CCS accused of pricing G-Cloud SMEs out of framework with £20m insurance cover hike

The Crown Commercial Service (CCS) stands accused of pricing small to medium-sized enterprises (SMEs) out of its flagship cloud computing framework, G-Cloud, by upping the amount of insurance cover participants must have by £20m.

A copy of the framework agreement document – seen by Computer Weekly – for the 14th iteration of the “SME-friendly” G-Cloud agreement states that participating suppliers must take out separate professional indemnity and public liability insurance of at least £10m each, plus a further £5m in employers’ liability insurance.

The framework document, published on 19 February 2024, states that suppliers must have these £25m insurances in place before the agreement goes live, which is expected to be on 29 October 2024. Applications for G-Cloud 14 are open until 7 May 2024.

The previous version of the framework, G-Cloud 13, only required participating suppliers to have up to £5m in employers’ liability insurance in place before it commenced, whereas this time around – in CCS’s own words – there are more “extensive insurance requirements”.

SME suppliers fear these heightened requirements might make participating in G-Cloud 14 cost-prohibitive for them, as the amount of cover required is far higher than they have previously needed.

Computer Weekly has a copy of a document that records all of the clarifying questions CCS has received from prospective suppliers about G-Cloud 14 since the framework documents went live on 19 February 2024, which features numerous queries about the increased insurance requirements.

“Does CCS understand the difficulties and costs associated with professional indemnity insurance to the sum of £10m, and how this might put off or impact smaller providers?” asked one.

Another supplier also aired concerns about how this change will affect the framework’s retention of SME suppliers, given the costs involved.

“The £10m limit is way above anything we have ever seen in any tenders, including a large critical national infrastructure proposal we drafted last year. It would be hugely expensive to increase our current £2.5m limit to £10m just to join the framework,” the supplier wrote.

“This would be a difficult decision, especially as there is no guarantee of any work under the framework. From our experience, £1m [in insurance] is usually sufficient to most public and private sector clients for contracts up to circa £3m in value. Keeping it at £10m will make it very difficult for SMEs to participate in G-Cloud 14.”

Incidentally, data shared with Computer Weekly by public sector-focused analyst firm Tussell shows the average G-Cloud 13 contract was valued at sub-£1m (£951,149). 

This “disproportionate hike” in insurance cover requirements has taken suppliers by surprise, said Chris Farthing, CEO of Brighton-based public sector supplier consultancy Advice Cloud, which coaches SMEs on how to win spots on CCS frameworks.

“We’ve had extensive market engagements [with CCS] over the past 12 months around G-Cloud 14 and this has never been mentioned once by the otherwise excellent CCS G-Cloud team,” he told Computer Weekly.

“Whilst the large companies will easily be able to adsorb this disproportionate hike, many SMEs will be looking at this additional burden and questioning whether government actually does value its SMEs.”

“The biggest loser will be buyers as prices will have to be increased to cover this additional, unnecessary cost”

And it will likely be public sector buyers that end up footing the bill for the additional financial burden this will put on suppliers, Farthing warned. “The biggest loser will be buyers as prices will have to be increased to cover this additional, unnecessary cost, as well as for future planning with inflation. It wouldn’t surprise me at all to see this get a legal challenge.”

Disproportionate insurance cover

G-Cloud supplier sources have also pointed out to Computer Weekly that the insurance thresholds for the hyperscale-focused Cloud Compute 2 framework are nowhere near as high as those CCS has put forward for the SME-focused G-Cloud 14.

The Cloud Compute 2 framework document stipulates that participating suppliers must have at least £1m professional indemnity insurance in place, as well as employers’ liability insurance cover of up to £5m, which amounts to £6m in total – compared with the £25m in cover G-Cloud 14 suppliers need to raise.

This is despite Cloud Compute 2 being set up specifically to handle much larger contracts than G-Cloud was designed or intended to process.

Cloud Compute was set up to dissuade public sector IT buyers from using G-Cloud to push through cloud contracts worth hundreds of millions of pounds, such as the recently announced £450m three-year contract the Home Office signed with Amazon Web Services (AWS).

That contract was one of several, totalling £894m, awarded to AWS on the same day in December 2023 through the G-Cloud framework, which was arranged through the second iteration of Amazon’s One Value Government Agreement (OGVA) preferential pricing scheme.

Nicky Stewart, former head of ICT at the UK Cabinet Office, told Computer Weekly the difference in insurance requirements between the two frameworks could be linked to the high number of multimillion-pound contracts still being transacted through G-Cloud.

The situation also suggests CCS has lost sight of what the purpose of each agreement is, she added. 

“The optics are just awful on this. There are some very high-value contracts being pushed through G-Cloud,” she said. “It appears SMEs are being penalised simply because neither AWS nor its OGVA customers have an appetite to use the more contractually rigorous vehicle that is Cloud Compute 2. If this is the case, it is not only very unfair, but also anti-competitive.”

In a statement to Computer Weekly, a CCS spokesperson justified the change and said the final amount of public liability cover suppliers are expected to have is still under consideration.

“The additional requirements have been added to G-Cloud 14 in line with the Public Sector Contract, with suppliers asked to have or commit to obtaining insurance cover up to a set amount,” the spokesperson said.

“The level of public liability cover for this agreement is in review, but will provide appropriate assurance to public sector customers for an agreement of its magnitude.”