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By | Kat Hall 9th March 2016 09:27

Audit Office pours cold water on's SME spending target claims

Dubious digits means cash flow through small biz might actually be flat, not increasing

Claims the government beat its target to pump more than 25 per cent of its largesse through SMEs in the last Parliament have today been critiqued by the National Audit Office, which says "it cannot be certain" spending increased at all over that period.

In February 2015, the government reported that it had met its 2010 SME spending target a year early, with 26 per cent of government spending reaching SMEs.

The latest spend figure on SMEs across government is 27 per cent of total procurement spending, with £4.9bn of that going directly to SMEs in 2014-15 and a further £7.3bn spent on SMEs indirectly through supply chains.

However, the National Audit Office said it is not possible to know how much of the reported increase is due to the changes in approach and how much is an actual increase in SME activity.

The government has changed the size of suppliers it surveyed each year for its indirect spend figures, making comparisons impossible. The NAO also questioned the underlying data of the direct spending figures.

"We cannot be certain that the amount government spends with SMEs has increased since it set its original target in 2010," it said. The body recommended the government stop changing its basis for estimating SME spending.

The government has now raised its SME spending target to 33 per cent by 2020. However, the report said reaching that target will be dependent on the Ministry of Defence, which is currently responsible for 44 per cent of central government procurement. Last year 19 per cent of the MoD’s procurement spend reached SMEs.

"The MoD told us it will be challenging to increase its SME spending further by 2020. It has already committed large proportions of its annual spending and is unlikely to be letting many further large contracts during the current parliament," said the report.

Amyas Morse, head of the National Audit Office, said: “If the government is serious about increasing its use of SMEs, it will need to focus on those areas where SMEs can deliver real benefits.”

He added: "As it seeks to increase this further, government will need to think carefully about the full range of risks and opportunities that contracting with SMEs presents, compared to working with larger providers.”

The report noted that previous governments have also sought to increase the number of SMEs it works with.

A Ministry of Defence spokesperson told El Reg: “We welcome these findings and are determined to make it easier for companies to work with Defence. That’s why we’ve set a target of spending 25 per cent of all procurement money with SMEs by 2020.”

In 2005, the government conducted a survey of a sample of public bodies. It used data collected from this sample to estimate that, as a percentage of total contract value, it awarded 22 per cent of its business to SMEs in 2004-05.

Echoing calls by think tank Reform this week for a government-wide G-Cloud model, the report also recommended an integrated digital platform for government procurement. ®

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