9. In addition to the main aim of saving money, the procurement reforms have wider objectives, which include co-ordinating the management of major suppliers across government, and encouraging smaller businesses (SMEs) to bid for government work.[16]
10. We expressed concerns about the government's record of co-ordinating the procurement of goods and services from the same supplier across departments, and sought reassurance that steps are being taken to get a better handle on this from the centre.[17] The Cabinet Office referred to the recent introduction of the Crown Commercial Representatives, which are senior individuals responsible for negotiating and managing the relationship with government's strategic suppliers. Each department which requires services from that company must go through that individual, who is equipped with all the relevant information, and will help government use its bargaining power in these commercial negotiations. We questioned why it had taken so long to introduce what appears to be a relatively obvious step.[18]
11. This central oversight is important if the government is to use its buying power to ensure the best deal for the taxpayer overall. Little or no attention has been paid to past performance when making procurement decisions; for example, we were surprised to be told in another hearing that A4e's poor performance record with government could not be taken into account in future procurement exercises for legal reasons.[19]
12. Since our hearing, the Cabinet Office submitted written evidence to us that it now keeps a central record of strategic suppliers' performance across government, allowing action to be taken where contracts are already in place. The Cabinet Office also told us that departments will now set and publish minimum standards for supplier reliability based on past performance. It will require bidders to obtain certificates of past performance from both public and private sector clients. However, this does not mean that government will be able to compare all bidders based on its own judgement of a supplier's past performance; it only allows for ruling out those companies which do not meet a minimum standard. At present this system also only applies to some sectors (ICT, Facilities Management, and Business Process Outsourcing), and where the contract value is of £20 million or more.[20]
13. Some of government's strategic ICT suppliers, such as Microsoft and Accenture, are reportedly paying low levels of corporation tax in the UK. The Cabinet Office told us that the Crown Commercial Representatives did have conversations with suppliers around "good UK Citizenship", which included tax, as well as other factors such as the employment the company creates in the UK. The Cabinet Office said that it would like to encourage a culture where these matters were on the agenda in every conversation, to send a message that if suppliers wanted to do business with government, "you have to be a good citizen". However, it told us that it was not able to stop procurements because of these factors, as this would be unlawful.[21]
14. The Cabinet Office told us in separate written evidence that it is taking steps to ensure that suppliers understand their responsibilities in terms of tax, proposing a process at selection stage whereby firms would declare their history of tax compliance. Ministers are currently considering the proposals. However, the Cabinet Office told us that it would be unlawful to ask, and consider, at selection stage how much tax is paid in the UK. Assessing potential suppliers based on how much UK tax they pay may also discriminate against suppliers from other EC member states and as such would breach EC Treaty principles.[22]
15. Another aim of the reforms is to boost participation of SMEs in government business, on which there has been some progress. For example, in the ICT sector the government introduced the 'G-Cloud' in 2012, a system whereby public sector organisations can purchase a range of IT services from an online catalogue. This system is a positive step in reducing the burden on SMEs, although take up is relatively low so far.[23]
16. However, the way that government designs its large procurement exercises conflicts with achieving the aspiration of 25% of government's business going to SMEs.[24] We recognise that the suitability for SMEs will vary between sectors but it is our experience that the way large procurements, such as the Work Programme or the Probation Service, are managed and designed favours large suppliers and does not create an environment where smaller businesses can thrive.[25] Furthermore, there are questions over the government's ability to measure SME participation against its own aspiration. The Cabinet Office claims that 10% of all central government procurement expenditure goes to SMEs; however it is not possible to confirm this data due to gaps and inconsistencies in how the information is gathered by departments.[26]
17. We challenged the Cabinet Office to set out its plans for improving the data on SMEs and to demonstrate further how it plans to achieve the 25% aspiration. The Cabinet Office has subsequently told us in written evidence that it and the Government Procurement Service are assisting departments to verify whether their suppliers are SMEs or not, and taking steps to ensure that suppliers are paid promptly.[27]
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20 Ev 22
22 Ev 23
26 Qq 98-100; C&AG's Report, Improving government procurement, para 2.41
27 Ev 21