1 Each year, the government spends around £45 billion on goods and services supplied by non-public sector organisations. Increasing the proportion of this spending that reaches small and medium-sized enterprises (SMEs) was a key priority within government's procurement policy over the past five years. In 2010, the government announced an aspiration for 25% of the spending to go to SMEs by 2015. In August 2015, the government announced that it would extend this target to 33% by 2020. The target covers both direct contracts with SMEs and spending that reaches SMEs indirectly (where the government's contract is with a larger provider that subcontracts SMEs as part of its supply chain).
2 The Department for Business, Innovation & Skills (BIS) estimates that there are currently 5.4 million SMEs operating in the UK. Most are private sector businesses, but the definition includes many voluntary, community and social enterprise (VCSE) organisations. Government uses the European Commission's definition of an SME, which defines it as an entity engaged in economic activity that:
• employs fewer than 250 people; and
• has annual turnover less than or equal to 50 million euros (£39 million); or
• has a balance sheet total of less than or equal to 43 million euros (£33 million).
3 The Cabinet Office's Crown Commercial Service (CCS) is responsible for the government's commercial policies. This includes leading on government's SME procurement policy. By increasing government's use of SMEs, the CCS aims to increase competition and innovation for public sector contracts. It intends to do this by:
• monitoring government's spending with SMEs, against its target; and
• identifying and removing barriers that SMEs face when bidding for government contracts.
4 Individual contract awards are decided by the government department awarding the contract. By identifying and removing the barriers faced by SMEs across government, the CCS aims to make it easier for SMEs to do business with government. As this becomes easier, the CCS expects more SMEs to bid for government contracts, increasing competition for work and leading to better value for the public sector.