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Software group calls for government to increase SME spending

Recommendations include scrapping day rates and setting up 'clear and rational' framework system

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The Small Software Association (SSA), an industry body representing SME software firms, has launched a campaign to encourage the government to increase its spending with SMEs.

SMEs gain just 10.5 percent of direct government spending according to the latest publicly available figures for 2012/13, rising to a total of 19.9 percent if indirect spending through sub-contracting arrangements with larger suppliers is included.

The SSA said that many of its members "still don't see the point of bidding for government business - it's time consuming and costly, and they often feel that the odds are stacked against them."

"We plan to start a dialogue to help the government get the best suppliers, and to increase the business development options of our members."

The government aims to channel 25 percent of Whitehall spending to SMEs by 2015, rising to 'at least' 50 percent for spending on 'new' government IT.

The SSA supports this goal, adding that SMEs are often experts in their field, creative, innovative, flexible and supportive of UK graduates and the wider economy.

The organisation has 95 members including Softwire, 3D Industries, Diginius, Hireserve and Visual Insight.

To kick-start its campaign, the SSA has suggested three areas of focus for improvement to help government meet its aims.

Removing obstacles

The group said that the government needs to start by removing obstacles that put SMEs off from bidding. It said it would help if the government set up "a clear and rational framework system that minimises the amount of time spent on bidding for work".

It suggested that the government should remove unnecessary requirements in contracts, such as pointlessly high levels of insurance, as they are too onerous for SMEs. It also called for "more trust and openness" in relationships between the public sector and its suppliers.

Levelling the playing field

In order to help 'level the playing field' between SMEs and larger, often incumbent, suppliers, the SSA said that day rates should not be used as a way of evaluating value for money for contracts.

It proposed that instead quotes should be based on the total lifetime cost of projects, as day rates are "easily gamed by large businesses and SMEs cannot afford to do this."

The group added: "Where SMEs can provide innovative solutions that drastically cut the number of days required, day rate is an extremely poor measure of value."

Promote SMEs within government

Finally the SSA said that there should be better promotion of the benefits of using SMEs between government departments and wider public sector bodies.

For example government could share case studies of successful work done by SMEs and promote the benefits of using SMEs internally.

Research by the Asset Based Finance Association (ABFA) released last month suggested that prompt payment is also an issue for SMEs seeking to undertake government work.

The research found that SMEs who take on subcontracted work for councils wait an average of 71 days for payment.

It is government policy is to pay undisputed invoices within five days, and all contracts say sub-contractors must be paid within 30 days. However, as it stands these rules only apply to central government.

The Cabinet Office not yet responded to the SSA campaign suggestions.


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