Corporate report

Small and medium sized enterprises (SME) action plan: 2023 to 2024

Published 30 November 2023

This was published under the 2022 to 2024 Sunak Conservative government

Foreword

Martin Traynor SME Crown Representative

In my role as the Small Business Crown Representative, I work with all government departments to help make our policies, practices, and procedures simpler for small and medium sized enterprises (SMEs) to navigate. I am also charged with working with the small business community to encourage them to think about bidding for contracts in both central government and the wider public sector.

Having worked closely with colleagues in Defra over the past 4 years, I have always been impressed by their determination and commitment to opening up procurement opportunities for SMEs. I have participated in a number of successful events where Defra played a leading role, bringing together public sector buyers and SMEs from across the country.

This updated SME action plan sets out Defra’s ambition to:

• build on the success of the previous action plan
• continue raising awareness of contracting opportunities for SMEs, both directly and through the supply chain

I look forward to supporting my colleagues at Defra and seeing their plans being put into action.

Lord Benyon, Minister of State (Minister for Biosecurity, Marine and Rural Affairs)

I am delighted to champion Defra’s SME action plan. At Defra we recognise not only that SMEs are fundamental to the UK economy, but also that they offer innovative solutions and a range of specialist skills required by Defra to deliver its strategic priorities.

Defra group is a significant buyer of goods, services and works and recognises the important role SMEs have within its supply chain either directly or in support of its tier 1 (prime) suppliers. SMEs have an important role to play as we continue to promote a competitive and diverse supply chain, encouraging innovation and improving value for money. Defra, along with all central government departments, has committed to diversify our supply chains. We ensure contracts are awarded not only on value for money, but also considering a supplier’s social impact. Including SMEs within our supply chain is key to these commitments.

This plan details our commitment to engage with SMEs throughout our commercial activities and the access we provide to the varied markets required in delivering our departmental objectives. We are committed to continuing to engage with SMEs and will take a pro-active approach to break down any barriers they face becoming suppliers to Defra.

To monitor our progress in this important area we have set ourselves goals to achieve and report against. Performance against these goals will be assured on an annual basis by Defra’s SME champion to add pace to the implementation of the actions outlined. This is in addition to continuing to work closely with our strategic suppliers to use our combined abilities to support SMEs within their supply chains.

Introduction and background

About the Defra group

Defra is the United Kingdom’s government department with responsibility for safeguarding our natural environment, supporting our world-leading food and farming industry and sustaining a thriving rural economy. Our broad remit means we play a major role in people’s day-to-day lives, from the food we eat and the air we breathe, to the water we drink. We also recognise our food, farming and fishing industries include many SMEs and voluntary, community and social enterprise (VCSE) organisations. 

The Defra group has around 27,000 staff. Although the Defra group only works directly in England, it works closely with the devolved administrations in Wales, Scotland, and Northern Ireland, and leads on negotiations with the EU and internationally. Read more about us and what we do.

Purpose of our plan

This action plan sets out how the Defra group will enable SMEs and applicable VCSEs to work with our department. It supplements statements made in Defra’s Outcome Delivery Plan and is one aspect of Defra’s wider sustainable procurement approach which also includes supporting supplier diversity and embedding social value.

Defra group’s nominated SME champion is the Defra group Commercial Head of Supplier Relationship Management. They are responsible for ensuring that the opportunities for SMEs in the commercial activity undertaken by the group are clearly communicated and any barriers faced are addressed. The SME champion is committed to working closely with the category teams and supplier managers across the Defra group to assess and support them in ensuring SMEs have access to opportunities in our future pipeline and through our strategic suppliers’ own supply chains.

Working with our arm’s length bodies (ALBs)

We work with and provide commercial advice for a number of ALBs that are part of the wider Defra group. These ALBs are not directly involved in the management of their commercial activity:

• Animal & Plant Health Agency (APHA)
• Environment Agency
• Marine Management Organisation (MMO)
• Natural England
• Rural Payments Agency (RPA)

SMEs and VCSEs

An SME is any organisation that has fewer than 250 employees and a turnover of less than €50 million or a balance sheet total less than €43 million. A breakdown of the different organisation sizes is in the table below.

VCSEs are voluntary, community and social enterprises which include charities, public service mutuals and social enterprises. Not all VCSEs however will qualify as an SME as set out in table 1. This action plan focusses on SMEs including applicable VCSEs.

Table 1: defining an SME

Business size	Staff headcount	Annual turnover	Balance sheet total
Medium	Less than 250	Under €50 million	Under €43 million
Small	Less than 50	Under €10 million	Under €10 million
Micro	Less than 10	Under €2 million	Under €2 million

Defra suppliers and supply chains

The Defra group buys a range of goods, services, and works which are detailed under the category headings below.

Buildings related purchases:

• science building construction and related services
• office building services
• facilities management, including utilities, catering and furniture
• general refurbishment and minor construction

Corporate services related purchases:

• professional services, including management consultancy (business and technology), finance services and legal services
• workforce, including permanent recruitment, temporary agency labour and contingent labour
• corporate solutions, including travel services, conferencing and events, marketing services, postal goods and services, office supplies, vehicle lease and fleet management, insurance and related services and occupational health and employee assistance

Environmental goods and services related purchases:

• evidence, research, and environmental equipment, including environmental surveying, monitoring, research, and services
• land use and biodiversity technical services, including expert advice and associated operational services
• veterinary, animal, plant and laboratory goods and services, including disease prevention and control services, laboratory consumables, equipment, maintenance services and testing services

Grants and grant prominent programmes related purchases and grants:

• land-based grants and related services, including the Nature for Climate Fund (NCF)
• marine-based grants and related services, including the UK Seafood Fund and the Fisheries Fund
• Official Development Assistance (ODA) services and related grants supporting international programmes

Infrastructure related purchases:

• regional flood and coastal defences, including related design and build contracts and supporting professional services
• civil engineering and operational maintenance for flood and coastal defences

Science Capability in Animal Health (SCAH) programme purchases:

• High Containment works for complex building structures, typically greater than £20 million
• enabling and infrastructure works, across a secure and operationally critical site
• procurement of High Containment Professional Services to support all aspects of a major programme

Technology related purchases:

• service infrastructure, including services for hosting and data centres, connectivity of our networks and telecoms and mobiles
• service operations, including products and services for the digital workplace, managed print, software and security and IT equipment and hardware
• business applications, including application development and maintenance

Our SME spend

The direct spend with SMEs is reviewed and reported monthly to Defra group Commercial senior management team. Quarterly spend data is also shared with the Cabinet Office (CO) who on behalf of government publish all Departmental SME figures.

Defra has a positive track record in the delivery of SME third party spend as detailed in the tables below. Further data is available about the central government spend with SMEs.

Table 2: Defra SME spend by year

Year	Direct SME spend	Indirect SME spend	Non-SME spend	Total spend
2019 to 2020	£232 million	£103 million	£930 million	£1,265 million
2020 to 2021	£254 million	£108 million	£1,352 million	£1,714 million
2021 to 2022	£351 million	£44 million	£1,310 million	£1,705 million

Our commitment

Our action plan will continue our commitment to build our engagement with SMEs over the life of this plan and throughout the commercial lifecycle.

Theme 1: Visibility and transparency

Our pipeline of requirements

We seek to continuously improve our pipeline visibility and make it of value to SMEs through publication of future opportunities directly from our eSourcing system.

During 2022 to 2023, we commenced publishing pipeline notices directly from our eSourcing system. SMEs are encouraged to visit the Find a Tender Service (FTS) to check on upcoming opportunities across government. We ensure opportunities are marked ‘SME suitable’.

Data and information

We commit to:

• building on our current recording and reporting of SME spend data which covers both direct and indirect spend data annually
• continuing to work on improving the accuracy of the SME classification with an automated process
• promoting transparency of SME figures across the Defra group Commercial teams
• increase reports available for self-serve and internal reporting
• continuing to capture SME awards at contract award stage
• confirming Defra group Commercial is ready to adopt Cabinet Office Find a Tender Plus - the project name for a digital service which will deliver a new solution for buyers and suppliers involved with UK public sector procurement

We also commit to reducing the number of standard terms and conditions across Defra group to enable clearer and more consistent terms of agreement between client and supplier.

Theme 2: Building our expertise

Best practice database

We will develop a best practice database for use within our category teams and contract and supplier management community within Defra group. This will highlight SME and VCSE involvement in commercial activity including signposting to good practice elsewhere across government. We will embed a knowledge sharing approach with stakeholders within Defra and with our supplier base.

Access for SMEs

Defra group Commercial will continue to embed sustainability and social value considerations in our procurement opportunities. For example, COVID-19 Recovery and Tackling Economic Recovery Themes are social value benefits that are being leveraged to increase supply chain resilience and capacity. They enable sub-contracting, access greater innovation and grow our supply chain diversity to support SMEs.

We have increased the social value weighting in bid evaluations to a minimum of 10% which we monitor as part of our governance and approvals process for contract awards. We will report on how many contracts awarded have social value benefits embedded.  The Procurement Policy Note 06/20 sets out how to take account of social value in the award of government contacts.

We will ensure all Procurement Policy Notes (PPNs) relating to SMEs are fully reflected in our refreshed category strategies, such as specific consideration of applying PPN 11/20: reserving below threshold procurements to deliver improved access for SMEs to our opportunities.

Contract management and prompt payment

We will support SMEs by ensuring our contract obligations are met, including prompt payment within 30 days of invoicing. Where SMEs are sub-contractors we will work with our strategic tier 1 suppliers to ensure the same. We have implemented the PPN ensuring that captured tier 1 suppliers are advertising new sub-contracting opportunities on Contracts Finder.

Defra will continue to improve how it supports payment to SMEs and ensure we support prompt payment initiatives for payments made to tier 1 suppliers and those from tier 1 suppliers to their sub-contractors in line with PPN 08/21: taking account of a bidder’s approach to payment in the procurement of major government contracts.  All suppliers of ‘Gold’ tiered contracts are encouraged to sign up to the Prompt Payment code as part of the Key Performance Indicators.

Category strategies

Our category strategies set out how we encourage SME participation including:

• varying routes to market such as lotting strategies that support SME and VCSE involvement whether as a direct supplier or as part of a tier 1 supplier’s supply chain
• requiring transparent plans from tier 1 suppliers for their supply chain including how they will engage with SMEs
• use of Crown Commercial Services (CCS) Frameworks (with committed 35% SME coverage) including G Cloud agreements
• where appropriate use PPN 11/20: reserving below threshold procurement where it could deliver improved access for SMEs

CCS is the national procurement partner for the UK public sector and provides a route to market for common goods and services. CCS commercial agreements are published as frameworks, catalogues, and dynamic purchasing systems (DPS) where details of these and how to access them as a supplier can be found on crowncommercial.gov.uk. Read guidance on how to become a CCS supplier.

Over the life of the action plan we will:

• develop market specific intelligence on SME presence for a given category, including the extent of these organisations within supply chains of tier 1 suppliers
• engage business owners for Defra group’s major programmes to review opportunities to expand use of SMEs and VCSEs and as part of Defra’s wider sustainability agenda
• strengthen use of the Sustainability Risk Management Tool at the outset of procurements to capture issues and opportunities for SME involvement in a procurement - this information will be captured on our eSourcing system to enable accurate reporting

Theme 3: Market engagement

Pre-market engagement

We will seek opportunities to engage with SMEs and their trade organisations to understand market drivers, innovation opportunities, capability and improve visibility of opportunities. We will hold pre-market engagement events (both in person and virtual) to encourage SMEs to work with us, either directly or through our supply chain. We will clearly explain our procurement process.

Simplified procurement processes

Defra will continue to use standard forms of contract, such as the Model Service Contract, Mid-tier Contract and Short Form Terms and Conditions. We have commenced a review of procurement documentation to reduce complexity of tender documentation and will look to ensure consistency with CCS templates as appropriate. The 12 key barriers for SME involvement identified by the Cabinet Office Small Business Advisory Panel continue to be addressed in our Procurement Policy and process guidance materials.

Strengthened governance, leadership, advocacy and challenge

We will:

• continue to attend Cabinet Office SME Champions group and regularly engage with the Cabinet Office Small Business team
• continue to develop SME reporting and monitoring of annual Indirect SME spend supply including trend analysis
• embed this action plan within the wider Defra group work on sustainability and supplier diversity
• review progress against the action plan twice yearly including reporting progress to Defra Corporate Service Board, Cabinet Office and annually to Defra group Executive Committee
• review annually and update the actions for the following year which will be signed off by the Defra group Commercial Chief Commercial Officer

Future years’ actions may include establishing a stakeholder forum led by our SME champion involving Category teams, Supplier Relationship Managers and Contract Managers from across Defra and ALBs to oversee delivery on this action plan.

Additional considerations 

Even with the above specific commitments to increase visibility of opportunities and engagement with SMEs, we recognise that there are challenges. For example, we have seen over the past year some SME suppliers to Defra being reclassified as non-SME due to the growth of their businesses, which is very positive and demonstrates success of our work with SMEs to this date. We will work with SMEs and with tier 1 suppliers using SMEs to develop case studies that demonstrate continued growth even where status has changed.

Some of our requirements may not be possible to be delivered by SMEs due to the scale that is required to support critical services. We recognize that therefore opportunities may lie in our indirect spend and we will work with our tier 1 suppliers to ensure the promotion of opportunities within their supply chains.

Our commitment to working with SMEs is clear from this action plan but it should not be taken as a guarantee that either spend with SMEs will increase, or that a specific number of contracts will be awarded to SMEs. There can be no commitment or representation on the part of Defra (or any other person) that any contractual arrangement will be entered into, or that we will proceed with any specific procurement.

Our actions

Theme 1: Visibility and Transparency

Action 1

Review our current contracts and procurement needs to understand which opportunities are available for SMEs and make these clear on our published pipeline, published direct from our eSourcing system.

Owner: Heads of Category

Target delivery date: Q2 2023 to 2024

Action 2

Confirm Defra group Commercial is ready to adopt Cabinet Office Find a Tender Plus to enable smoother supplier registrations

Owner: Commercial Operating Office Lead

Target delivery date: Q1 2024 to 2025

Action 3

Improve efficiency of procurement systems by simplifying eSourcing system sign-up and removing supplier duplication on Purchase to Pay system, speeding up processes and payments.

Owner: Commercial Operating Office Lead

Target delivery date: Q3 2023 to 2024

Action 4

Reduce the number of standard terms and conditions available across Defra group to facilitate streamlined supplier sign-off, particularly for SMEs.

Owner: Commercial Operating Office Lead

Target delivery date: Q3 2023 to 2024

Theme 2: Building Expertise

Action 5

Share best practice case studies with Commercial and Contract Management communities across Defra group.

Owner: Commercial Operating Office Lead

Target delivery date: Q3 2023 to 2024

Action 6

Ensure all our Procurement Strategies set out how we will engage with potential suppliers to share our requirements and seek to understand market drivers, innovation opportunities and capacity. We will ensure all PPNs relating to SMEs are fully reflected in our refreshed category strategies. This will include market engagement events (both in person and virtual) that target specific sectors where we believe SMEs can help deliver our programme of work.

The number, feedback and outcomes of such events will be recorded in Contract Award Reports and disseminated to relevant Defra group Commercial Category teams.

Owner: Heads of Category

Target delivery date: Q3 2023 to 2024

Theme 3: Market Engagement

Action 7

Engage with business owners in Defra group to encourage use of MyBuy platform. MyBuy will provide guidance to buyers in selecting fit-for-purpose suppliers and expanding SME access to procurement opportunities.

Owner: SME Champion

Target delivery date: Q2 2023 to 2024

Action 8

Implement and continuously improve risk management actions on Sustainability and Supplier diversity within the Commercial lifecycle. 

Owner: SME Champion

Target delivery date: Q3 2023 to 2024

Action 9

Conduct an annual Indirect SME spend supply survey to identify 3rd Party SME spend. Align with Voice of the Supplier survey to critical suppliers targeting SME supply chain activities.

Owner: SME Champion

Target delivery date: Q4 2023 to 2024

Action 10

Provide twice yearly updates on action plan progress to Defra Corporate Service Board and annually to Defra group Executive Committee.

Provide quarterly progress reviews with Cabinet Office as part of regular engagement meetings. 

Owner: SME Champion

Target delivery date: Ongoing

Action 11

Refresh this action plan on a yearly basis.

Owner: SME Champion

Target delivery date: December 2025

Further information

Procurement at Defra provides details of our purchasing arrangements and information for those looking to become a supplier.

Notices of our procurement opportunities are published on Contracts Finder and Find a Tender.

Central government spend by department with SMEs in recent years both directly and through the supply chain.

Check when large businesses pay their suppliers and the proportion they do not pay on time.

For any questions about this SME Action Plan, please email procurement@defra.gov.uk.