The forgotten links in the government’s supply chain

The forgotten links in the government’s supply chain

Posted by Admin on 20 March 2018

Following the collapse of Carillion earlier this year, the top government outsourcers have been in the public eye. But whilst it is important to scrutinise the big players, it is easy to forget the day-to-day reality of public procurement. 

Whether it is coaches driving children to school or carers delivering home support to the elderly, there are thousands of suppliers working with government to keep the public sector running.

The attention is often focused on the ‘Strategic Suppliers’ – the 27 companies such as Capita, G4S and Serco that are deemed by the Cabinet Office to be particularly significant to the wider public sector1. Yet Tussell analysis of data from the UK’s official procurement portals shows that the vast majority of activity takes place away from these firms. 

In 2017, the Strategic Suppliers, along with their subsidiaries and joint ventures, won £6.5B worth of awards and an estimated £4.7B of frameworks (essentially preferred supplier lists2). This represented just 11% of total award value and 3% of total framework value issued across the wider public sector last year.

Although their absolute award value increased slightly between 2016 and 2017, the Strategic Suppliers still represent a small proportion of value overall.

Strategic Suppliers - Award and Framework Value

Strategic Suppliers: Award and Framework Value 2017

Crucially, the number of suppliers sharing the rest of public sector business is growing every year. In 2015, an average of 2,500 different suppliers won contracts each month but by 2017 this had risen to nearly 3,100.

Number of Distinct Suppliers by Month

Number of Distinct Suppliers by Month

A large proportion of these suppliers are small and medium-sized enterprises (SMEs). In 2017, SMEs accounted for 50% of the total volume of contracts issued across the public sector, up from 48% in 2016 and 46% in 2015. This is undoubtedly a positive – and rather overlooked - trend.

Award & Framework Volume: SMEs vs Large Companies

Distinct suppliers: SMEs and Large Companies

The government's ever-expanding supply chain is supporting businesses right across the country: 85% of suppliers to the wider public sector are based outside of London, with particular clusters in Scotland, the North West and the South East.

Distinct Suppliers by Region (Since Jan 2015)

Government contracts play a crucial role in the success of thousands of companies in the UK, in turn creating jobs and promoting growth.

The public sector will always be dependent on large suppliers to achieve economies of scale or utilise their experience in delivering complex projects. But we should not forget the rest of the government’s supply chain and the progress being made in opening it up to more and more SMEs.

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1 For more information on the Strategic Suppliers, see this update from the Cabinet Office.

2 The reported value of frameworks (essentially preferred supplier lists) is the maximum value that could be issued over the course of the agreement. We estimate framework value by dividing this maximum amount equally between all suppliers listed on the agreement.

Tussell uses public sector information (a) licensed for use by the UK Government under the Open Government Licence v3.0 and/or (b) from the EU Tenders Electronic Daily website licenced for re-use by the European Commission. This information remains the copyright of the UK Government and European Commission respectively.​