The government’s recent progress report Two Years On has as its stated aim: to encourage greater involvement by SMEs in contracts. However, given recent concerns over the high-profile Universal Credit government IT project, how should such progress be judged? Dr Brian Gannon explores the issues.

When it came to power, the Coalition committed to directing 25% of government procurement to smaller companies by 2015. At roughly the mid-way point in this government’s tenure, how has it fared on this?

Judging by most headline writers, it would seem not very well. In a stinging rebuke of the handling of preparation for Department of work and pensions (DWP) landmark policy change, Universal Credit, the National Audit Office (NAO) concluded that the DWP had failed to secure value for money in the early stages of the project. “Overly ambitious in both the timetable and scope of the programme,” concluded the spending watchdog. Yet again, the competence of Government when it comes to IT projects is in doubt.

However, it’s not all doom and gloom in government technology. In the past the public sector has struggled with working out how to engage with technology, and has almost by default spent millions on big-ticket, top down development approaches. In contrast, a new approach is now emerging, in line with the Coalition’s early promise – one which relies on greater use of smaller, more agile providers.

For example, the Cabinet Office recently issued a review of progress so far, in its recent report Two Years On citing a whole series of statistics demonstrating success to date. At the mid-way point to 2015, Whitehall has increased its direct spend with SMEs from 6.5% in 2009/10 to 10.5% in 2012/13. Figures from the sector’s largest suppliers have identified a further £4bn (9.4%) of indirect spend being channelled through their supply chain to SMEs. Although there is still more work to be done, things are moving in the right direction. Let’s just remind ourselves why this is the right direction of travel.

A modern, more modest approach

Put simply, the use of large computer and software companies for big ticket public sector projects has not proved cost-efficient, so why not look elsewhere? Smaller companies have proven to be flexible, agile – and particularly in IT – innovative. Can they now be considered a very viable option in these austere times?

This approach also carries far less risk for the public sector procurer, particularly when it is aligned with agile development techniques, customer-focused design, and use of open source technology where it’s available. The good news is, from the Cabinet Office down, agility and openness are a key part of what the Government is looking for. The public sector needs to create a set of sustainable, in-house technology skills; and technologists need to be part of public sector teams, which are empowered and able enough to create the innovations and support their deployment.

How far are we away from such a scenario? We should remember that we’re still at a very early stage of digital transformation. But progress is rapid: and this includes the very visible restructuring of Government procurement services, streamlining the way technology and digital services are procured. G-Cloud is the first output of this, but there are more developments to come.

You also have to look at the work of the Cabinet Office’s Government Digital Services (GDS) unit to see the very promising route of travel. Its first task was to build Gov.uk, a common online interface into all Government services. This has been a great success. It’s slick, well designed and easy to use – having been designed with the citizen in mind. It has won awards, and has provided a mandate from which GDS has been able to embark on the broader digital agenda.

Is it goodbye to the oligopoly?

Does that mean all the public sector’s IT problems are solved? Far from it. Returning to the Universal Credit situation; it’s been reported that as of April 2013, DWP had spent £303m on contracts for designing and developing IT systems to be supplied by just four main providers – all large systems integrators. So it seems that the oligopoly lives on! To make matters worse, most commentators, including the NAO, expect this entire sum to be written off.

At the other end of government, however, it’s all much more positive despite it being early days. Real progress is being made with arrival of G-Cloud and the Government Digital Services Framework, and the pace of digital take-up across wider central government is increasing, with a range of ‘exemplar’ digital programmes supported by GDS.

It’s still a reasonable question, however: will the government give one pound out of every four of its procurement budget to any firm outside the oligopoly? It may, admittedly, take time, but nonetheless, there is a definite sense that years of ‘business as usual’ are finally coming to an end. Smaller firms genuinely stand a better chance of winning significant government business, especially around ICT – if they are able to deliver lighter, nimbler solutions and real taxpayer value for money.

From our experience, as a tech SMB working in this space, the changes have made a substantial difference and will, we believe, continue to do so. For us, as a modest-sized IT company, it used to be prohibitively expensive to bid for government business because the sales cycles were so long. It could take as long as four to six months to bid for a simple electronic document and records management project. Now, this can be as a short as four to six weeks – an order of magnitude faster. This means not only that it’s much more affordable to tender for business, but also that it’s much easier to plan our resources and ensure that the right team is available for each job.

Are there risks for government in working with smaller firms like ours? Perhaps. But they are manageable and contained – and the resultant delays and budget over runs are unlikely to become as headline-grabbing or serious as we have become somewhat inured to over the last decade. The reality is that we’ve only begun to glimpse what’s coming, but change for the better in public sector procurement is most definitely underway.

The author is Director of Corporate Development at digital services specialist Kainos