One in every £3 of government spend will be with SMEs by 2020. This announcement, made at the tail end of the summer, looks like good news on paper, but what will it actually mean for independent professionals? Central government procurement accounted for over £40 billion last year. It was spent on things like purchasing land and machinery, as well as building management and ICT outsourcing. That’s what we mean when we talk about government procurement spend. Last year’s £40 billion is equivalent to over 5% of the Government’s annual spend, but many of the smallest businesses aren’t feeling the benefit of these projects in their pocket.
If all this money is going to small businesses, then what’s the problem?
Any efforts from government to move away from this dependence on larger suppliers is welcome, but it remains to be seen if this new ambition will translate into more contracts for freelance workers. Given that an organisation with 250 employees which turns over tens of millions each year is considered to be an SME, it is difficult to see how this announcement will help freelancers.
A far more useful commitment would see government take real steps towards breaking up contracts, with a sub-target that a quarter of spend within the SME ambition will be with micro businesses, including collaborations of independent professionals.
This is because freelancers often struggle to access the process, and government misses out on the unique flexible expertise that independent professionals offer and the value they deliver for complex projects.
How does the tender process work?
Tenders are currently advertised on GOV.UK via the ‘Digital Marketplace’, where digital services can be sold through platforms including the G-Cloud framework, and through the ‘Contracts Finder’. Onerous compliance requirements unfortunately hinder the chances of freelancers competing with larger businesses – for example, high minimum capital and insurance requirements. Big businesses often hire procurement specialists just to wade through the red tape involved with bidding for contracts.
What this ultimately means is that we do not have a level playing field – the system is set up in such a way that big businesses have an unfair advantage when it comes to winning contracts. This doesn’t make sense, especially given the number of high-profile fiascos involving big projects. Last summer, for example, it emerged that taxpayers are facing a £700 million bill after the Government lost a legal battle with Fujitsu following a failed NHS IT system.
Simplifying the process – what IPSE wants to see
To remedy this, we want government to commit to publishing tender documents in an open source, editable format. This would allow micro businesses to suggest revisions and flag up aspects of the contract which present difficulties.
It is, of course, inevitable that some government contracts will be awarded to larger businesses, but this doesn’t mean that independent professionals have no role to play. A Cabinet Office study has found that the 50 largest suppliers to government are responsible for 35% of government spending, and there must be a role to play for our smallest businesses further down the supply chain.
A greater onus needs to be placed on these large ‘tier 1’ contractors to demonstrate how they will open up opportunities for subcontracting to the widest possible group. Tier 1 contractors should be expected to publish details of who they contract with in order to promote accountability.
It is also imperative that government finally sorts out the problems surrounding security clearance to make it easier for independent professionals to contract for government work. IPSE’s Security Clearance Forum, working with the Cabinet Office, has achieved real progress in this area, with the publication in 2014 of the Security Clearance Code of Practice. More work needs to be done, though, to tighten up the ‘justifiable exception’ clause within the Code to ensure that independent professionals are not still penalised.
When it comes to simplifying bidding requirements in order to facilitate greater competition, a big hurdle is that the current framework means that government isn’t properly aware of all the issues hindering micro businesses. Those bidding for contracts are deliberately kept at arm’s length, so that there is no opportunity to address issues or improve processes, contract by contract.
Clearly, there is a broader need for policy makers to be kept better informed about the needs of the self-employed and the issues they face with procurement. To this end, IPSE believes that a forum should be established to ensure regular dialogue between small and micro businesses and government. This forum would review the way in which ‘personal service companies’ are engaged by the public sector, with a specific remit to review the success of the Contingent Labour One framework.
We want to see a world where the size of your businesses doesn’t hold you back from winning government contracts. Ambitious targets for spending are a good first step and we should praise the Government where praise is due, but we need further efforts to embolden freelancers to bid for and win government tenders. Independent professionals play a pivotal role in delivering growth for businesses of all sizes, and it doesn’t make sense that government should miss out on these benefits.