Govt opens up IT contracts to small businesses

Tuesday 28 January 2014

For those in the IT sector considering becoming a limited company or starting a small business, the good news is that it will soon be easier to tender for public contracts.

The government has opened up the sector by introducing a series of "red lines" - hard and fast rules to ensure a small few don't have the monopoly on public IT contracts.

Making the announcement, Cabinet Office minister Francis Maude explained that the changes will help ensure maximum taxpayer value is extracted from services, while giving more opportunities to small to medium-sized enterprises (SMEs).

Opening up the market in this way will create greater competition and liberate the government from "longstanding inflexible contracts with IT providers".

This is all part of the government's attempt to improve procurement and ensure smarter purchasing decisions are taking place.

Already, £3.8 billion in savings have been made across government departments between 2012 and 2013.

Keeping a closer eye on IT spending, in addition to pushing forward with the digitisation of services, also saved £500 million.

The new red lines are hoped to lower expenditure further. Policies include the prevention of IT contracts over £100 million in value, unless there is an exceptional reason to do so. The government claims that the creation of smaller contracts will make it easier for SMEs to bid, thereby increasing competition.

Companies with a contract for service provision will also be prohibited from providing system integration in the same part of government.

Meanwhile, no automatic contract extensions will take place and new hosting contracts will last no longer than two years.

"Big IT and big failure have stalked government for too long; that is why this government is radically rethinking the way it does business," Mr Maude said.

"We are creating a more competitive and open market for technology that opens up opportunity for big and small firms. These red lines will ensure the government gets the best technology at the best price and we will be unashamedly militant about enforcing them to provide value for hard-working taxpayers."

Levelling the playing field for those tendering for IT contracts has already begun. Indeed, more than a third of companies building digital public services are now on a new procurement framework. Eighty-four per cent of these firms are SMEs, demonstrating how the market is opening up.

Liam Maxwell, chief technology officer, stated: "To create the efficient and responsive services that the public demands, government must have access to the most innovative, most cost-effective digital solutions.

"That means going to the widest range of suppliers, and giving ourselves every opportunity to renegotiate and reassess contacts."

He added that it doesn't make sense to extend a contract that was created with old technology and pricing in mind.

"These red lines make clear that we are doing business in a different way," Mr Maxwell said.

To ensure the government is living up to its promises, the Office of Fair Trading has begun an investigation into public sector IT procurement to ensure there is enough competition in the market and SMEs have proper access to opportunities.

By Victoria McDonnell

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