Rt Hon Francis Maude MP
Cabinet Office
70 Whitehall
London
SW1A 2AS

05 October 2011

Dear Francis,

SME and Social Enterprises and Government procurement
I am writing further to my recent letter to Ed Vaizey, dated 8 September and regarding Brighton's growing digital sector and other small and medium enterprises around the country (my reference: ML.C0092.AW.08.09.11 ), as I understand that this letter was passed to the Cabinet Office for a reply. In responding, I should be grateful if you would take some additional points into account.

As you will know from my letter to Ed, I am keen to see Government action to award all public sector contracts of less than £100,000 to SMEs and to break down larger public sector contracts so that SMEs have a greater chance of winning them.

Firstly, given that my letter to Ed was passed to the Cabinet Office, I'd like to provide some additional background to demonstrate the importance of the SME and social enterprise sector in Brighton and Hove, where the vast majority of businesses are small or micro-level (86% of our businesses employ less than 10 people, with 11% employing between 11 and 49 people).

Following the last DOMS questions, Ed Vaizey came to visit several digital companies as part of Brighton Digital Festival, which has just finished and which was a great success. The key message of the Festival was the importance of linking arts and design on the one hand, and digital technologies on the other.
The Digital Festival was organised by the city's digital and arts communities, and co-ordinated by Lighthouse, a digital culture agency based in Brighton. A particularly good example of the kind of success that we need to foster is ‘Lives at War' - a computer game designed by young people from Longhill and based on their interviews with older people in the city who lived through World War II.
In a similar vein, yesterday I met with a very impressive not-for-profit social enterprise, a self-employment program working with offenders from HMP Lewes and with the University of Brighton. The enterprise is also in talks with Ford Prison. This is a really strong example of a small local not-for-profit enterprise delivering for the public good.

Like the Federation of Small Business (FSB), I am concerned that in Government contracting there does appear to be a belief, in some quarters, that volume and scale always deliver better value - and that better value is always about price. The FSB is concerned that we are currently seeing a programme of increasingly centralised procurement of many goods and services, which in turn is leading towards larger, aggregated contracts with fewer suppliers and for which small businesses are unable to compete. For example, the awarding of the Government print contract, which replaced 140 contracts with a single contract.
By awarding large contracts to a very small number of suppliers, the opportunities for SMEs risk being closed off at a time when the Government is so publicly committed to opening things out.
Overleaf, I have pasted a briefing from the FSB, which points out that the UK is lagging behind the EU average when it comes to SME access to public procurement markets. In fact, the UK is placed 24th out of 27 member states. The figures show that there is a huge difference between the hugely important role played by SMEs in our economy and their share in public procurement in the UK. The FSB also points to research showing that nearly three quarters of small businesses rarely or never bid for Government work.
My concern is that for both SMEs and social enterprises that there should be a level playing field for securing public contracts. Small businesses and organisations will always have less capacity to absorb the costs of bidding for public contracts. Therefore, I should be grateful for details of any work the Government is undertaking to ensure that SMEs and small social enterprises get a fair share of public procurement. What practical support can Government provide for smaller organisations on bidding costs and to help ensure that SMEs and social enterprises are made fully aware of all bidding opportunities?

Acknowledgement of the problem at central Government level is welcome but concrete action is needed if we are deal with the stark figures that the FSB highlight. With this in mind, I should be interested to know whether the Cabinet Office has given any consideration to the viability and practicality of a policy which set a percentage target for all Government procurement to come from SMES or social enterprises (irrespective of the sector)? I appreciate that there may well be barriers to such a move but would be interested in your thoughts on the pros and cons of such a policy.

I should be grateful for your response to the points raised in this letter when you reply to my previous letter of 8 September.

Yours sincerely,

Caroline Lucas, MP, Brighton Pavilion

CC: Mark Prisk MP, Minister for Business and Enterprise