Central government fails to meet SME tech spending targets

The UK government is not meeting its own goals to spend more on technology from small and medium-sized enterprises (SMEs), a new report has found.

Only 8% of taxpayers’ money has gone to smaller tech businesses over the past three years, despite the government’s aim to increase that figure to 33% by 2022, according to the Buying into the future study by govtech venture firm Public.

Another key finding of the report – has analysed spending at the Cabinet Office, the Ministry of Defence and the Department for Work and Pensions – is the sharp rise in uncontested contracts, or single-bid tenders, up 476% over the three-year period.

The report has also found that 92% of SMEs prefer to work with the private sector rather than the government, and points out that many small technology businesses find it “almost impossible” to win public sector contracts.

Recommendations set out in the study include a review by the Government Digital Service (GDS) of its own progress around technology procurement and the definition of strategic priorities going forward.

The disconnect between the public sector and tech SMEs could mean opportunities for the UK government from the country’s buoyant tech startup scene, the report said.

“If given the opportunity, risk-taking and innovative tech startups can deliver higher-quality products and services to government buyers at cost-efficient prices,” it said.

The study said a new package of incentives for smaller tech firms should be introduced to encourage them to bid for government tenders.    

Johnny Hugill, lead author of the report at Public, said that regardless of Brexit, London will not be overtaken as a key European startup hub for years and the UK is well-placed to lead public sector transformation.

“But right now the gauge is heading in the wrong direction,” he said. “Startups aren’t being given the chance to improve services in the same way that they have changed every other part of the economy.

“The government is distracted by Brexit and the opposition hasn’t yet understood how to deliver public services in the modern world. It’s not too late, but reforms will be needed to make a difference.”

The report said an interdisciplinary team of buyers, entrepreneurs and policymakers​ should also be set up within the Cabinet Office to champion new models of buying technology.

It also called for the establishment of a National School for Technology and Government to provide innovation training to civil servants.

Despite efforts to boost SME representation in the government’s IT supplier base, figures related to one of the most significant areas of tech spending – cloud computing – suggest the opposite.

An analysis of G-Cloud and Digital Outcomes and Specialists framework sales figures suggests that the proportion of cloud hosting deals going to big suppliers continues to rise.

Giving evidence to the Science and Technology Commmittee earlier this year, Simon Hansford, co-founder and CEO of UKCloud, said: “There has been a significant reduction in spend with SMEs over the last couple of years.

“It’s drifting back into those old ways, which I would suggest were not the good days, where there was a small number of suppliers.”