1.21 In working towards the new target of 33%, the CCS is negotiating individual targets with departments. Departments have committed to helping the government meet its target by including relevant objectives in their single departmental plans.9
1.22 If it is to meet the 2020 target, the government will rely heavily on the MoD increasing its level of SME spending. The rest of central government has already collectively achieved the 2020 target, reporting SME spending of 33% in 2014-15 (see Figure 2 on page 19). In contrast, only 19.4% of the MoD's 2014-15 expenditure was with SMEs. Based on CCS estimates of 2020 spending, if MoD increases its SME spending to 25%, the rest of government collectively will need to increase their SME spending to at least 37% of their total procurement spending. The MoD told us it is limited in its ability to increase its spending with SMEs due to the complexity of defence procurement (Figure 4).
Figure 4 Significant proportions of MoD's procurement spending up to 2020 is already committed, with limited opportunities to renegotiate contracts. Furthermore, the nature of its work means it can be difficult to identify opportunities that are appropriate for SMEs. For example: • Most of MoD's procurement relates to high-value defence equipment, such as submarines or warships, which are usually delivered by larger prime suppliers. The supplier is then responsible for appointing a supply chain. SMEs will not have the capacity or experience to compete for these contracts so - for much of MoD's spending - can only access opportunities further down the supply chain. • MoD requires all its providers to meet security requirements, which may deter some SMEs from pursuing MoD opportunities. • MoD tends to work with a small number of existing suppliers. In the past it has used single-source approaches for more than half of its procurement, although this is reducing. This makes it harder for new entrants to access the market. • In its procurement, MoD is aware that it uses language that may be unfamiliar to those not already working with it and aware of its approach. Similarly, the size of the MoD (1,600 commercial staff) can mean SMEs struggle to find out who to contact for information. Source: Interviews with senior Ministry of Defence commercial staff |
________________________________________________________________
9 These were published on 19 February 2016 and are available at: www.gov.uk/government/collections/single- departmental-plans-for-2015-to-2020