said: “We’re making it as easy as possible for small business to supply to government. They in turn will help us to deliver efficient public services that meet the needs of citizens.”

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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