Government redefine SME policy

A Government has three clear option is they end up being unable to deliver a policy; they can come clean, hope nobody notices, or change their definition of the policy.

It would seem that the latter has been applied to the policy which dealt with private sector procurement supporting SMEs, small to medium enterprises.

Government documents are arguing that SMEs are key to future economic growth, and the public procurement from SMEs should be increasing with them. For this, they have set a target of 25%.

However, the redefinition of what has effectively been downgraded to an aspiration from a policy means that instead of the SMEs directly receiving the original 25% of the value of the central government procurement, all business being done with SMEs, including those in the supply chains, will now be included in this percentage.

This is going to make a huge difference as supply chains are renowned for being complex, and can include a vast number of different organisations. Should you analyse most supply chains it will not be long before you find first one SME, and then many more, involved in the process.

Within some supply chains, business with SMEs can actually exceed the total cost of the end product for the procuring organisation. As the government has now included indirect business with SMEs, they have guaranteed success, and if they had also used this definition, every previous government would have also succeeded.

This change in the policy matters to both the SMEs and the economy of the UK. Those that are in the supply chain often find that their margins are squeezed by the government’ main contractors, thus inhibiting their growth, and affecting their ability to both invest and create jobs. If you also try to measure the value of the business with SMEs in the supply chain, it is very difficult and also open to manipulation.

People are wondering if it would be totally unreasonable to suggest that some departments in the government will now be tempted to spend with SMEs more through measurement than due to any change in practice.