Government targets

1.10  In 2010, the government announced an aspiration for 25% of central government's contracts to be awarded to SMEs. In February 2015, it announced that 26% of central government spending reached SMEs in 2013-14, achieving the aspiration a year early.

1.11  In August 2015, the government announced a revised target for 33% of government spending to be with SMEs by 2020. Based on current spending, this would represent a further £2.7 billion.

1.12  Both targets:

•  are measured by the value of contracts and not by volume or number of contracts;

•  include departments' supply chains ('indirect' spending); and

•  include centrally managed procurement, central government departments, their agencies and their arm's-length bodies.

1.13  Government measures its target using two types of data on spending, which are reported by the CCS on behalf of central government:

•  direct: the public sector awards a contract directly to an SME; and

•  indirect: the public sector contracts with a larger provider and SMEs are appointed as subcontractors in the supply chain.

1.14  The CCS first reported direct spending with SMEs in 2010-11 as 6.8% (£3.2 billion). It first reported indirect spending a year later in 2011-12, at 6.5% of spending. Government reported year-on-year increases in these estimates. In 2013-14, it reported that it had met the 25% target for the first time.

1.15  The latest figures, for 2014-15, show 10.9% direct spending (£4.9 billion) and 16.2% indirect spending (£7.3 billion), making a total of 27.1%. Most of the increase is in indirect spending, which now accounts for 60% of reported SME spending. Across government, departments reported significant variation in performance, ranging from 8.6% (HM Treasury) to 41.6% (Ministry of Justice) (Figure 2).