Government Contracts (SMEs)

Sammy Wilson Excerpts

Wednesday 28th January 2015 Westminster Hall

[Dr McCrea]

I absolutely agree with my hon. Friend and will also deal with that as we continue with the debate.

[Sammy Wilson (East Antrim) (DUP)]

I am sure my hon. Friend will touch on the matter, but does he accept that part of the problem lies with the procurement rules that we inherit from Europe as part of an attempt to create the single market? They lay down pretty draconian requirements when it comes to bidding for Government contracts. We ought to be looking at how those requirements can be amended and how we can raise thresholds to avoid some of the European regulations on procurement.

[Dr McCrea]

I agree, but even within the European regulations, there are things we can do and that the Government should do more of to alleviate some of the problems that my hon. Friend mentions.

In the 2013 autumn statement, the Chancellor included measures designed to benefit small businesses, including the introduction of a £2,000 employment allowance from April 2014, making it cheaper to employ staff aged under 21. That incentive, according to the Government, will benefit up to 1.25 million businesses and result in about 450,000 businesses, or one third of all employers, being taken out of paying national insurance contributions altogether.

After the autumn statement, the Government launched the “Small business: GREAT ambition” scheme in December 2013—a series of measures designed to make it easier for small businesses to expand, including the introduction of broadband vouchers worth up to £3,000 in 22 cities throughout the United Kingdom, which were designed to let more small firms access faster broadband connectivity. It is disappointing to note, however, that Malcolm Corbett, head of the Independent Networks Co-operative Association, has said:

“The scheme has not proved as successful as the Government had hoped”.

I therefore encourage those businesses eligible to avail themselves of the scheme before the March 2015 deadline to do so.

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[Dr McCrea]

I would not like to make policy on the hoof. An array of party colleagues are listening carefully and we are coming up to an election, so I would rather that my party make any policy decision.

[Sammy Wilson]

Before my hon. Friend moves on, does he accept that there is considerable merit in the point raised about the green procurement card, especially when it comes to the purchase of fresh food for schools and hospitals, which can be locally sourced? There is an environmental as well as an economic argument for sourcing such goods and services locally.

[Dr McCrea]

I am happy to agree with my hon. Friend on that point and am delighted that he has a genuine interest in that environmental issue. I am sure that will be noted carefully.

The old proverb says, “Give a man a fish and you feed him for a day. Teach him to fish and you feed him for life.” Although Stephen Allott, the Government’s appointed SME champion, argues that the

“big change is that procurement reform under Labour was a nice thing to have, whereas today saving money is central”,

the Government need to realise that people’s livelihoods are at stake. Owners of SMEs have often bravely given up a comfortable lifestyle and made significant investment to start up businesses from scratch. They are not mere pawns on a Government chessboard to be played when election time comes around. Much more needs to be done to upskill SMEs in the public procurement process. If a supplier has not bid before and is not very skilled at completing the tender, although it might be the best supplier, it will not win the contract. That was the point raised by my hon. Friend the Member for Upper Bann (David Simpson) a few moments ago.

Interestingly, Mr Allott has stated that the difficulty in fast-tracking the SME agenda arises because of staff cutbacks in the public sector, and notably cuts to the number of individuals in procurement. Such streamlining has led to greater aggravation. It may on occasion save the taxpayer money, but it does nothing to support SMEs. Mr Allott has gone further, stating that the pressures now borne by remaining procurement staff have led many to

“stick with the suppliers they know rather than spend time researching potential partners or having speculative meetings with untried suppliers”—

so it is not what you know but who you know. That leaves SMEs isolated while large companies continue to court those with influence.

On indirect contracts, how will the Government ensure there is a “David and Goliath” approach to prevent prime contractors from driving down prices and creaming off the best work for themselves, leaving slender pickings for their smaller partners? What will the Government’s SMEs champion be doing to help SMEs to get the best possible deal when working with large companies?

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[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies, for what I believe is the first time. I again congratulate the hon. Member for South Antrim (Dr McCrea) on securing this very interesting debate on public procurement—having heard myself say that, I may need to get out more if I find public procurement an interesting subject to debate.

I have witnessed procurement in the public and the private sectors. Indeed, in my time in local government, I was glad that our procurement was brought into line with some of the private sector practices and brought up to date. In my local environment, we had to bring in many of the SME businesses to spread the money around and create as much opportunity as we could.

We are all aware that small and medium-sized businesses are the backbone of the British economy and we need to ensure that central Government and local government do everything they can to help them through procurement procedures. The hon. Member for South Antrim gave a lot more statistics than I ever have to hand, but I can say that SMEs account for a large part of the private sector business in the UK and, I believe, 58% of private sector employment. That equates to 14 million people up and down the country being employed in SMEs.

This is about keeping things as local as possible. We know that 83p in every pound spent by local government procurers with local businesses will go back into the local economy. That in turn will stimulate the local economy and provide real employment opportunities there. It is a question of people stretching procurement as far as they can to get the biggest payback on what they are putting out there for goods and services.

SMEs are a major driving force of our economy and deserve their fair share of public sector procurement. Public sector bodies, including central Government, spend about £220 billion a year on goods and services. That indicates the complexity of the procurement. They procure everything from paperclips to chemicals—you name it. Government procurement is extremely complex.

Progress has been made in public sector procurement, and I will go on to highlight some of the advances made by the Government. I accept that steps have been taken and advances made. We have gone from almost a “catalogue” procurement process to what we see today—an approach that is more embracing of best practice and best value. I referred to a “catalogue” approach to procurement, which was simply taking something off the shelf and saying, “We have purchased from them for the last 10 years, so we’ll continue to purchase from them for the next 10.” That was not the best way to enable SMEs to get in on procurement by public bodies.

However, more could be done to improve the best-value approach. Not least is the fact that best value does not always mean the cheapest price, and what about people doing contract monitoring over the length of a contract to prove that they have a valued and performing supplier? We need to evidence contract monitoring if we are to make progress on procuring more locally and putting more into SMEs.

Public procurement is an underused tool when it comes to keeping trade as local as possible to local government and central Government spreading contracts around the country. It is essential that the Government take that on and spread the contracts as far and as wide as possible around the country. They should not simply look at a certain area where most of the spend takes place. If we are to regenerate areas, we can do so through Government procurement.

We also need to enhance contracts that we put out there by writing into the terms and conditions employment opportunities such as apprenticeships and therefore get more for the money we spend. More than half of SMEs believe that the process of tendering for Government contracts requires, as we have heard, more time and resources than their business can allow, making the tendering process too costly and time consuming.

We can take as an example what I have already highlighted—e-procurement. This is about going out and educating SMEs on what they need for e-procurement, and a common mistake is for them to fall into the same practice they used for tendering processes. As we have highlighted, broadband issues lead to difficulties when people are trying to download a tendering document, which takes a bit of time. It will bomb out at the last minute and, hey presto, they have missed out on the contract.

[Sammy Wilson]

The hon. Gentleman is making some thoughtful and worthwhile points, but does he not accept that the more we build into the contract and the procurement process not only price, but the qualitative issues he has talked about, as well as ongoing issues such as apprenticeships and employing the long-term unemployed, the more that adds to the complexity and the paperwork involved in the procurement process and to the monitoring of the contract? There is a balance to be struck between, on the one hand, taking the simple approach of looking at price only and, on the other, looking at quality, employment opportunities and all the other qualitative elements of a procurement exercise.

[Mr McKenzie]

I accept the hon. Gentleman’s point, but if procurement does one thing, it should be to get the most for what is spent. Monitoring whether we get jobs, especially apprenticeships, out of procurement would not be too difficult. The local council in my area has done that for many contracts. Those contracts have been gratefully received, and we have been really successful in keeping our youth unemployment down to a low level using those contracts.

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[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in the debate, Mr Davies. I congratulate my hon. Friend the Member for South Antrim (Dr McCrea) on setting the scene, which he did clearly and specifically with reference to his own area. I thank other hon. Members for their speeches. It is a pleasure to see the Minister in his place—I look forward to his response—as well as the shadow Minister, the hon. Member for Wigan (Lisa Nandy). Yesterday some of us, in discussion with her, mentioned that there were 100 days to the general election, but she said she was more interested in the next 91 days, because in 91 days’ time something more important for her will happen. We wish her well for when that occasion arrives—congratulations.

This debate is about a topic central to economic progress, on which opportunities to speak are much sought after. SMEs are an area of great importance for Northern Ireland for many reasons. We each have numerous SMEs in our constituencies, and in Strangford they are vital to job creation. There are four or five that began from a small kernel or seed and now employ about 200 people. They are of the utmost importance, because they have been proved to be vital to rebuilding and strengthening the economy in times of much economic uncertainty, such as the past five years. Not only that, but they form the centre of any financial strategy for progress with sustainable regional and national growth. For those reasons we should in all ways promote and encourage entrepreneurship in SMEs. My concerns have to do with funding—its availability, information about it, and the ability of anyone to apply for it.

Another concern stems from the multi-level governance dimension. In the coming months much responsibility will fall to local government, with the reform of the Northern Ireland council structure. Additionally, there are concerns about forthcoming EU directives and their implications for SMEs and Government contracts. A particular European issue recently has been changes to how EU directives will affect SMEs. Figures I have been given suggest that perhaps 150 to 200 SMEs have been forced to close as a result. Perhaps the Minister will comment on that.

I cannot emphasise enough how important SMEs are to Northern Ireland’s economy; I hope that that is shown by Northern Ireland’s European entrepreneurial region status for 2015, which has a focus on SMEs. I congratulate agencies such as Invest NI, local councils and all the SMEs that contributed to achieving that status. A lot of effort went into striving for it, and that effort delivered. I thank everyone who made it a reality. It shows that we are already charging forward in investing in our people, their creativity and their innovation, all three of which are important. What has been achieved is a recognition that we need to put support for such endeavours at the top of our agenda for stimulating sustainable growth and development.

For one thing, local businesses in Northern Ireland were responsible for 90% of the employment increase since 2011. That figure should not be ignored; it represents an astounding one in seven of the working population being employed because of an SME. Invest NI support for local businesses has created or promoted 1,783 jobs from April to the end of November, through targets to assist in SME expansion. Arlene Foster, the Minister at the Department of Enterprise, Trade and Investment, and our friend and colleague in the Northern Ireland Assembly, has been active in that area, and has made it a priority. She is very photogenic and is regularly in the paper announcing the expansion of jobs. It is great when that happens on a regular basis in Northern Ireland.

All that should be celebrated, but there is still a long way to go before SMEs gain the clout that they need to compete against larger competitors, as my hon. Friend the Member for South Antrim suggested in his detailed and informative introduction. It is troubling that small businesses in Northern Ireland exported only 4.8% across the EU, while larger businesses exported 80%. There is clearly a gap in our efforts to assist smaller enterprises, which must be addressed with much haste, as my hon. Friend said.

[Sammy Wilson]

Although we are hearing about the downside to procurement and all the rest of it, there are encouraging signs in Northern Ireland. A small company that starts up in Northern Ireland will last 75% longer than a similar company anywhere else in the United Kingdom. We need to put out the message that start-ups are very successful and there is resilience.

[Jim Shannon]

We all value my hon. Friend’s knowledge of business life in Northern Ireland, and he makes a valuable contribution to the debate. Some 30,000 micro-businesses accounted for 89% of local companies. We must emphasise the need to look at the barriers that prevent the rise of SMEs, especially with regard to Government contracts, and address them coherently and fully. Steps have already been taken to look at the accessibility of funding, to simplify the application process and to remove the red tape of bureaucracy that bumps up the costs of application and development in public procurement.

I sometimes wonder how anyone ever gets through the early stages of a business. Years ago, there was less bureaucracy, but today we seem to be entangled with it at almost every level. On the ground, SMEs still find it difficult, costly and sometimes unfeasible to compete with larger competitors.

I congratulate the councils, Invest NI, South East Economic Development and other agencies. Financing their endeavours is only the first of many hurdles faced by SMEs, and it is vital to their success. To have that stage of the process so well accounted for by those valuable agencies is paramount. Through the assistance of such agencies, bank loans to SMEs totalled £408 million in the second quarter of 2014, which represents a rise of 29% on the previous quarter.

Although that work has been important and successful, there is still a lack of clarity about how to identify and access the many sources of available support. I would reject any process that further impeded the accessibility of money through more and more layers of bureaucracy. As of 1 April, Northern Ireland will downsize to a new system of 11 regional super-councils, through which we will do our best to simplify the process and walk SMEs through the steps of accessing Government contracts and funding.

The Northern Ireland Members present are all former Members of the Northern Ireland Assembly. My hon. Friend the Member for Upper Bann (David Simpson) reminded me when we were preparing for the debate that the Northern Ireland Assembly insisted that Government contracts in Northern Ireland must include a 30-day payment scheme for those who had contracts, many of whom previously had to wait 90 days or longer for payment. It is absolutely ridiculous that small companies should have to wait so long. We can take some credit for moving forward that process in Northern Ireland.

I welcome the fact that the UK Government have pushed forward in their goal of awarding 25% of Government contracts to SMEs. Entrepreneurship will drive our economy forward through innovation and creativity. Therefore, we really need to make the leap of innovation—of becoming a successful endeavour—an attractive idea, given the risks of setting up and upholding an SME.

My hon. Friend the Member for North Antrim (Ian Paisley) referred to broadband, which is a problem not only in his constituency but in all our constituencies. I gather from my constituents that he has had some success in banging together the heads of those responsible, and making sure that the DETI and the NIE get together and achieve success. In my constituency, we have a similar problem, and those involved in online businesses have been prevented from expanding their businesses by the lack of broadband. That seems ludicrous. I cannot understand how the problem can be so prevalent in this age of modernisation. It seems simple to me to make the connection within 100 yards of a business to help it to progress, but we find layers of bureaucracy, obstacles, obstructions and reasons for not doing so. We need to act on that system in good faith and make it better if at all possible.

I have concerns about the EU directives and their implications for our ability to invest in our vital SMEs. I acknowledge that a range of positive measures has come from the EU, and not everything is negative. I know we have lots of problems with the EU, but there are positive aspects on a regional basis, such as the merging of funding into an accessible single portal, which includes the structural funds, with an emphasis on encouraging SMEs as a pivot of national economies. However, I am concerned about the upcoming enforcement of the EU public procurement directive. The directive states that

“for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition.”

I am concerned about the implications for local, regional and national SMEs, and about our obligations to protect SMEs on a national level, given that they have put so much back into our economy—not only in growth, but in lowering unemployment levels. What exactly will that mean for the distribution of Government contracts? Will the implementation of the directive create any obligations that will impinge on our goal of awarding 25% of Government contracts to SMEs?

I welcome any measures in the public procurement directive that aim to cut red tape and assist UK companies to make the most of the single market. I hope that the promised new regulations will benefit SMEs by encouraging buyers to break contracts into smaller lots and by reducing the cost of the bidding process. The European Commission claims that they may reduce that cost by as much as 60%. SMEs in my constituency and nationwide need reassurance that the process of obtaining Government contracts will not become more elaborate, confusing or inaccessible, and that their interests will not be compromised by the implementation of the directive. I thank my hon. Friend the Member for South Antrim for giving us all a chance to contribute, and I look forward to the shadow Minister’s contribution and the Minister’s reply.

[Lisa Nandy (Wigan) (Lab)]

I thank the hon. Member for South Antrim (Dr McCrea) for initiating the debate. He was absolutely right to point out just what a force small and medium-sized business are across the country. There are 5 million of them, and they are what keeps our economy moving. He cited examples from his constituency, and I am sure that all hon. Members will have their own examples in mind. Taken together, SMEs are the single biggest employer in my constituency, and that situation is replicated in many towns, cities and rural areas throughout the country.

There is much more that we could do to support SMEs, which are one of the country’s greatest assets, and to unlock their talent, energy and commitment to their communities. I was interested to hear what the hon. Gentleman said about job creation in Northern Ireland over the past few years. It is fascinating to hear what small businesses manage to do despite all the problems and challenges that they face. Think what more they could do if we put in place more support and took away some of the barriers that they encounter.

We must acknowledge the extent to which SMEs have felt the squeeze in recent years, and the problems surrounding Government contracts, which are the focus of today’s debate, must be seen in that context. An economic policy that imposed huge front-loaded cuts on public services has undoubtedly had an impact on SMEs, because in many areas of the country—this picture is familiar to people in Wigan—that policy has created a toxic mix of unemployment, low wages and insecure jobs, which has stopped people spending money in small shops and businesses, thus costing those businesses trade and, in many cases, jobs. In a few instances, the situation has cost people their entire business, which was why I listened with interest to what the hon. Member for East Antrim (Sammy Wilson) said about the balance that must be struck between conditions on contracts and the need for simplicity. He is absolutely right to raise that point because there is a common picture throughout the country of contracts that contain unnecessary complexity that could be removed, with some concerted effort.

When we talk to SMEs, we often find that they are keen to use Government contracts as a force for social good, as my hon. Friend the Member for Inverclyde (Mr McKenzie) described when he spoke about apprenticeships and jobs, but they can need Government support to achieve that. The future jobs fund was a good example of a partnership involving public sector bodies at first, and later smaller employers that could not necessarily afford wage subsidies, but wanted to create opportunities. The programme had a significant effect on young people.

In my area, as is the case in many parts of the country, making the living wage a condition of contracts has been hugely helpful for many SMEs, partly because that means that they do not have to engage in a race to the bottom to undercut prices, because if the requirement to pay the living wage is clearly set out in a contract, such companies can compete without driving down the conditions of their work force. SMEs also benefit from that approach because if more people in towns such as mine are paid the living wage, it is more likely that they will have surplus income to spend in local shops and businesses, meaning that the cycle continues.

It is right to recognise that the picture has been very difficult for many SMEs across the country. The huge front-loaded cuts to many local authorities, health services and other public sector bodies have meant that SMEs have lost contracts. Many small businesses that could borrow money easily from banks on a short-term, sustainable basis a few years ago are now struggling due to the loss of trade and contracts. Taken together, all those things have been problematic for this group of businesses.

Despite the cuts, and although central Government are not handing out large contracts or spending huge amounts on public services, and are unlikely to ramp up that spending any time soon, there is far more that they could do by using the range of tools at their disposal. That was why the hon. Member for South Antrim was right to focus on Government contracts and procurement, which are among central Government’s biggest tools for good. Central Government spend £40 billion a year on goods and services, about 10% of which goes directly to SMEs. Over time—I am not making a party political point because this has happened over a considerable period—a trend has developed for putting in place centralised contractual arrangements that, for various reasons, have tended to shut smaller organisations out of the process altogether. As a result, businesses that are closest to their communities, and that deliver services and do the good that hon. Members have talked about, have become subcontractors in a supply chain, if they are able to compete at all. My hon. Friend the Member for Inverclyde said that he might need to get out more, and while I could not possibly comment on that, perhaps the same is true for the Government, because there is a regional and local picture to consider, too.

[Sammy Wilson]

Does the hon. Lady accept that, at a time of fiscal constraint, there is a need to get value for money from contracts? That sometimes means that contracts need to be centralised, but one way around that might be to encourage consortiums of small businesses to apply for larger contracts, because such contracts do not necessarily have to exclude small businesses. I sometimes wonder whether we have explored all options of how we ensure that we can have large contracts while still involving smaller firms in delivery.

[Lisa Nandy]

The hon. Gentleman is absolutely right. I was just about to address the difficulty that small and medium-sized companies face when bidding for public sector contracts. The hon. Member for South Antrim talked about the lengthy, expensive and unnecessarily complicated process, and the lack of support, so I will not rehearse those points to the Minister, although I am interested in his response to them.

One way in which we can ensure that small and medium-sized businesses are not shut out of the procurement process is by moving that process much closer to communities through the devolution agenda, with more commissioning at a regional level. In the past few years, local enterprise partnerships have been established in the place of the regional development agencies, which were very successful. In some areas, local enterprise partnerships still have to bed in, and we can do much more at the local, regional and national levels to make them work for local communities. I see this being played out at the local level, too, but when resources are scarce in local, national or regional government, there is a perceived tension between getting value for money and giving contracts to local providers or those that can offer over and above in relation to the social good. In reality, small and medium-sized companies are much more effective at delivering such contracts because they are rooted in their community, because they see the social impact of what they do and because they can have regard to a range of factors beyond just day-to-day profit making.

There is a good example of that, from which I hope the Government have learned. During the commissioning process for the Work programme, some smaller providers, including a number from the voluntary sector, pulled out because they felt that they could not make an impact through their contracts. We can see a good example of the problem of contracts being dominated by bigger companies, with smaller organisations acting as sub-primes, because St Mungo’s, the homelessness charity, pulled out because not one person was referred to it through the Work programme during the period of its contract. It is inconceivable to think that, had St Mungo’s been given the contract directly, it would have been unable to find people who were desperate to get into work and could have benefited from the intervention it could offer.

The hon. Gentleman was right to say that such dominance by a small number of larger companies is not effective at any level—it is not good for the public or for SMEs. This is not just about SMEs getting what they deserve; it is about ensuring that we are delivering the best value for money in our communities and across the country.

In the time I have remaining, I will address the length of time it takes for payment to reach SMEs for the services that they provide. We hear the complaint that bigger companies are contracted and small companies have to act as sub-primes. The Government could do much more to act in instances when they have made a payment to a prime provider but that has not yet reached the smaller company at the bottom of the chain.

[Sammy Wilson]

A possible solution when there is a substantial number of subcontractors is the greater use of project bank accounts. Rather than money being paid to the main contractor, it goes into a project bank account to be drawn out as invoices come in. In Northern Ireland, a main contractor can be excluded from applying for public sector contracts for a specified period of time if there are complaints that it is clearly not abiding by the terms of a contract.

[Lisa Nandy]

I would welcome the Minister’s response to the hon. Gentleman’s intervention.

Although the Government’s record on prompt payment is better than that of the private sector, the National Audit Office found a few weeks ago that the figures are skewed by the Government making prompter payments to a few large suppliers. Astonishingly, it is virtually impossible to assess the record of the Cabinet Office and many other Departments because paper invoices are not dated when they arrive, which is a method commonly used by smaller organisations. Despite the Government’s rhetoric, the situation betrays a casual attitude to something that can be make or break for many small businesses. It would be helpful to know what the Minister has done in the past few weeks to address the situation. Were the Government to pay invoices within five calendar days rather than 30, the reduced interest cost to businesses could be worth up to £88 million, according to the NAO, and the reduced cost to the taxpayer could be up to £55 million. The NAO report called for strategic leadership from the Government and I hope the Minister agrees that it is important that the Cabinet Office leads on this by ensuring that its own suppliers are paid on time.

In conclusion, the Government could draw on the success of other countries. Labour would set up a small business administration that could work to mainstream and hardwire such activity in government. That would require a huge cultural change, but there are small things that the Government could do more quickly, such as taking action on late payments, to signal their intent to unlock one of this country’s biggest assets.

[The Minister for Civil Society (Mr Rob Wilson)]

I am grateful to the hon. Member for South Antrim (Dr McCrea) for securing this debate on such an important subject. I know that much of his concern is born from the experience of a constituency case, and it is absolutely right that he should speak up for small businesses in his constituency. I join him in congratulating all those wealth creators who take the risk of running their own businesses and, ultimately, pay for the public services that we all enjoy.

From the outset, this Government have fully recognised the vital role that small and medium-sized businesses have to play in helping us to achieve the best possible value for money when we buy goods and services. That was why we included in our initial programme for government an aspiration that by the end of this Parliament 25% of direct and indirect Government procurement of goods and services by value should go to SMEs.

That was a bold step considering that, under the previous Government, Departments had no idea how much they were spending on SMEs. After a lot of hard work, we found that it amounted to 6.5% of Government procurement of goods and services in 2009-10, or £3.1 billion. That was a shamefully low figure, given that 95.5% of private sector businesses in the UK are micro-firms—companies with fewer than 10 employees. However, those micro-businesses together accounted for 32% of private sector employment and 20% of private sector turnover.

We recognised that something had to be done to remove the barriers facing SMEs bidding for Government contracts, and we have gone a long way to removing those barriers. During the past four years, we have increased accessibility and transparency, identified and tackled poor procurement practice and provided practical assistance to help SMEs. We are now taking steps to extend those reforms further across the public sector.

In 2011, to increase accessibility, the Government established the Contracts Finder for central Government. That is a one-stop shop to enable suppliers to find procurement and subcontracting opportunities, tender documents and contracts online and free of charge. The Government have also committed, for the first time, to the publication of future contract opportunities to provide greater transparency about future public sector business, and to help suppliers to plan for and win more business.

Contract pipelines also enable the Government to secure deals that offer better value for the taxpayer by allowing for early negotiation with suppliers. The contract pipelines have developed from £40 billion of future spend in 2011 to more than £191 billion on 19 pipelines by December 2014. This information provides a view of major contracting opportunities through to 2020 and beyond, and it includes projected spend on High Speed 2 and the Thames tunnel, to give just two examples.

We have also appointed Stephen Allott as Crown representative for SMEs to be a

“strong voice at the top table”

for SMEs. He works across Government, and with SMEs and their trade associations, to get full value from SMEs and to increase the number of SMEs bidding for and winning Government contracts. We also set up the Cabinet Office SME panel to provide a regular forum for SMEs to raise the issues that concern them most and to hold our feet, as a Government, to the fire.

[Sammy Wilson]

Will the Minister give way?

[Mr Rob Wilson]

I will continue for a little bit longer, if I may, because I have to get through a lot of questions to which I know the hon. Gentleman and others want answers.

To identify poor procurement practice, we have introduced a mystery shopper service. If a supplier encounters poor practice, such as an over-bureaucratic pre-qualification requirement or unreasonable selection criteria, they can blow the whistle and refer that to our mystery shopper service, which will raise it on their behalf with the contracting authority. We regularly publish the outcomes of mystery shopper investigations on the gov.uk website. We have now received nearly 800 mystery shopper cases, with four out of five investigations resulting in a positive outcome.

In addition, the mystery shopper service has started proactively spot checking procurements by examining procurement documents online. We have instigated nearly 500 spot checks to look at a range of aspects of procurement, and have found issues in around 20% of the checks that we have conducted, including burdensome pre-qualification questionnaires.

Some 45 of those spot checks tested compliance with the Public Services (Social Value) Act 2012 and involved asking contracting authorities to set out how they considered the requirements of the Act in the pre-procurement stage of service contracts. The sort of evidence that we look for includes whether any consultation took place with the market, and with current and potential service users, and how the conclusions drawn from such consultation were used to shape the requirement. In total, 20% of the authorities examined were unable to provide sufficient evidence of compliance, so we have advised them to ensure they consider the Act in future.

We are particularly conscious of the burden of pre-qualification questionnaires, which are used to select suppliers to be invited to tender, and the pressure that they can place on SMEs. To address that situation, we have eliminated the use of PQQs in 15 out of 17 Departments for all central Government procurement under the EU threshold of approximately £100,000. The two Departments still using PQQs—the Foreign and Commonwealth Office and the Ministry of Defence—are doing so only for security reasons. For those procurements that still require a PQQ, we have introduced a much simpler standard set of questions, which reduces the burden on suppliers and levels the playing field in terms of financial risk and evidence of experience.

We recognise that being paid promptly is vital to enable SMEs to manage their cash flows and to reduce the amount of time wasted on chasing invoices. We are determined to help businesses to manage their cash flows and to transform the culture of late payment. In 2010, to respond to the point made by the hon. Member for Wigan (Lisa Nandy), the Government reiterated our policy of paying 80% of undisputed invoices within five days and ensuring that the prime contractors pay tier 2 suppliers within 30 days as a condition of contracting with Departments. We expect our suppliers to follow our example on prompt payment and to pay their subcontractors within the 30-day limit. When this does not happen, we encourage suppliers to report late payment to the mystery shopper service.

We know that we need to do more to improve performance across the public sector, however. We have made much progress in the past four years, but following recommendations by Lord Young of Graffham, we now intend to extend these reforms across the public sector to non-devolved bodies such as the NHS and local councils in England.

We intend to introduce measures in the next few weeks to ensure that 30-day payment terms flow down the public sector supply chains into all new contracts, which will ensure that smaller suppliers benefit from prompt payment. Contracts Finder will be extended to become a one-stop shop for public sector contract opportunities. We have fully redeveloped the original site to make it more user-friendly, including by creating a powerful search facility to make it easier to find and bid for work, and providing the ability to look up contracts by location and postcode. The site will function on multiple devices.

I am conscious of the time, but I want to cover as many of the questions that were asked as possible. We heard about EU procurement rules being unwieldy, and we have negotiated a new procurement directive that will improve the chances of SMEs winning public contracts. Regulations to transpose that directive will be introduced very soon.

As for the EU procurement requirement, as part of this year’s new public contract legislation, there will be more open approaches for supplier procurement and a reaching out to more suppliers, including SMEs. The documentation required from SMEs is being reduced to make it easier for them to access opportunities. The UK engaged proactively in negotiations on a new directive on SMEs and EU markets.

I was asked about aggregating demand with regard to helping SMEs. Breaking large contracts into more manageable lots is key to ensuring that SMEs can compete for aggregated deals, and the new procurement regulations will require contracting authorities actively to consider that. The new public contracts regulations will apply across the whole public sector, apart from devolved bodies, and will include Lord Young’s recommendation to abolish PQQs. Under Lord Young’s reforms, we are requiring the public sector generally to advertise contracts on Contracts Finder. This includes an option to highlight any opportunity as applying to an SME.

The hon. Member for South Antrim talked about an individual company. The Highways Agency fully supports the use of Conemaster on its road networks. It has funded its use in road trials, as well as an analysis of its economic performance, which showed that Conemaster demonstrated a positive benefit-cost ratio of 2:1.

I think that is about as far as I will get on answering hon. Members’ questions, but I would like to say finally that we—