Government Operations Committee on April 24th, 2018

[The Chair, Conservative, Tom Lukiwski]

Colleagues, even though we don't have all our members here—I'm sure the absentees will be on their way—I'd like to welcome all the participants today.

We have Dr. Chideock from London via video conference.

[Dr. Cass Chideock, Deputy Director, Small Business Policy Team, Crown Commercial Service of the United Kingdom]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you for being with us.

Before we begin, colleagues, I'll just say how wonderful it is to see all of you again. In particular, thank you to my colleague Madam Ratansi for pinch-hitching for me during the last several weeks when I was out attending to some medical issues.

Thank you, Yasmin, for chairing the meetings.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I'm glad to see you back.

[The Chair, Conservative, Tom Lukiwski]

I'm glad to be back.

I have to ask you, however; in my absence, was Mr. McCauley on his best behaviour? Sometimes he gets a little frisky.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Oh, he was on his best behaviour.

[The Chair, Conservative, Tom Lukiwski]

Good for him. I'm glad everyone was on their best behaviour.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I think the pep talk before you left worked.

[Voices]

Oh, oh!

[The Chair, Conservative, Tom Lukiwski]

Patrick, will we be having others joining us by video conference?

[The Clerk of the Committee, Mr. Patrick Williams]

No, there will be just the one in this first half of the meeting.

[The Chair, Conservative, Tom Lukiwski]

Okay.

Dr. Chideock, thank you very much. I'm sure you've been briefed appropriately. You know how our committee works. We'll be looking for a brief opening statement from you. Following that, we will engage in a series of questions from our committee members.

Without further ado, I would ask you to introduce yourself formally, make your opening statement, and we will commence.

[Dr. Cass Chideock]

Thank you very much.

My name is Cass Chideock, and I'm Deputy Director for the SME Policy Team within the Crown Commercial Service. I'm going to work on the basis that the committee knows that we at the Crown Commercial Service are essentially a trading fund that's part of the Cabinet Office, a buying agency for the British government. Within that body, we have a small policy team, and my team and I form the SME policy function, leading on the U.K. government's operational target to spend more with SMEs across the board.

I have been asked to provide a high-level overview of the U.K. procurement system and U.K. efforts to increase participation of SMEs in government procurement. I think an important part of the context in thinking about comparisons with procurement in Canada would be that the U.K. public sector buys according to EU procurement rules. We don't focus on specific quotas or set-asides, as I know some countries do. That would be illegal within the context of our legislation.

My focus is very much on levelling the playing field for small businesses so that they are able to compete with larger businesses. That varies: making sure that procedures are simple, that they have access, that they can find opportunities with government, and that government itself is able to work with small businesses in terms of engagement and procurement.

The U.K. government has had an aspirational target to spend with SMEs since the coalition government dating back to 2010. The first target was for 25% spent with small businesses. When I say 25%, that's direct spend, spent directly with SMEs but also spent in the supply chain to the first tier down from the prime contractor.

We use the OECD's definition for SMEs, and that's fewer than 250 members of staff with limits on turnover: a turnover of less than or equal to 50 million euros and/or a balance sheet total of less than or equal to 43 million euros.

As I said, we had a first target for 25% spent with SMEs by 2015, and that was met in the 2014-15 spend. We measured from April 1 to the end of March of the following year with a 27.1% spend. We currently are working on a target to 2022 for one third, for one pound in every three spent with SMEs—again, directly or indirectly.

I mentioned that we measure both this direct and indirect spend. Those are the terms I'll use, because those are the ones I'm familiar with. I think it's fair to say that what we spend directly with SMEs is considerably easier than measuring what our suppliers spend with their supply chain. I won't go into details, but I'll be happy to talk a bit about that, if it would be something that the committee would find interesting.

We measure spend right across central government, including defence spend and construction spend. Defence and big infrastructure projects are the two areas where it's most difficult to get SMEs in, particularly in terms of direct spending. We count arm's-length bodies for different government departments in that spend as well. At the minute, for example, for the Department of Transport, we're counting network rail spend and hiring agency spend.

Our current spend for 2015-16, which is the last year for which we have published figures—because it does take us time to collect and collate figures and make sure they're accurate—is 24%. We have experienced a drop since 2014-15. We are now at around 12 billion pounds spent in 2015-16 with SMEs, which is about 5 billion more than in 2011-12, the last time for which we've got comparable figures.

What have we done to get there? Some of what I'll be talking about will be before my time. I joined the team about three years ago. Up to about 2015, we had a series of payment targets in central government, because we know that payment is very important for small businesses. It's important for all businesses, but it's particularly important for small businesses where cash flow is a real issue. We have targets to pay 80% of valid invoices within five days and 100% within 30 days. We track those department by department. They were held in the central government on essentially a voluntary “we expect you to do this” basis.

We have a service called “mystery shopper”, which is a team established to investigate cases of poor procurement practice, and we use that to target and identify where, within the government procurement cycle, small businesses are experiencing problems. Payment, for example, comes up often. Bureaucracy and difficulty with accessing procurement are others.

We have a site that brings together, from across England and Wales, including local government, opportunities to sell to government, and that's called Contracts Finder. We had our first iteration created between 2010 and 2015, and there was quite a lot of work to simplify framework contracts. For example, you may have heard of G-Cloud, which is a framework contract now in its 9th or 10th iteration that creates a form of catalogue for public sector organizations to buy digital and cloud services from businesses, and we have very high participation rates from SMEs and high levels of spending with SMEs through that framework.

Since 2015 we've taken on further activities. One of the things we've done is banned pre-qualification questionnaires falling below the OJEU, the Official Journal of the European Union, threshold. We took that step out of the procurement process, and above that threshold, we've set up a standardized questionnaire so that small businesses engage with something they recognize from previous experiences.

We took the mystery shopper service and we put it on statutory footing, which requires that, in essence, if a question comes in about a particular public body, that public body is expected to comply with the mystery shopper service.

We rebuilt and refreshed Contracts Finder completely and made it much more user-friendly. We used an agile process to really engage with users of all kinds to make sure that it was working effectively, and we've required central and local government businesses to advertise opportunities on it. For central government, we have a threshold that any contract over 10,000 pounds should be found on Contracts Finder, and we expect to see opportunities flagged in advance, better notice for the opportunity itself to be open, and then publication of an award notice letting anyone who reads it know whether or not it was awarded to an SME.

Contracts firms are completely free to use this. It works across mobile, all kinds of tablets, and laptop platforms etc., and it's pretty user-friendly. It's very simple, but it's user-friendly, and it has an open API, so it's available to be used for open data.

Last, we require payment of valid invoices within 30 days, the measure I previously mentioned. We required that through law, and we required that to be passed down the supply chain, so we're now telling our key suppliers that they have to pay their supply chain in delivering a contract within 30 days, if the invoice is valid.

Just this last month, on April 10, we announced a few further measures. We announced a consultation on considering prompt payment performance in awarding public contracts. We're going to use this consultation to find out what would work for suppliers and for public sector organizations, and we're keen to identify a route by which we can use awarding public sector contracts in encouraging a prompt payment culture, because we believe that prompt payment culture is still not in the place we would quite like it to be.

We've also required, for larger contracts, provision of data on spending in the supply chain, which will help us. It helps us kind of drive that message of spending more with small businesses, and for opportunities in the supply chain that have not yet got an existing business delivering them to be advertised on Contracts Finder. Those two are open to small businesses that are able to go and find those opportunities.

There are other things that have worked well that the committee may wish to hear about. We do a lot of work within my team working with government departments. CCS is by no means handling all of the spending across the central government. We work with government departments to make them aware of the target, to require them to have sub-targets, and to develop trajectories toward delivery of that aspiration in 2022.

We have a person who holds the role of small business crown representative. To use a phrase I think we've used in the past, they hold the government's feet to the fire in dealing with small businesses. They really make sure we're paying attention and they act as the voice of small business in government. That post is currently held by a woman called Emma Jones, who's kind of a leading light in promoting small businesses in the U.K.

We have a group called the SME panel—

[The Chair, Conservative, Tom Lukiwski]

I do apologize for the interruption, but we have a fairly tight timeline here, since we do have some other guests joining us by video conference.

[Dr. Cass Chideock]

Do you want me to—

[The Chair, Conservative, Tom Lukiwski]

No, that's quite all right, but in my experience, most of the information transfer comes during questions and answers with committee members. I know our committee members have a great many questions, so if you don't mind, we'll go directly to our interventions.

[Dr. Cass Chideock]

Absolutely.

[The Chair, Conservative, Tom Lukiwski]

Hopefully we'll get all of the information that you have to offer in that time.

We're starting with Madam Ratansi for seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you very much.

I hope you are not sleep deprived. I guess it's six o'clock in London. It's not so bad. We're making you work overtime.

I understand from the papers we have here that the CCS is an agency that was brought about to consolidate the procurement in one area. In Canada, we have a similar situation, which is Public Services and Procurement Canada. You said something about small and medium-sized enterprises not getting direct public sector contracts, but they have to be subcontracted. Am I right in understanding this?

[Dr. Cass Chideock]

No, sorry. Perhaps I was misleading you in what I was saying. We do plenty of direct contracting with small businesses, but when we have this aspiration to spend a certain percentage, we can't both direct spend with SMEs and indirect spend. We take the view that SMEs will benefit in the supply chain, and often, for some businesses, that's a good way to start out in doing business with government.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I'd like to bring to your attention a report that came out. I think you're very familiar with it. It's the report on Carillion and its failure. It says that the ministers have allowed procurement to become a cartel, using 30 or 40 large businesses to subcontract, to participate in the supply chain. Your auditor general has claimed that this does not seem to help small and medium-sized enterprises. The collapse of Carillion has shone light on this issue.

Could you comment on what's going on and how you measure the challenges of consolidating this procurement with the ability to be more transparent, more accountable, and more fiscally prudent?

[Dr. Cass Chideock]

I'm not able to comment in detail on Carillion, because that's not an area of my responsibility, unfortunately. I think more generally I can say, yes, there is a tension in the U.K. government between getting efficiency gains by aggregating need for common goods and services and disaggregating to create smaller contracts and opportunities that might be more accessible to small businesses. That's the tension we have to work with. For the most part, we try to find opportunities where, instead of a win-lose situation, we're in win-win.

As far as the transparency....

Sorry.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

No, go ahead on the transparency aspect.

[Dr. Cass Chideock]

On transparency and accountability, I mentioned the website Contracts Finder in my preamble. That's our main route, at the minute, for making detail about contracting and procurement in government available to anyone who wants to explore it.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Do you have any idea if the government responded to the National Audit Office where it says that the small and medium-sized businesses were excluded from the direct public service contract? Do you have any idea why the auditor general made such a comment?