Procurement Briefing 2013

Procurement Briefing 2013

CONFERENCE REPORT

Contents

Introduction ________________________________________________________________ page 3 Opening Plenary: Technology Procurement and SMEs ___________________________ page 4 Rt. Hon Francis Maude MP, Minister for the Cabinet Office _______________________ page 4 Mike Bracken, Executive Director, Government Digital Service (GDS) _______________ page 9 Sir Charlie Mayfield, Chairman, John Lewis Partnership __________________________ page 11 Panel provocation and debate _______________________________________________

page 12

Liam Maxwell, Chief Technology Officer, HM Government _______________________

page 12

Frank Lambe, Chairman of Payment Card Technologies, Lenlyn Group ____________

page 12

Lesley Sewell, Chief Information Officer, Post Office ____________________________

page 13

Steven Beard, Chief Executive, Agilisys ________________________________________

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Sally Collier, Deputy Chief Procurement Officer, HM Government _________________ page 14 Keynote Address: Stephen Kelly, Chief Operating Officer, HM Government _________ page 15 Summary of report back from discussion groups ________________________________ page 17 Closing Keynote: Chloe Smith MP, Minister for Political and Constitutional Reform __ page 20

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Francis Maude MP

Mike Bracken

Stephen Kelly

Introduction “We are entering a new world for government technology procurement – one that is quicker, cheaper, more competitive, transparent and flexible – with more opportunities for innovative SMEs to enter the marketplace.”

Rt Hon Francis Maude MP, Minister for the Cabinet Office The Procurement Briefing 2013 'Transforming Technology Procurement through SMEs' is an invitation only event that brought together a network of 100 senior officials and decision makers from procurement and technology backgrounds in central and local Government and Business.

Hosted in association with the Cabinet Office and GDS, this year's conference explored the new world of Government technology procurement and the opportunities it presents to engage with new suppliers, in particular SMEs. With the onset of 'Digital by Default', the whole way the Government procures and delivers technology is being radically overhauled. There is now a commitment to buy services that can be delivered in an agile environment and to design procurements that enable innovative solutions from the market, such as innovative transactions with citizens and new platforms that can deliver digital by default. This involves a fundamental break from large, long term contracts that restrict departments' ability to change quickly or from tapping into innovation.

The days of long, cost-inefficient, restrictive contracts are over. It is a timely moment for the Government to exploit the huge growth potential in the IT sector by encouraging the best suppliers to offer innovative solutions that provide real value for money for the taxpayer.

The day addressed a number of key objectives: • To better understand what digital by default technology services mean for procurers and suppliers alike, and the impact this will have on diversifying the supplier base to include more SMEs. • To look at the different ways procurers can open up opportunities to SMEs • To use the day to tackle challenges faced by civil servants in the procurement process, looking at practical steps to minimise risk and remove other barriers to entry.

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Opening Plenary: Technology Procurement and SMEs The opening session set out the opportunities and challenges presented within technology procurement and what can be done to go further and faster in terms of opportunities to procure from SMEs.

Rt. Hon Francis Maude MP, Minister for the Cabinet Office The Minister began by commenting that he had delivered multiple speeches to civil servants on the importance of public service reform over the last few years and had received feedback from many officials that his core messages have been “remarkably consistent” if not repetitive! And yet in striving to deliver real change across government consistent and renewed pressure is essential.

Certainly the words “Government IT project” have not inspired a high degree of confidence in the past – particularly in light of past governments pumping as much as £20 billion a year of tax payers' cash into such schemes. One might have expected this kind of investment to deliver faster, efficient and more user-friendly services. However in reality unit costs of IT procurement continued to rise while services remained patchy and civil servants continually complained about the standard of government IT systems and services.

What went wrong?

The Minister contended that for too long there has been a misguided conviction in Whitehall that big was beautiful. As a result, too many long-term exclusive contracts were consistently awarded to a limited number of very large suppliers. This produced IT projects that were too big, too lengthy, too expensive, too risky and complex – and plagued by overruns, delays and failures.

Meanwhile more innovative and cost-effective solutions from smaller suppliers were never getting anywhere near Whitehall, and the length of contracts meant that many technological deliverables were already obsolete upon eventual completion. This was bad for the taxpayer, service users, businesses and economic growth.

SMEs are a crucial engine for growth – 99.9% of the UK's businesses are SMEs, they are responsible for almost half of private sector output and create two thirds of all new jobs.

IT companies in particular are essential for growing our economy – recent research shows British internet companies are growing at a rate more than 50 times faster than the rest of the country, with online start-ups booming.

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This expansion is being driven mainly by small and medium-sized firms - most high-growth businesses have fewer than 100 employees, while average revenues are £8.9million. Yet in the past these very firms would have been ignored by government. When we came into office only 6.5% of government business by value was going to SMEs.

Pro-business government The Minister stressed that the UK is competing in a global race - to succeed there is a need to support entrepreneurial businesses to invest and grow. This government is determined to make the UK one of the best places in Europe to start, finance and grow a business – to this end we have cut corporation tax, boosted tax relief to start ups and cut red tape.

The Government has launched radical reforms to increase opportunities for SME suppliers and to give better access to SMEs creativity and innovation. The aspiration is for a quarter of government business to go – directly or indirectly – to SMEs by the end of this Parliament. This is not about giving SMEs a free pass to win business. These are tough economic times and the urgent need to reduce the deficit means public resources are much scarcer. It is a responsibility to the taxpayer, now more than ever, to spend their cash better.

Relentlessly pursuing efficiency has allowed this government to make unprecedented savings of £3.75 billion in our first 10 months in office. In 2011-2012 we saved a further £5.5billion and the recently announced savings of £10 billion last year. Better procurement has and will continue to be a huge part of this drive.

The whole way government procures and delivers technology is being radically overhauled to ensure we get the best value for money. The Government is moving away from legacy IT and our reliance on a few large system integrators – for example, the days when a major service integrator could charge £30,000 to change a logo on a webpage. Instead the public sector is creating a more competitive and open marketplace for buying technology services and solutions – and this will open up opportunities to all kinds of businesses and business models.

Level playing field What has this meant in practice? Since coming into office this Government has identified and knocked down a number of barriers that were previously preventing SMEs from winning work.

• There is much greater visibility of opportunities through the Contracts Finder website.

There are now published procurement pipelines in 18 sectors, including IT, covering nearly £79 billion of public sector spend so that suppliers get a much better picture of the contracting landscape over the next five years.

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• The Qualification questionnaire – so often used as unfair short-listing tool that invariably put the bigger companies through – has been abolished for low value contracts and simplified elsewhere.

• We're breaking down the length and size of contracts. The Minister has set out that for any IT programmes not being displaced by digital solutions - no project, framework or contract can be over £100 million.

• There are Open Standards to allow government to interoperate, so that we don't have to build the same thing 30 or 40 times. These standards will improve competition for government contracts, allowing us to open up to a larger number of suppliers and encourage innovation in government IT. The focus isn't just on direct spend to SMEs - our 25% aspiration also includes spend in the supply chain. There is much effort across all sectors to open up the supply chain and ensure the right level of participation from SMEs. For IT this has the potential to exceed 25%.

Where government has long term existing contracts, such as Capgemini's ASPIRE contract with HMRC, there is a commitment to remove the exclusivity deals that stop SMEs from competing for additional work, opening up the supply chain. Prompt payment of subcontractors is a key focus.

All new contracts require the prime contractor to pay its subcontractors within 30 days, so that no supplier is disadvantaged by being in government's supply chain.

The Government is building closer relationships with suppliers to ensure it can tap into the best innovation on the market. Small companies report that one of the hardest things about winning government contracts is breaking into government in the first place – it can feel like Whitehall is full of faceless procurers who are unaware of what smaller firms can offer. This is changing. Last summer saw the introduction of the Solutions Exchange website which enabled businesses to pitch their innovative goods and services directly to government buyers. Taking the results of that pilot, a new tool is being developed to be rolled out later this year.

Finally, there is an SME panel where SMEs engage directly with the Minister and senior officials in Cabinet Office over procurement reforms from prompt payment to pre-procurement engagement.

Benefits of reform However, there is a long way to go but there are signs these reforms are working. Overall government has increased its direct spend with SMEs from 6.5% in 2009-10 to 10% in 2011-12, and in 2011-12 figures from government's top suppliers shows that SMEs had benefited from a further 6.6% of spend in the supply chain.

One of the most successful innovations is the delivery of the G-Cloud framework, which embraces open procedures. This is a step change in the way government buys IT. It's quicker, cheaper, more competitive and more accessible to SMEs. As a result, of the 700 successful suppliers on the framework – 83% are SMEs. 6

The Government is seeking to make the procurement process faster, less bureaucratic and more open. The Home office has saved 83% on a hosting contract by contracting with Skyscape.

Skyscape is an SME providing hosting and other IT support services – and were one of the first accredited suppliers on G-Cloud. They started as a small start-up with 6 people - and now employ over 30 as a direct result of the business they get through G-Cloud.

There are other positive examples - SME software provider Kahootz now sees around 80% of its public sector business coming through G-Cloud – and the company is now looking to take on new staff and export to overseas markets.

To ensure the government is maximising the benefits of this approach - central government departments are now mandated to consider Cloud options first in any IT procurement, and the wider public sector is also strongly recommended to adopt the same approach.

Digital by default With the onset of this government's 'digital by default' agenda, the opportunities for innovative companies wanting to work with government have never been greater. This is a transformative programme. At the moment half of Government transactional services don't offer a digital option at all – and apart from a handful of services, if there is a digital option few people use it because it's not a sufficiently fast or convenient option.

This is inefficient. For some government services, the average cost of a digital transaction is almost 20 times lower than the cost of a telephone transaction, about thirty times lower than the cost of postal transaction and about 50 times lower than a face-to-face transaction. In addition it is not user-friendly - it's our responsibility to go to people where they are – not wait for them to come to us and over 80% of the population are online.

This government is determined to build fast, clear, simple digital services that are so good that people who are online will choose to use them. Two years ago, there were an incredible 2,000 government websites. They have now been streamlined those into a single, central domain, GOV.UK, which is built entirely around the user's needs. Not only is the result simpler, clearer and faster, it will also cost taxpayers up to £50 million less per year than the services it replaces.

This is just the beginning. The Government is determined to make everyday transactions digital.

This process is being kicked off by the 7 main transactional departments, DfT, HMRC, Defra, DWP, BIS, Home Office and MoJ, who handle around 90% of all central government transactions.

It will soon be easier for people to do things like pay their car tax, book driving tests, complete tax returns or apply for their state pension online.

It is estimated that by shifting the transactional services offered by central government departments from offline to digital channels there will be £1.2 billion of potential annual savings from now until 2015 and £1.7 to 1.8 billion a year beyond 2015.

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Open government Open data is an untapped resource. It puts information in the public domain and with that comes huge potential. The benefits are enormous, the disadvantages are few - the risks can be managed.

This is relevant because the possibilities of freely available government data are endless. Open data is a catalyst for innovation in the private sector, supporting the creation of new markets, businesses and jobs. From the release of NHS data to promote life sciences research to the publication of data from all 5,000 weather stations in the UK – the Government is creating an information marketplace by releasing vast amounts of open data into the public domain for entrepreneurs and businesses to work with.

In support of this movement, the government is publishing for consultation a draft National Action Plan which will set the direction for the UK on open data and transparency. The plan will define how the UK uses transparency and open data to help businesses and charities grow, to increase citizen participation, and improve the accountability of public services. Businesses, civil society organisations and members of the public now have the opportunity to give the Government their views and help shape the final plan in advance of October's international Open Government Partnership Conference, of which the UK is currently co-chair.

Conclusion Government is changing: it us opening up, grasping new technology, and bringing its skills and services into the 21st century. This will mean greater efficiency for the taxpayer. It will mean services designed around the user's needs not the administrator's. By opening up opportunities to SMEs it is hoped to stimulate growth and jobs.

This kind of change won't happen overnight – it requires a whole new way of working across Whitehall. It will be vital to embed digital skills into the organisational DNA as set out in the Civil Service Reform plan. But the Government will get there – and is determined to buy, borrow and build the capability it needs. It also needs businesses to continue to engage with government – to explain where barriers remain and where reforms aren't delivering on the ground. There is now an opportunity to report overly bureaucratic procurement to the Mystery Shopper service so that the Cabinet Office can investigate. Furthermore, if you have an innovative idea that will save money and improve public services this government is listening – and is open for business.

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Mike Bracken, Executive Director, Government Digital Service (GDS) The Government Digital Service was established two and half years ago after Martha Lane Fox worked with Francis Maude to produce the digital by default strategy. Initial deliverables of this strategy included establishing a digital centre for government (GDS established in November 2011), fix government online publishing (GOV.UK launched in October 2012) and fix citizen interactions and transactions with government (started in January 2013).

One hundred days ago the GDS kicked off the Sprint 13 initiative which allocated 400 days to transform the way government transacts with its customers. This is no simple challenge – barriers include a legacy of nearly 20 years of existing and entrenched technology and systems.

GDS's next job will be to transform the top 25 government services (those which involve the highest numbers of transactions) to become digital by default.

There are currently 662 different transactional services operated by government (services which involve two-way engagement with users). This amounts to over 1.3 billion transactions per year.

However in computational terms, this is fairly average. For example a large telecommunications company will conduct that number of transactions in a single day.

Our current approach is not merely to focus on government websites – we are overhauling the entire transactional machinery in a digital context. The top 50 transactions with government represent 90% of all transactions. The least used transaction being the application for a licence to be buried at sea! Understandably, we a prioritizing the digitization of services associated with the greatest levels of user demand.

The top 25 government services by volume of transactions involve 14 separate agencies and 8 different government departments. The example of transacting with UK farmers is particularly expensive for government – an average cost of £727 per transaction. Part of the problem is that for farmers to apply for relevant government/EU subsidies they rely on hand drawn maps of their land holdings. GDS is working on an digital online tool which helps farmers draw upon existing geo location and mapping data to generate these maps. We are also working with the Student Loans Company to deliver better value for their digital service users. In addition we have created a digital recruitment hub to government to accelerate its acquisition of the right kinds of skills and expertise to drive forward the digital by default agenda.

GDS has also published the Government Service Design Manual which offers guides and resources for those seeking to create agile, user-focused multidisciplinary teams to deliver digital services in government. This manual sets out a number of service design steps including: • Discovery – research the needs of users, determine what measurement benchmarks to use, and evaluate technological or policy-related constraints

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• Alpha – prototype solutions which address the needs of users and conduct small scale testing to gain initial feedback on the overall design of the service • Beta – release a test version for public use whilst continuing to iterate, build and scale this version whilst meeting user needs • Live – the service goes live, alongside continued efforts to improve and refine the service based on user feedback In many ways it is an amazing achievement for government to exclude the UK's best talent and creativity from government procurement supply chains. GOV.UK is hosted by an SME – not a large web hosting company.

Q: What is the balance that GDS is hoping to strike between the technology and the redesigning process?

A: The redesigning process is the key. Technological change is part of the initial catalyst for service improvement, but ultimately the processes themselves need to develop and evolve.

When GDS started many commentators suggested that we would require primary legislation to achieve many of our objectives – but so far there is nothing that we have not been able to do without legislation!

Q: In relation to the contracts finder website – commissioners of services tend to use very different terminology than suppliers, which makes it incredibly difficult to find the right contracts using key word searches.

A: We are continuing to work on refining the search functionality to improve user experience.

Q: What is the correct balance from the government perspective in terms of security versus practicality?

A: Security needs to be designed in as part of the procurement process so that is built into the user experience from the beginning rather than added afterwards.

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Sir Charlie Mayfield, Chairman, John Lewis Partnership The John Lewis Partnership has also struggled to address the challenges posed by legacy IT systems. As the capability of technology increases and user adoption rates rise – the gap between the expectations of customers and the reality of digital services is constantly widening.

The nature of the challenge faced by John Lewis is to ensure that a user in Aberdeen can order a new iPad and a shirt at 18:55 on a Monday evening and collect those items at the nearest John Lewis outlet by 14:00 the next day. This particular service has been extremely popular with our customers. Out of £1 billion of online sales – our check and collect service represents 50% of that total. Achieving this is relatively challenging as it requires all the ordered items to be packed up and put on a van by 9:30am the next day. This is a very complex and interconnected system so iterative changes always involve significant costs and additional investments.

Twenty years ago the Kings and Queens of the retail world were the buyers and sellers. Now we are seeing a sea change in that traditional landscape. Currently our supply chain director is one of the most important employees in our business.

A further big change has been an increase in the esteem and value we place upon key leaders in IT within our organisation. These days we will take “no” as an answer from an IT Director – and then ask “what do we need to do in organisational and resourcing terms to turn that into a yes”?

The right attitude and approach remains essential to success. 70% of big IT programmes cost double the anticipated investment and end up producing half the expected benefit. The best approach is to attempt to mediate traditional commissioning perspectives (we want everything) and traditional supplier perspectives (we can give you everything) with a heavy dose of reality check. The intrinsic human desire for the comfort of certainty can be misleading. Instead it is important to embrace risk and uncertainty – and then work within those accepted parameters to successfully mitigate the risks of failure.

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Panel provocation and debate Liam Maxwell, Chief Technology Officer, HM Government We need to stop procuring. We have worked with lots of you – and benefited from what people have been telling us and learning at the same time. We wanted to achieve a dynamic market (for example, one in which 85% of IT work is not going to a small group of suppliers) and a more open market. We wanted more SMEs doing business with us and to increase competition. I am not a junkie for SMEs – I am more focused on competition. GDS is about innovation and flexibility.

The BBC has a very large set of services they use to get their signal to you – and these services are subject to an infrastructure procurement programme. However, the BBC does not go out to procure individual TV episodes! Government has on occasion tried to over specify to this extent.

There is an urgent need to stop procuring and start designing. We need to build in and design for change.

In relation to the G-Cloud, we expect the new digital procurement framework to provide additional flexibility. We are also seeing strong collaboration between GPS and GDS which will make market more dynamic. In general all procurements are migrating towards a more open and fairer market approach supported by feedback systems such as Mystery Shopper.

We are now moving to design led commissioning. If we make things smaller, agile and more flexible we will have the ability to deliver better and more responsive services. Digital by default essentially means that we want to make the online service good enough that people use it instead of traditional means. So what can we do to help? How can we move faster? How can someone like me help you get a faster implementation of better and newer procurement routes?

Frank Lambe, Chairman of Payment Card Technologies, Lenlyn Group One key question - is government benefiting from the emerging payments from SMES? There is a concern that procurement is about security and fear – that an SME will fail and the companies are judged by their larger balance sheets. Easyjet chose us as a partner because we were both secure and innovative. Mike Bracken’s presentation showed me that things are changing although that perception does not always penetrate all the way down the chain.

The payments sector is a very controlled and regulated area with requirements to prevent fraud, money laundering….etc. Operators in this space need to ensure that their services and mechanisms are controlled, reportable, and measurable.

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Delivery of mobile payment services is particular valuable from an inclusion perspective. SME’s sit down with clients and always deliver a bespoke service. Trust us – work in partnership with us – and don’t just treat us as a supplier. We will help you shape the solution that is required on the ground. Small does not mean that they can’t deliver. Good things come in small packages. Do not be afraid to talk to the SME sector and work in partnership with us. We care for what we deliver because we live or die by that standard and the client satisfaction associated with our delivery.

Lesley Sewell, Chief Information Officer, Post Office Understanding the process of public procurement is a big challenge. Recent developments such as G-Cloud and PSN are positive – but there is still lots that needs to be done.

At the Post Office the digital agenda is at the heart of what we do.

Big legacy systems are very much an issue for us. We are founder partner of the UK digital skills alliance – and we have pledged that by the end of 2013 all our staff will have basic digital skills.

We are also launching a regional campaign in October in the North east. 19% in North East have never accessed the internet (in comparison with nearly 15% across the UK).

From 2013, we will enable our staff in our network of over 11,500 Post Office branches to signpost customers to where they can get online in their local community. For the first time in the history of the digital inclusion agenda, UK-wide information can be accessed in one postcode search: Libraries, UK Online centres, Age UK and internet cafes that offer free access, training or informal online support will join forces to enable customers to find the best online support for them, wherever they are in the country.

We have 11,000 branches with two million SMEs coming through our doors every day. We have begun a programme of branch transformation. We are seeking to become a multi-channel retailer offering seamless and interoperable services to communities. In terms of our procurement strategy – our current processes are lengthy – and we need less legacy systems and a more open market. Currently we are in the midst of disentangling legacy systems and data from Royal Mail (which is an opportunity for modernisation).

It is all about skills and people at the end of the day. We have a vision of moving towards a common digital platform using open systems and standards. We need to integrate delivery channels whilst fundamentally changing our approach to how we build and deliver technology at the Post Office – which will help us work and engage with SMEs. We have also set up a new procurement function which has made positive progress.

What are the challenges we face? One key challenge is that we would like to get to the point where we don’t have any data centres. We are also investigating how well performing pilot schemes can be scaled up across our distributed network which currently handles over 2.5 million transactions every day. An important question is how do we balance the financial strength and security of big providers against the creativity, agility and innovation of SMEs? How do we run a procurement process which combines the best of both worlds? How do we create that flexible procurement process which generates the solutions and outcomes that we need?

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Steven Beard, Chief Executive, Agilisys I’d like us to examine what I like to refer to as the “£5 million problem”.

What could you do with £5 million? For £5 million we could solve many of Mike Bracken’s problems. Francis Maude set out some grand projects.

I believe with £5 million we could get 5 million citizens online.

And we could start by training 1000 digital apprentices (16-18 years old).

As a business we have trained 120 digital apprentices this year alone – so we know what it costs.

We are excited by the prospects of the digital economy and skills, and see this kind of investment as vital to the future growth of the knowledge-based economy, SMEs or otherwise.

Mike Bracken’s presentation reported that it costs DEFRA in the region of £700 in average transaction costs with UK farmers. This is a travesty – as we all know that’s unnecessary in this digital age. In India there are already 200 million farmers receiving government subsidies via their mobile phones.

To offer a cautionary case study - in 1888 Kodak was established and went on to employ 140,000 people across the world – and yet today this company no longer exists. Today Instagram employs 13 people. I would encourage the dinosaurs to “die on their feet” and make way for new blood!

Sally Collier, Deputy Chief Procurement Officer, HM Government Two years ago this government set its aspiration for 25% of government business to go to SMEs in order to achieve better value for money and services for the tax payer. So what has happened? We have had high level support from the Prime Minister, Ministerial champions including Francis Maude who spoke earlier today – as well contributions to this event from the Chief Executive of the Government Digital Service, the government’s Chief Technology Officer and Chief Operating Officer. I think that gives an indication of the level of commitment within the current government towards achieving this target.

Since announcing the 25% target, we have: • Published details of £90 million worth of looming contracts using the government future contract pipepline facility • Abolished Pre-Qualification Questionnaires below 100K. • Put over a 1000 central government professionals through lean procurement training • Set up the mystery shopper website which has processed 300 complaints and achieved a 100% resolution rate Does this mean our job is done? No – there is still a long way to go, as well as a potential legacy commitment to continue this process once the 25% target has been reached.

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Keynote Address: Stephen Kelly, Chief Operating Officer, HM Government The reform of government procurement is a programme with huge momentum. Will it be perfect – no. Will there be bumps in the road?

Absolutely. There is a passionate commitment for a radical but quiet revolution. But this will require consistent commitment and collaboration from all sides. We are dramatically trying to change the way that government interacts and builds value for different stakeholders.

There are three key questions: 1. Can we improve and enhance public services through innovation in challenging economic circumstances?

2. Can we take seismic levels of money out of the system to rebalance finances whilst delivering better services at lower cost with better outcomes?

3. Can we do that differently from the past in a way which front loads UK growth?

If SMEs and businesses can see increased revenues in the forward pipeline then that will feed into increased numbers of new hires and investment. We have moved from about 6% SME spend to 17% - whether that is directly with SMEs or via the big systems integrators subcontracting.

Government needs to be part of the solution in combating economic stagnation and boosting growth.

The data suggests we are going in the right direction. We need to ask ourselves what do people need and what do businesses need? The civil service is fabulous – but we are also very good in the UK at following rules – and sometimes there is a need for new thinking and new ways of working. Most people who join the civil service do so in order to make a difference. We need to keep that in focus at all times and deliver the outcomes that matter to people. When we hit barriers we need to work collaboratively with both SMEs and the bigger players in the market in order to generate solutions.

The government procurement process can be very daunting to SMEs – but government is committed to making this easier. We used to by computer power cables for £57 when they were £8 on Amazon! When you are stuck in a process sometimes madness is the outcome – and we can't stop that overnight.

Some key ingredients for SME success: 1. What is the culture of your company? Great companies are customer/market centric companies. If you care passionately about customers and markets then you can help us innovate and support disruptive change and better outcomes for tax payers.

2. Have a big bold vision – and galvanise everyone in the company around that vision. Vision and sense of purpose motivates and unifies companies. What does the destination look like – and how are you going to change the world?

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3. Never say “we are looking to sell in two years”! Good companies get bought – they don't get sold. Great companies generate value for their employees and their shareholders. Focus should not be on exit strategies – it should be on building huge value.

We are also seeking to engage more closely with the investment community in order expand sources of SME finance. Last year we saved £10 billion across multiple public service delivery areas whilst improving service outcomes. We are making a difference – but we want to connect with others who can help us work collaboratively to innovate further.

It is perhaps worth noting that ORACLE was originally a project spun off by the Central Intelligence Agency based on US government innovation in the 1970s. Previous innovation and technology took a while to reach the consumer. Now consumers are leading the way in terms of adoption and access. In contrast we have government computers with 7 minute boot times”!

The final word here is that progress on this won't necessarily be an easy experience – but few things worth doing are.

Q: How long are you going to be staying in government - and will you be able to see these changes through?

A: How do we do it differently this time? Never waste a crisis as the source of mandate for radical change. The UK has debt levels of 500% of GDP. This is not a quick short sharp shock recession – responding requires that we do things differently and approach challenges differently. There is a mood change across the civil service that we need to refocus ourselves on the people who really matter and concentrate on outcomes as opposed to processes. For the first time we have a coherent integrated strategy which is being executed. If we had the same penetration of SMEs in the UK as in the US market – there would be no unemployment in Britain!

Q: How can you as government COO get the message to SMEs that you are open for business and that you are going to make it easy for them?

Q: There is no doubt that the rhetoric is strong – but the reality on the ground is somewhat different. Many of the big contracts are actually being extended. Also one of the best ways of killing innovation is having SMEs in the supply chains of large companies. My experience of over 20 years of working with government tells me that is the last way that I'd want to do business with government.

A: I didn't say this was going to be easy! Don't throw all your eggs into the government basket – you should test drive it. 50% of £6 billion's worth of government contracts are coming up for renewal over the next two years. Some may be extended for security purposes, but the objective is to break them down and commoditise them. Our Mystery shopper imitative received 300 complaints which were resolved to 100% satisfaction. The overriding air cover around this agenda is so powerful that we will prevail.

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Summary of report back from discussion groups: Delivering a new world 1. Pre-procurement: There still seems to be a high degree of uncertainty about how pre-procurement works – when does it start – what is right, what is wrong? There are also issues of resourcing in terms of SME's finding the time to engage in pre-procurement. Some of the positives covered by this group were the existence of good examples of pre-procurement – in particular the commissioning model from the BBC – and the pre-procurement approach used by the DVLA. Key lessons from these were – start early, be realistic, be open and transparent, share information - which shapes the market and expands the potential range of consortiums which can be created. It was also agreed that it is essential to have a strong focus on the pre-procurement outcomes you are trying to deliver. Additional issues were raised around the best mechanisms for communicating and promoting pre-procurement processes. One key question was how can government share best practice between departments – and how should they identify examples of success and disseminate the results?

2. Capturing Innovation: This group focused on creating the right environment for government to innovate. Definitions of innovation ranged from creating something which is genuinely new – to applying or implementing something which already exists to deliver better results. Several key challenges were discussed including: • How do you ensure that the businesses requiring innovation are aligned with both procurement and advisors?

• IPR issues – how do SMEs prevent IPR being given away?

It was concluded that there is a clear need for a safe environment where SMEs can feel comfortable discussing their Intellectual Property and Unique Selling Points. This requires officials involved in procurement and business users within government to engage with SME suppliers to develop collaborative and creative problem solving mechanisms. There is also need for greater recognition and awareness in government and SMEs of the different tools which could be used to support this kind of approach. Cabinet Office will shortly be launching the Solutions Exchange, which could play an important role in bringing new stakeholders into the procurement equation.

3. Engaging with the Public Sector This group examined four issues surrounding barriers and obstacles to greater engagement: • Local government often finds it difficult to work collaboratively because of local politics and funding arrangements.

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• The group discussed the desirable characteristics of the intelligent customer (as in one which would successfully and productively interact with the intelligent supplier). Key challenges were considered to be cultural issues, lack of specialist knowledge, conditioned behaviours, and getting to see the right people from the government side.

• Centralised procurement can sometimes have useful features – but in many instances just abstracts the procurement process further away from the business objectives involved. Ideally procurers should be as close to the users as possible. GPS capabilities were also discussed – but not in a positive light.

• Another recurring problem was that of procurers conflating the aggregation of supply and the aggregation of demand. The later makes sense to gain better buying leverage – but aggregating supply requires reliance on a small number of suppliers.

Further recommendations and suggestions were: • Promote better communications with public sector • Promote better guidance on the legal requirements – given that this makes public sector staff risk averse.

• More available information/materials on market capability.

• Allow the public sector to build relationships by providing guidance on what relationships are appropriate.

• Channels which share technical knowledge and information on best practice and exemplars which are searchable and enhance discovery.

• More recognition of good performance and good supply practice – given that it is practically impossible to name and shame bad suppliers.

4. Procurement process: This group reviewed a series of challenges associated with the procurement process. Risk was a key issue for both buyers and suppliers – in the context where one person's barrier is another's risk mitigation strategy. There is a need for more transparent procurement requirements, alongside better distinctions between encouraging competition versus innovation. There were also discussions around whether personal conversations between buyers and suppliers undermine overall objectives of increasing transparency and fairness.

There was also significant sceptism from both sides around new mechanisms such as G-Cloud.

One quote which came out of the group discussion was that “the best way to sell to government is to seek to influence the specification so it is aligned to your proposed solution”. Procurement professionals are often very worried about being sued by suppliers during the procurement process which then restricts opening up the procurement process to SMEs. It was also stressed that procurers and suppliers should make sure they are focusing on the right market/sector. Further discussion covered issues surrounding terms and conditions – and whether those might be adapted to specific market sectors (rather than merely applying the same long monolithic list of requirements irrespective of the specific sector). It was suggested that in attempting to boost procurement through SME's there is the need to “unload the dice” – for example by breaking very large requirements down to more appropriate and manageable chunks which opens up the market to new entrants.

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5. Potential Suppliers: It was contended that a lot of good work is already being done by government departments – but there isn't any coordination between these departments – and no centralised communication or promotion of good practice. There also needs to be common language across government to demystify and rationalise the requirements and processes associated with procurement. Ideally this should increasingly map across to the language used by supplier. An example of potential confusion was illustrated by this morning debate during which the term “transaction” was a commonly used. However this has a different meaning in government than it does in, for example, the financial sector. There is also a need to review procurement compliance requirements. If the barriers are too high then SMEs just won't get involved. There was also substantial discussion of the positive role of case studies involving SMEs working with government in terms of informing better future practice and approaches. There is also a strong case for aggregating and promoting internal government case studies focusing on good practice which each department could share with its staff. It was commented that the G-cloud is a fantastic opportunity to get people engaged – although perhaps it could become an even more vibrant ecosystem for engagement. Final closing questions were: •

Is there any mechanism for pre-approval for SMEs, so they don't have go through the same process multiple times for the same size/type of contract?

•

How can we demystify and break down the procurement process? Can different stages be separated out communicated in some kind of roadmap with a corresponding itemization of the level of effort associated each part of that process (e.g. three clicks and you're on the list for consideration….etc).

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Closing Keynote: Chloe Smith MP, Minister for Political and Constitutional Reform It is clear that the enormous energy and enthusiasm for improving things on both sides is undiminished. I am passionate about increasing access for SMEs to the procurement process. I think it is fair to say that this government has recognised what SMEs can do - which is why we set the 25% target – to achieve tax payer value and improved services. The importance of continuing to communicate this throughout government departments is still on-going. The people in this room have the opportunity to contribute to that success. The traditional strengths of SMEs: agility, value for money and innovation are all incredibly important to government in the current climate. We are looking for services which meet public needs, and this requires going to the whole market, not just a subset. Government procures on behalf of the tax payer and therefore needs to demand value for money and high standards.

It is about having open procedures, less stringent financial history requirements, less PQQs, more standard terms, and no limit on the number of suppliers that can participate in frameworks. Departments are saving between 30%-90% under these new arrangements.

But how can we scale up this discussion? How can we take this further and engage more people?

We need to include innovation hubs, business schools and universities in this debate.

In order to change culture we need to communicate back to the customer for whom we are procuring, whilst also ensuring that the guidance and information materials are fit for purpose.

We have recently published our SME friendliness criteria which helps government departments assess their performance (criteria designed by SMEs themselves). By May this year we had 425 cases on mystery shopper – 300 resolved which equates to 80% of all cases. Later this year we will be publishing information on the amount we are spending with SMEs (a two year on report).

This will allow the SME community and the wider public to hold us to account. You will see better quality data for both direct and indirect spend. We have increased accessibility and transparency – and through dialogue with the sector we are increasing our understanding of the blockages and barriers which exist. When we get together with the right range of stakeholders we can roll our sleeves up together and get on with finding solutions.

It is important to have early dialogue between buyer and supplier before procurement begins and I hope that the solutions exchange will have a key role in supporting this and opening up the market. I also want to go further and bring this thinking to local authorities, the police service, the health service and other stakeholders. Lord Young's report demonstrated the inconsistencies in the approaches of different buyers across government. We agree passionately that the wider public sector should support economic growth by procuring more from SMEs.

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