Less than 1% of Universal Credit IT spend goes to SMEs

Less than 1% of the IT spending for the government’s flagship Universal Credit programme has gone to SMEs, according to a Computer Weekly investigation.

The figures demonstrate how far the coalition is from its aim of breaking the "oligopoly" of large suppliers that dominates major Whitehall IT projects.

More than two years after prime minister David Cameron launched the coalition's SME initiative, striving for government to do 25% of its business with small and medium-sized enterprises (SMEs), the Department for Work and Pensions (DWP) and its major IT suppliers have employed virtually no SMEs on the government’s biggest IT project.

The work has been done almost entirely by some of the largest members of the same IT oligopoly that the government claimed it would not only break, but also persuade to employ SMEs as subcontractors on their large government deals.

Using data analysis of over 700,000 payment records the DWP issued since April 2010, as well as Freedom of Information (FoI) requests and company financial reports, Computer Weekly has discovered just how far short of the 25% target the government's flagship IT project has fallen.

Just 0.52% of Universal Credit IT supplier spending went directly to SMEs between January 2011 and May 2013, according to DWP payment records matched against a list of suppliers that a DWP FoI revealed to have worked on the project.

By May this year, DWP had paid £152m primarily to major Universal Credit contractors Accenture, Atos, BT, IBM, Capita, HP and SCC. 

FoI and payment records showed just three more SMEs had been employed indirectly on Universal Credit in the last two years – these are the only companies known to have been granted subcontracts to those major suppliers.

Subcontracted SMEs may not have increased the proportion of SME spending by the Universal Credit programme noticeably, if it at all.

The three SME subcontractors were Notum Associates, a recruitment consultant, Matinee Sound and Vision, which does translation and video subtitles, and Lucidus Consulting, which provides advice on organisational change.

DWP listed 34 suppliers that worked on Universal Credit between January 2011 and May 2013, either directly or under subcontract to one of the major suppliers. DWP payment records show it paid £2.4bn to those suppliers for all work they were involved with, including Universal Credit and any other unrelated DWP contracts they hold.

DWP spent just 0.1% of this £2.4bn directly with SMEs - £2.5m - which went to four small firms of consultants: Emergn, Bramble, Evolve Business Consultancy, and Compass Management Consulting.

Most of the £2.4bn was spent with just one company, HP, which earned £1.3bn, or 53% of the expenditure. BT claimed £400m (17%); Accenture got £277m (12%); while £117m (5%) went to IBM; £89m to Capita (3.8%); £81m to SCC (3.4%); and £73m to Atos (3%). (See also the table below, which shows the breakdown by supplier for Universal Credit).

DWP said in a statement: "SMEs were involved from the outset of Universal Credit. DWP encourages the use of SMEs where it is appropriate."

Accenture, BT and IBM all refused to comment. HP said it had committed to increase the number of SMEs in its own supply chain, but would not answer specific questions or comment on Universal Credit.

Stephen Allott, the SME tsar appointed by the prime minister to promote spending with small businesses, was unavailable for comment.

The Cabinet Office issued a two-year progress report on the SME initiative earlier this month. It claimed its SME initiative had increased direct government spend with SMEs from 6.5% to 10.5% from March 2009 to April 2013. It did not report the trend in subcontracted SME spending through major contractors, though it had a recent figure of 9%.

The report also revealed that a new, higher target of 50% of spending through SMEs has been introduced specifically for new IT contracts.

The share of overall SME spending at the DWP decreased 4% in the last year to 7.1% for all forms of work.

A Cabinet Office spokesman said it would not comment on Universal Credit. He granted that Universal Credit did come under custodianship of the Cabinet Office's Major Projects Authority and Cabinet Office was also directing the SME initiative across government. But he said: "We are leaving it to DWP to respond."

DWP was initially an outspoken supporter of the prime minister's SME initiative.