Corporate report

HMRC SME Action Plan 2021 to 2022

Published 27 January 2022

1. Introduction and background

1.1 Government small and medium enterprise (SME) agenda

Small businesses make up 99.9% of the business population.

A key objective is to increase growth for SMEs and drive forward the national economy, with these businesses accounting for approximately 60% of the total workforce and 50% of total turnover in the UK private sector^{[footnote 1]}.

SMEs can also fulfil some niche services not provided by larger organisations and provide contingency and flexibility to support public services.

Various measures have been introduced to make public procurement more accessible to SMEs. The main aims are to:

• facilitate engagement with SMEs
• promote an ‘SME-friendly’ procurement process
• strengthen relationships with Tier 1 suppliers (suppliers engaged directly by HMRC) to help promote SMEs within their supply chains

The content of this action plan relates to the April 2021 to March 2022 financial year.

1.2 About HMRC

HMRC is a non-ministerial government department responsible for the collection and management of revenue to pay for the UK’s public services, as well as the payment and management of tax credits. We have an annual procurement spend in excess of £1.6 billion (based on 2019 to 2020 financial year expenditure), across 3 main categories:

• IT
• Property and Facilities Management (P&FM)
• Corporate Services

We are currently undertaking an ambitious programme of transformation, changing and improving our services to customers and increasing our efficiency and effectiveness.

Examples of our transformation initiatives include:

• the professional services and contingent labour programme ensures we shape resourcing operating models in line with our Workforce Plan appropriately across HMRC, selecting the most appropriate approach in each case - sourcing routes allow for participation of SMEs through direct engagement and in the supporting supply chain
• our IT transformation programme involves modernising our technology infrastructure, including making greater use of cloud services - we have already successfully disaggregated our ASPIRE IT contract into smaller, more manageable lots
• as part of our Building our Future Locations programme, we are migrating our workforce to 13 new regional centres across the UK - when our legacy Property and Facilities Management Private Finance Initiatives expire in 2021, we’ll transition to Full Repair and Insure (FRI) leases, with facilities management (FM) services provided by regional suppliers

These and other transformational programmes across HMRC present exciting opportunities for SMEs, both through direct contractual relationships, as well as indirectly, through our prime contractor supply chain. 

2. Our SME expenditure

2.1 SME expenditure 2014 to 2020

The table below illustrates our total contracted expenditure with SMEs between 2014 and 2020. The data also includes a breakdown of direct and indirect SME expenditure during this period (figures have been rounded).

Financial Year	Total net procurement spend	Direct SME spend (% net total)	Indirect SME Spend (% net total)	Total SME spend (%net total)
2014 to 2015	£1.372 billion	£137 million (10%)	£119 million (9%)	£256 million (19%)
2015 to 2016	£1.441 billion	£160 million (11%)	£117 million (8%)	£277 million (19%)
2016 to 2017	£1.576 billion	£216 million (14%)	£126 million (8%)	£342 million (22%)
2017 to 2018	£1.470 billion	£151 million (10%)	£132 million (9%)	£283 million (19%)
2018 to 2019 [footnote 2] [footnote 3]	£1.492 billion	£143 million (10%)	£173 million (11%)	£316 million (21%)
2019 to 2020	£1.642 billion	£145 million (9%)	£198 million (12%)	£343 million (21%)

2.2 HMRC SME expenditure by category 2019 to 2020

The table below shows the breakdown of spend for 2019 to 2020 across the IT, P&FM and Corporate Services categories (figures have been rounded). Spend coded as ‘uncategorised’ in our procurement tool is not included in this breakdown^{[footnote 4]}.

Category	Total category spend	Approximate % direct SME spend	Approximate % indirect SME spend
IT	£857 million	3%	13%
P&FM	£416 million	22%	9%
Corporate Services	£332 million	8.5%	14%

3 Future procurement pipeline

This section highlights anticipated upcoming procurement opportunities that may be suitable for participation by SMEs and highlights how each category encourages SME engagement.

3.1 IT category

IT category expenditure is split across the following main service areas:

• Data and Analytics
• Managed Print
• Managed Desktop
• Enterprise Tax Management Platform (ETMP)
• Enterprise Operations Platforms (EOPS)
• Wide Area Network (WAN)
• Cloud Operations Services
• Digital Delivery Services (DDS)
• Core Business Application Maintenance and Support
• Test and Release
• Cyber and Security
• IT Strategy and Architecture Advisory
• Service Integration Services

HMRC has initiated a Technology Sourcing Programme (TSP) to manage the renewal of a significant proportion of its key IT contracts over the coming 2 years.

We’ve developed a new IT sourcing approach that will increase our flexibility to work with a growing range of providers, giving us greater access to innovation in the marketplace.

As part of TSP, we anticipate being able to split down our large contracts into smaller packages of work, providing an increased number of opportunities suitable for direct and indirect SME participation. The programme has started reaching out to suppliers via market engagement events.

We are aiming to generate wide interest in our plans among a range of suppliers - big and small – to ensure we get the best possible responses to future procurement exercises.

As well as communicating directly to the IT supplier industry, we are using our colleagues in the Crown Commercial Service (CCS) to promote the opportunities TSP can offer through their frameworks. In addition to the TSP programme, we continue to:

• encourage our prime suppliers to include ‘SME showcases’ at their annual innovation days
• require our prime suppliers to increase their use of SMEs and improve data collection methods highlighting SME usage in our supply chains
• enable many SMEs to develop commercial software for end users of our services, through our application programming interface (API) development programme
• deliver governance processes that ensure SMEs are considered at key stages of the procurement lifecycle

New procurement activities anticipated to be undertaken during the 2021/22 period provide further opportunities for SMEs. Those over £1 million potentially suitable for SMEs include those in this table.

Contract	Estimated contract value	Estimated procurement start	Suitable for direct/indirect SME participation?
Delivery and Implementation Partner for information Security Management Systems	£2,000,000	April 2021	Indirect
Application Remediation Services	£6,000,000	April 2021	Indirect
TSP Phase 2 Advisory and Development Services	£30,000,000	April 2021	Indirect
Enterprise Security Risk Management Delivery Partner	£1,000,000	April 2021	Indirect
Support of HMRC Crown Hosting Environment	£15,000,000	June 2021	Indirect
HR Cloud Application	£1,400,000	June 2021	Indirect
DPS ‘Platform’ professional services	£9,000,000	June 2021	Indirect
DPS ‘Search’ professional services	£5,000,000	June 2021	Indirect
DPS ‘Advanced’ professional services	£5,500,000	June 2021	Indirect
Documentum Configuration Support	£10,000,000	June 2021	Indirect
SAP Ariba Cloud Services	£4,500,000	Dec 2021	Indirect
Programme Agile Delivery Partner	£8,000,000	Dec 2021	Indirect
Microsoft Dynamics Best of Breed Partner	£8,000,000	Feb 2022	Indirect
Continuous Delivery Capability for Multi-Channel Digital Tax Platform	£4,600,000	Feb 2022	Indirect

3.2 Property and Facilities Management (P&FM) category

P&FM category expenditure is split across the following main service areas:

• Projects and Fit Out (eg fit out of new HMRC regional centres and refurbishment work to the existing HMRC estate)
• Hard Facilities Management and Utilities (eg reactive building maintenance and gas supply)
• Soft Facility Management and Security (eg cleaning and CCTV monitoring)
• Professional Services (eg consultancy services)
• Furniture, Fixtures and Equipment

The high value of many contracts within the Facility Management and Projects and Fit Out space means there may be limited scope for direct participation by SMEs for much of the category’s expenditure.

We are however keen to engage SMEs throughout our wider supply chain wherever possible. A number of these contracts utilise high numbers of SMEs via Tier 2 and Tier 3 suppliers (suppliers not engaged directly by HMRC, but used as part of the wider supply chain to deliver HMRC contracts), with up to 90% of these suppliers classified as SMEs in some areas.

For many Facility Management and Security contracts, we have also set the ambitious target that 33% of our Tier 1 contractors supply chain be made up of SMEs.

There is however greater opportunity for direct SME participation within areas such as Furniture, Fixtures and Equipment due to the associated lower contract values. As a relevant example, a recent agreement awarded to 9 suppliers included 7 SMEs.

In addition to setting supply chain targets for new contracts, we are looking to improve SME engagement further through the following methods:

• continue to work with Tier 1 contractors to promote SME engagement through their supply chains and track contractual obligations via KPI performance
• ensure Facility Management contracts consistently meet SME usage targets
• provide more opportunities for SMEs within the utilities space
• actively work with our strategic procurement partners, such as the CCS, to ensure routes to market are suitable for SMEs
• promote the direct use of SMEs wherever possible for suitable technology contracts, such as our Estates Digital Blueprint project
• continue to work with internal stakeholders to ensure procurement activity is streamlined and SME-friendly

New procurement activities anticipated to be undertaken during the 2021 to 2022 period provide further opportunities for SMEs. Those over £1 million potentially suitable for SMEs include the ones in this table:

Contract	Estimated contract value	Estimated procurement start	Suitable for direct/indirect SME participation?
Design Services GPA Hubs Programme	£4,000,000	June 2021	Indirect
EU Transition Infrastructure Design and Build Project	£7,500,000	July 2021	Indirect
Project Management and Cost Management Services for HMRC Locations Programme	£2,100,000	January 2022	Indirect
Design Services for HMRC Locations Programme	£3,400,000	January 2022	Indirect

3.3 Corporate Services category

Corporate Services category expenditure encompasses areas such as:

• travel and events
• communication services including print and scan
• post and courier services
• fleet management
• logistics
• financial and banking services
• consultancy
• contingent labour
• other specialist HMRC requirements

While there are opportunities to increase direct engagement with SMEs across the Corporate Services sector, the scope to do so is somewhat limited. The reasons for which include:

• some of our larger areas of expenditure, such as financial and banking services, and logistics, may not be suitable for direct delivery by SMEs due to the high values and service requirements associated with these contracts
• many contracts are awarded through pre-existing CCS arrangements, of which we are unable to influence the suppliers available

We are however working hard to explore opportunities for SME engagement in light of changing market dynamics, such as the introduction of more SMEs to sectors that were traditionally dominated by larger organisations.

For example, we have identified a number of areas in the Financial Services category which could be delivered by the diverse and SME-led Fintech sector in order to bring innovation to HMRC whilst ensuring value for money.

We are therefore looking at methods for engaging these suppliers as part of the associated procurement procedures.

We have considered those areas where there are opportunities for both direct and indirect SME participation. Our strategic pipeline summarises our current procurement activity along with anticipated projects up to 2022, with several priority projects relating to Resourcing, Financial Services and Core Customs requirements anticipated to be delivered during the next 12 months.

New procurement activities anticipated to be undertaken during the 2021 to 2022 period provide further opportunities for SMEs. Those over £1 million potentially suitable for SMEs include:

Contract	Estimated contract value	Estimated procurement start	Suitable for direct/indirect SME participation?
Inland Border Facilities (IBF) Enduring Site Services Operator	£700,000,000	October 2021	Indirect

4. Our SME action plan

This section outlines our strategy and initiatives to raise SME engagement across HMRC.

Our action plan focuses on 5 key areas:

• promoting the SME agenda
• simplifying the procurement process
• SME engagement
• supply chain engagement
• SME engagement targets

4.1 Promoting the SME agenda

We have been successful in raising the profile of the SME agenda across HMRC in 2020 and we will continue to build on this in 2021 and beyond. Our initiatives include:

• appointing an SME champion to promote the SME agenda across the department
• implement findings from a recent ‘buyers survey’, to raise awareness levels amongst our buyers, contract managers and category leads
• updating our Standard Operating Procedures to promote the SME agenda, and holding SME training and awareness events for our staff

• continuing the engagement of the cross-functional steering group of commercial ‘SME ambassadors’, which meets monthly to:

  • pro-actively identify forthcoming opportunities for SMEs across the 3 category pillars (IT, P&FM and Corporate Services)
  • stimulate ideas and innovation, share best practice and coordinate commercial activity to help HMRC to achieve its SME target
• incorporating the SME agenda into our category strategies and plans
• as part of our ‘sign on’ process for all procurement activity, requiring category leads to confirm that the SME agenda has been considered as part of the sourcing strategy and that SME-focused initiatives have been incorporated wherever possible, including splitting contracts across smaller packages of work where appropriate
• promoting the SME agenda across HMRC business units at an earlier stage in the procurement process and supporting the formulation of business requirements to encourage increased SME engagement

4.2 Simplifying the procurement process

We endeavour to make it easier for SMEs to bid for our work by:

• streamlining the number of questions included in procurement processes wherever feasible
• reviewing and amending our own terms and conditions and procurement documentation to ensure they are ‘SME-friendly’ and make government procurement more attractive to SMEs
• dividing our contracts into smaller lots where possible
• implementing a feedback mechanism at the end of relevant tenders to gather information from bidders on how we can improve future procurement processes and make them easier for participation
• use of less complex procurement processes such as framework mini-competitions, making it easier for pre-qualified SMEs to bid

4.3 SME engagement

Our aim is to improve visibility of opportunities for SMEs to contract with HMRC and our supply chain through several different initiatives, including:

• presenting at national cross-government ‘Meet the Buyer’ events
• working with the Small Business Crown Representative, the SME Policy Adviser in Cabinet Office, and SME champions in other government departments to share innovative ideas and best practice and to provide support and mentoring for SMEs interested in bidding for government work
• developing our market and supplier intelligence functions to enable our category leadership teams to engage with HMRC business units and influence upstream procurement strategy decisions at an earlier stage
• developing and publishing a commercial pipeline, which will give the market advance visibility of opportunities
• increasing our use of the internet and social media to promote and signpost opportunities
• undertaking more extensive pre-market engagement for procurements including using Prior Information Notices (PINs), and hosting supplier information days
• using Contracts Finder to publish opportunities over £10,000
• engaging with several key suppliers to promote the Contracts Finder service for their own sub-contracting opportunities.
• working with CCS to identify cross-government opportunities, share commercial intelligence (for example, on emerging markets and suppliers) and capitalise on collaborative opportunities between departments
• conducting interviews with key stakeholders to understand the areas they feel are key to improving SME spend
• presenting to potential SME suppliers, at ‘Meet the Buyer’ events and through a series of webinars, on ‘de-mystifying public procurement and the bidding process’
• identifying upstream opportunities across business areas and hosting innovation and ‘Dragon’s Den’-style events for IT and digital suppliers
• use of SME-friendly frameworks to provide a streamlined process for SMEs bidding for HMRC contracts
• implementation of a post- tender SME bidder feedback mechanism, to capture areas for improvement to help inform future procurement opportunities
• developing case studies based on awards to SMEs which give the supplier perspective of contracting with government and feature feedback and interviews with the successful supplier

4.4 Supply chain engagement

Our aim is to increase our indirect spend with SMEs through our supply chain wherever possible. Our initiatives include:

• working with key suppliers to use Contracts Finder to advertise sub-contracting opportunities
• obtaining SME data on indirect spend directly from our suppliers, and making reporting on SME spend a contractual requirement for key suppliers
• influencing our large contractors to develop their SME networks and eco-systems
• making SME engagement (including development plans and targets) a standard agenda item at Supplier Relationship Management (SRM) meetings with key HMRC suppliers

4.5 SME engagement targets

We are implementing several initiatives to improve SME data collation, review and reporting, including:

• facilitating comprehensive SME data collation and ensuring our SME data reporting is accurate
• developing a procurement pipeline to enable us to understand future contractual commitments and better inform our SME spend forecasting
• refining our SME performance hub, which tracks progress against our direct and indirect spend targets and is reviewed by our Chief Commercial Officer and Commercial Senior Leadership Team (SLT) on a monthly basis, and by our Chief Finance Officer (CFO) quarterly

5. Risks to delivery of the plan

We recognise that notwithstanding our extensive programme of targeted activity to increase SME engagement, participation in sourcing events and, ultimately, spend, there are several challenges to be overcome. For example, some of our critical services require 24/7 business continuity across key parts of our IT estate, which some SMEs may struggle to support.

Our aspirational SME spend targets across certain areas are, therefore, largely based around indirect spend and we are working with our key suppliers to promote the SME agenda through the supply chain.

An additional challenge, which in many respects demonstrates the ‘success’ of our SME strategy, is that several existing SME suppliers have been reclassified.

These suppliers, who have now been awarded a significant amount of work across government, no longer meet the definition of SME and hence our procurement spend with them is no longer in scope for contributing towards our SME spend target.

While we are committed to providing more opportunities for SMEs, we are unable to guarantee that there will be new, different, or a greater number of opportunities for SMEs over the coming months or years, or that any such opportunities will result in increased SME participation or spend with SMEs, or that a particular contract or a specific number of contracts will be awarded to SMEs.

Neither the issue of this SME action plan, nor any of the information presented in it, should be regarded as a commitment or representation on the part of HMRC (or any other person) to enter into a contractual arrangement or to proceed with a procurement.

6. More information

See Procurement Policy Note – Reforms to make public procurement more accessible to SMEs.

See our Procurement in HMRC pages for more on how our procurement process is organised.

See the Small and Medium Business Hub for more on how central government departments are supporting SMEs.

1. Source: Department for Business, Energy & Industrial Strategy- Business population estimates for the UK and regions 2020: statistical release. ↩

2. HMRC’s reported SME expenditure for 2018 to 2019 includes an extrapolated figure in respect of its indirect SME expenditure, calculated and applied by Cabinet Office. See Central Government Direct and Indirect Spend with Small and Medium sized Enterprises 2018/19 for further information (published 29 January 2020). (Extrapolation method: using the average % of indirect spend reported by large suppliers to a department as the indicative % for all indirect spend. This extrapolation was applied to departments that reported indirect spend on at least 70% on their spend). ↩

3. HMRC spend data has been updated following a reported change and error identified in the FY2018 to 2019 figures. This has therefore been amended for accuracy and transparency. ↩

4. Spend coded as ‘uncategorised’ in our procurement tool is not included in the table at section 2.2. ‘Uncategorised’ spend (£37.21 million in 2019 to 2020) relates to capital expenditure, project spend, and spend that has not been matched to an appropriate category code in our procurement tool. Work continues to resolve this. ↩