DfT pledges to spend one-third of its procurement budget on SMEs by 2022

The Department for Transport (DfT) has set out an action plan to increase its spend with small and medium-sized enterprises (SMEs) to 33% by 2022, and to support small and innovative companies through grants.  

The department will steadily increase its spend with SMEs over the next few years, aiming to hit 29% this financial year, rising to 31% in 2019/20, 32% in 2020/21 and reaching its 33% target in 2021/22.

This is slightly behind the government’s overall target of increasing spend with SMEs to 33% by 2020.

The DfT has already awarded £700,000 as part of a series of transport technology research innovation grants (T-TRIGs) to several projects, 14 of which came from SMEs.  

These projects include developing software to improve airspace use and reduce flight times, a communication app for people who use sign language, and a smart navigation system for “autonomous vessels”.

The action plan also highlighted the DfT’s £40m-£80m Specialist Technical Advice for Rail Framework, in which 15 of the 42 suppliers on the framework are SMEs that have won direct contracts with the department. The larger suppliers on the framework are expected to deliver 40% of their work through SMEs, the plan added. 

According to the action plan, the procurement landscape in the DfT Group, which includes HS2, Highways England and Network Rail, is “complex, with limited potential for direct SME award”.   

It added: “It is imperative that the DfT Group continues to evaluate its supply chains to identify indirect opportunities within them.”

As one of the country’s largest infrastructure projects, HS2 will also have “substantial indirect opportunities for SMEs” in addition to it awarding a “large number of smaller-value corporate contracts”, the action plan said.

In monetary terms, 33% of the DfT’s procurement budget means the department will spend about £5bn with SMEs, according to the plan.

However, only one-third of that – £1.7bn – will be direct spend, while the rest is indirect spend. Counting indirect spend with SMEs means that any contract the department holds with large suppliers who then pass on some of their government business to SMEs as subcontractors can be included.

Transport minister Jo Johnson said SMEs play a “key role” in the UK’s economy. “With this new action plan, we are leading by example by making it easier for these businesses to bid for contracts, and we will continue to support them over the coming years,” he said.

Earlier this year, government figures showed that departments overall spent 22.5% with SMEs in the 2016/17 financial year, down from 27% in 2014/15. However, the DfT spent 29.9% of its procurement budget with SMEs in 2016/17, making it one of the highest-spending departments with SMEs.