Public Services > Central Government

Making sense of BIS, DECC, and the SMEs

Published 28 June 2014

Mark Thompson argues encouraging SMEs to play a key role in Whitehall requires time and support, while new entrants must show they can be part of a mixed economy of large and small suppliers - and government must understand the value each model brings to the whole


There's been some interesting coverage during the past few days about apparent teething troubles being experienced by the Department for Business, Innovation and Skills (BIS) and the Department of Energy & Climate Change (DECC), as they transition to new contracts that make greater use of SMEs.

The debate appears to have been initiated by remarks from Vince Cable about intermittent service, which picked up in an FT article last Friday, in which a senior public servant commented that "Getting more SMEs in was an idealistic Tory policy in 2011 to shake up Whitehall. But in effect they are not necessarily the best fit for this sort of task."

As one of those centrally involved in developing this 'idealistic' policy, I am worried that early teething troubles might be seized upon to imply that such a policy is either dated or misguided: it is neither.

To consider why, let's use the analogy of drug addiction. Over the past 25 years, government has become addicted to multi-year, bespoke/integrated contracts that have come to infuse its very bloodstream - to the extent that such contracts now prop up many of its front line business operations.

Strategy, architecture, processes, governance, roles, skills, commercials, incentives - all have progressively been realigned around a central logic of large-supplier dependency, a logic that now colours the very business of government. Unfortunately, as in the case of any other addiction, such dependence is unsustainable, both from a funding point of view, and because of the gradual degradation/weakening of the health and bargaining power of the addict.

Therefore although the government could soldier on for a while longer (and let's face it, it would be less immediately disruptive and painful to stagger on and not confront the addiction), actually the sooner it gets on with the inevitable the better.

Just as addicts fear the cold turkey that accompanies withdrawal, government can absolutely expect some disruption, and that this transition will be difficult and painful (remember, it needs to happen across all of the above dimensions and more). Having all but ignored the UK SME marketplace for 25 years, we can't expect levels of 'hot standby' maturity from this market, suddenly capable of sustaining instantaneous switchover.

As the minister responsible for encouraging UK industry to compete with the foreign-owned conglomerates that continue to dominate the government's IT supplier community, one might have hoped that Vince Cable might have contained his impatience, and instead shown more leadership in making and encouraging our home-grown tech market to maturity.

As a volume consumer of IT services, government has a unique role to play in helping this happen. Had it done so years ago, instead of creating a 'false marketplace' of restricted favoured supply, we would not now be in this position in the first place.

Finally, we should remember that such accusations of cost wastage as may be levelled at government and SMEs for attempting to start curing this addiction are dwarfed by wastage within some single contracts with large suppliers.

This long list of gargantuan disasters is of course in danger of being joined by Universal Credit, and the litany of disasters may well continue until departments realise that there is a market place other than just their traditional big company suppliers. Certainly in some larger departments, things remain very much business as usual.

Of course, service integration and management (SIAM) models are imperfect - not least because they remove margin incentives for suppliers without necessarily offering volume in return, leading to a relatively unattractive set of contractual opportunities - although the Office of the Chief Technology Officer (OCTO) is trying to improve in this by encouraging sharing of volume consumption across government, a move which might create volume in time. It is unsurprising that it is possible to find things to criticise: we can expect these, and other, shortcomings of these new models to come to light as the models are trialled and refined.

All this said, SMEs absolutely need to step up to the levels of professionalism that are required on the front-line of public services: being 'agile' is no excuse for lack of rigour, cultural insensitivity, or unwillingness to engage positively with legacy institutional structures.

New suppliers need to demonstrate, not demand, that they should increasingly form a part of a 'patchwork' mixed economy of large and small suppliers. And government needs to understand the value that each model brings to the whole. My personal belief is that smaller organisations are generally better at innovating because their people have less to lose by disrupting the status quo - and that larger organisations are generally better placed to handle volume and complexity - though I accept that many will howl with frustration at such a broad characterisation. Government must form its own, evidence-based, view on this question, and adapt its use of the market accordingly.

So back to DECC and BIS, and other similarly pathfinding government bodies: in starting to confront their own addiction, they should expect close attention from all quarters, including many that would like to see these early attempts fail. Some of these people are likely to be incumbents keen to keep existing shambles under wraps; it is surely instructive that amongst those incumbents who provided input to the FT article highlighting these issues were senior civil servants, whose interests have become frequently convergent with those of their suppliers, as I have previously argued.

Like all recovering addicts confronting the reality of their dependency for the first time, those in government who have been brave enough to challenge this sort of entrenched power deserve our support, not dismissal.

Mark Thompson is group strategy director of Methods. He is also a senior lecturer in information systems at Cambridge Judge Business School and recently chaired the National Digital Conference which discussed the progress towards digital transformation in the UK.

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