Guidance

DfT actions for improving business opportunities for SMEs

Updated 26 January 2023

Foreword from Rt Hon Jesse Norman MP, SME Minister, Department for Transport

I am delighted to have taken on the role of ministerial champion for small and medium-sized enterprises (SMEs) at the Department for Transport (DfT).

SMEs constitute 99% of all companies operating in the United Kingdom (UK). They are widely recognised as essential to the creation of sustained economic growth, greater productivity and innovation, as well as the continuing vitality of communities across the UK.

They are also a key part of the vibrant construction sector supply chain needed to deliver the ambitious portfolio of transport projects promoted and supported by the DfT.

The DfT in the year 2021/22 had the second largest capital expenditure (CDEL) in Whitehall, amounting to £19.2 billion. This scale of investment into our economic infrastructure brings with it huge opportunities for SMEs to participate in the delivery of these programmes.

Accordingly, the department is working to ensure that SMEs have better visibility of potential opportunities through the publication of its commercial pipelines and those of its arm’s length bodies, as well as the inclusion of all opportunities above a set amount in the find a tender portal. It is also committed to enhancing its engagement with small businesses and ensuring that larger suppliers treat SMEs fairly, including through prompt payment of undisputed invoices.

This DfT SME action plan sets out how the department plans to enhance its spend with SMEs and promote innovative ways of engagement to increase the transparency of opportunities and spend.

Its work over the past six years has seen it outperform against each of the annual targets for SME participation in our supply chains and the delivery of 34.1% participation against its 32% target in financial year 2020/21.

This refreshed SME action plan is designed to expand and accelerate this work. Together with my colleagues and officials will be regularly reviewing progress against this plan and our targets with the DfT commercial director and the DfT SME champion. Any SMEs with well-considered and practical ideas to contribute to this work are welcome to contact these key officials or myself via [email protected]

Jesse Norman MP

Executive summary

In 2017 the government set a target for 33% of all procurement spend to be with SMEs by 2022. The Prime Minister asked each department to prepare an SME action plan to achieve. This is the latest update of our SME action plan.

There are three main policies supporting the SME agenda:

• prompt payment. From 1 April 2022, bidders for new contracts are required to provide evidence they have paid 95% or more of their invoices in 60 days or 90% to 94% of their invoices in 60 days and agree to an action plan. Procurement Policy Note 08/21

• transparency to tier 2. DfT group contact key suppliers who are responsible for the top 80% of spend with DfT to ascertain spend with SMEs. Procurement Policy Note 01/18

• reserved contracts. Departments have two options to reserve contracts below threshold:

  • reserve the procurement by supplier location

  • reserve the procurement for small and medium-sized Enterprises (SMEs) or voluntary, community and social enterprises (VCSEs)

DfT group has an SME champion who monitors the effectiveness of the action plan and compliance to policy. The SME champion chairs the DfT working group, whose objective is to identify and resolve actual or perceived barriers, share initiatives, and ensure early market engagement to provide greater visibility of opportunities for SMEs. DfT group host joined meet the buyer events to increase engagement and spend with SMEs.

For the financial year (FY) 2020/21, the department exceeded its in-year target (percentage spend with SMEs was 34.1% against an in-year target of 32%). The indirect SME survey for FY 2021/22 will be completed mid-December 2022; FY 2021/22 spend data will be available in April 2023.

DfT group will host a series of regional meet the buyer events over this and the following financial year, at locations in all parts of the UK providing SMEs with the opportunity for face-to-face networking and briefing on the DfT group’s commercial pipeline.

Objective

In 2017, the government set an ambitious target for 33% of all procurement spend to be with small and medium enterprises by 2022, either directly with them or indirectly through larger suppliers. This target was adopted by the DfT. Departments were asked to prepare action plans to meet this target, which would be reflected in the department’s outcome delivery plan. This action plan covers the DfT(c), its executive agencies and arm’s length bodies.

This action plan also outlines how the department has performed against the target since 2017 and the initiatives, market engagement and collaboration it will undertake to build on the department’s strong record for embedding the SME agenda.

SME policy

Prompt payment

Cabinet Office introduced procurement policy note (PPN) 04/19, which sets out how, from 1 September 2019, prompt payment performance by our larger suppliers to SMEs was to be considered in the procurement of major government contracts with an anticipated contract value above £5 million per annum. From 1 April 2022, the payment threshold increased from 85% in 60 days to 90% in 60 days. To ensure consistency across DfT group the following initiatives were introduced:

• the recommendations set out have been cascaded across the DfT group via our DfT(c) SME lead and policy leads and discussed at our procurement knowledge networks (which brings commercial professionals together across the DfT group)

• the DfT SME lead is monitoring commercial pipeline information and contracts finder to identify potential in-scope contracts. To date, all procurements have been compliant

• continue to raise awareness in the supply chain through collaboration with suppliers, trade associations and other key stakeholders

• exemptions from the policy are to be approved by the department’s commercial director and the government’s chief commercial officer

Transparency to tier 2

Analysing the DfT group procurement spend for FY 2020-21, the DfT SME lead identified suppliers responsible for the top 80% of spend within DfT group. The supplier details were sent to the relevant organisations, who contacted their suppliers to ascertain their spend with SMEs. Circa 92% of suppliers confirmed their spend with DfT group. This process is vitally important to the department, as our largest proportion of spend with SMEs is indirect (that is, via larger suppliers in the supply chain).

Reserved contracts

As a result of Brexit, the UK as additional autonomy when procuring contracts for goods, services and works, particularly below the find a tender service thresholds.

PPN 11/20: Reserving below threshold procurements sets out two options for reserving below threshold procurements:

• reserve the procurement by supplier location

• reserve the procurement for small and medium-sized enterprises (SMEs) or voluntary, community and social enterprises (VCSEs)

The department has formed a reserved contract working group, consisting of members from executive agencies, arm’s length bodies and other government departments. Their role is to identify potential opportunities to award reserved contracts, mitigate potential challenges to our approach, develop a pilot to test the proposed approach and ensure a consistent process across DfT group.

2020/21 SME target

For FY 2020/21, the department exceeded its in-year target, (percentage spend with SMEs for was 34.1% against an in-year target of 32%) To ensure continuous improvement across the group, systematic in-year targets have been set, see Table 1.

Table 1: DfT group SME spend targets 2021/2022

Financial year	SME spend target	SME actual performance	Direct spend actual/forecast %	Direct spend actual/forecast	Indirect spend actual/forecast %	Indirect spend actual/forecast
2015/16	22%	23.8%	11%	£1.3 billion	12.8%	£1.5 billion
2016/17	24%	29.9%	11%	£1.2 billion	19%	£2.1 billion
2017/18	26%	31.3%	10.5%	£1.2 billion	20.8%	£2.4 billion
2018/19	29%	32.6%	12.6%	£1.7 billion	20%	£2.7 billion
2019/20	31%	34.2%	9.8%	£1.4 billion	24.4%	£3.5 billion
2020/21	32%	34.1%	12.3%	£1.9 billion	21.7%	£3.2 billion
2021/22	33%	—	11%	£1.7 billion (approx.)	22%	£3.3 billion (approx.)

The indirect SME survey will be completed by the end of January 2023. The 2021/22 data will be available at the end of April 2023.

Category analysis

DfT group spend with SMEs is direct (from the DfT group to the SME) or indirect (from the DfT group to a larger supplier who contracts with the SME). In FY 2020-21 DfT group spent £14.6 billion, of which £8.4 billion (57%) was construction (diagram 1). Our construction spend is focussed on complex capital projects in the roads and rail construction and maintenance sector, where there are fewer opportunities for SMEs to directly contract with DfT group entities; our focus across the DfT group is therefore to identify SME opportunities within the supply chains of the main tier 1 contractors.

As a result, it is essential to create opportunities for SMEs in the supply chain by increasing engagement between DfT group, key suppliers (especially tier 1 and 2 suppliers) and SMEs.

Diagram 1: DfT group procurement expenditure 2020/21

Area of expenditure	Expenditure (£)
Construction	£8.4 billion
Professional services	£3.4 billion
Energy and fuels	£840 million
Information and communications technology	£555 million
Industrial services	£356 million
Facilities	£234 million
Vehicles	£100 million

DfT group meet the buyer events

Multimedia platforms proved invaluable during the pandemic, assisting businesses to collaborate and communicate effectively. Feedback from key stakeholders suggests, whilst effective, multimedia significantly reduces the opportunities for suppliers to network and build a working relationship with potential buyers. As we emerge from the pandemic it provides DfT group with the opportunity to re-engage with SMEs face to face. As a result, DfT group will host a series of innovative regional meet the buyer events over this and the following financial year in locations across the UK.

This is an exciting model DfT group are embarking on which will help break down barriers for SMEs. The events will provide SMEs with advice on how to do business with the government, offering them commercial pipeline transparency, innovation opportunities, policy updates and ultimately, win contracts. It is where SMEs, current and potential government suppliers, can raise concerns anonymously about potentially poor public-sector procurement practice.

The DfT SME lead is leading cross Whitehall meet the buyer events, allowing SMEs the opportunity to network with SME champions from all Whitehall departments enabling SMEs to have a better understanding on how to bid for and win government contracts in other non-transport related markets.

Examples of SME initiatives across DfT group

Department for Transport central

The STARTwo framework, (initially procured with a total contract value of £110 million, increased to £157.5 million) is a continuation of the STAR framework and was developed using lessons learnt from the original framework, including early market engagement, progressive assurance and the effects of procurement policy notices. The value of STARTwo work completed up to and including December 2020 was £18.7m, of which £5.6m (30%) was placed with SMEs. Although the 30% was lower than the 40% we had hoped to secure, it was a significant progress in the work placed with SMEs.

In 2021, the STARTwo team supported even more SMEs and was achieved through sharing prior information notices for future procurements with all suppliers within the framework relevant lot. This allowed the suppliers and SMEs, to have full visibility, providing the opportunity for the creation of joint ventures to bid for and win contracts. In addition to that, the STARTwo team actively monitor suppliers’ performance at work package level as well as through quarterly contract management meetings.

As a result of these actions, the value of STARTwo work completed up to 31 December 2021 was £44.8m, of which £16m (36%) was placed with SMEs. This represents a substantial progress in the work placed with SMEs and continued the consistent increase throughout 2021.

High Speed 2 (HS2) Ltd

To maximise SME engagement, HS2 Ltd hosts an annual meet the contractor event, which has taken place since 2017. The most recent event for main works civils and stations (November and December 2021), consisted of 6 days of webinars, break-out sessions and 1-2-1 meetings for potential suppliers to attend. Over 500 organisations joined the meetings with HS2 tier 1 contractors, of which 77% were SMEs.

HS2 Ltd also facilitates meet the bidder events as part of its extensive market engagement programme and online supplier guidance, providing SMEs with further opportunities to engage with the project and access support in how to identify and win work.

In addition, HS2 Ltd regularly hosts, presents and exhibits at external events to promote opportunities to businesses along the line of route and across the UK. Over 33 events were delivered in the first half of 2022, with over 1,000 businesses directly engaged. Since 2020, HS2 Ltd has engaged with over 3,700 local businesses, the vast majority of which are SMEs.

To date, over 2,700 suppliers have delivered work on HS2 from every corner of Britain, over 70% of which are SMEs.

National Highways

The Lower Thames Crossing project team are devising a procurement strategy designed to promote SMEs and other locally based suppliers with a comprehensive programme of engagement and advocacy. Furthermore, they are partnering with the supply vhain sustainability school to provide hundreds of learning resources for businesses keen to work on the project. Use of the National Highways learning pathways initiative means businesses can demonstrate they have completed learning on a range of key topics and are project ready.

The project has run a series of events to keep local businesses engaged and updated through its development and as it looks ahead to awarding major contracts. It has also built an SME directory, which, has more than 700 companies identified. This directory is periodically provided to contractors bidding for major contracts to ensure they have ready access to SME businesses with a range of skills and specialities from around the region. The SME directory provides local businesses with the much-needed foot in the door on the project and provides major contractors a quick and easy way to build their supply chain from businesses at the core of the communities through which the Lower Thames Crossing will run.

Network Rail

Network Rail continue to implement their SME action plan launching a supplementary SME action plan aimed at establishing tier 1 supplier support. It comprises 15 actions which will make it easier for SMEs to thrive in the rail sector. These initiatives support government’s industrial strategy and the rail sector deal.

SMEs play a significant role in the growth of the economy. Pre-Covid-19 SMEs accounted for c15.7 million jobs in the UK. 60% of all private sector employment. SMEs are also important to Network Rail, as this business community is recognized as being highly adaptive and innovative.

Commit to publishing procurement pipeline

Network Rail support the rail supply group, work pipeline visibility charter, aimed at UK businesses supplying services or products to the rail sector. To date, 342 suppliers have signed up, committing to sharing their work pipeline information with suppliers. By making work pipelines visible to suppliers and sub-suppliers, businesses see significant productivity improvements as suppliers have sufficient time to plan work delivery more efficiently. Providing certainty on the work profile also assists with staff retention.

Commit to ensuring that your supply chain has free access to Network Rail standards

Network Rail standards can now be accessed free of charge on the new standards portal by all suppliers. Suppliers wishing to access these standards can register via a portal, where they receive a 100% discount during the checkout process. This allows Network Rail to reference the relevant standards within tender documentation in the knowledge that our standards are freely accessible and transparent to suppliers.

Transparency

To view and be considered for tenders for the Maritime and Coastguard Agency (MCA), DfT(c), Driver and Vehicle Standards Agency (DVSA), and Driver and Vehicle Licensing Agency (DVLA), you must register on our online system.

High Speed 2 Ltd

For the HS2 supplier guide, FAQs, supply chain maps, contract tables and more, see the supply chain section of the HS2 website.

Register your details with HS2 Ltd to receive regular updates and information on future events.

Register on CompeteFor to see all upcoming subcontract opportunities on the project.

Network Rail

To view up-and-coming market engagement events and meet the buyer events, go to Network Rail’s supply chain web page.

National Highways

For information on working with National Highways, either directly or indirectly see supplier guide.

Procuring innovation

Transport research innovation grant (TRIG)

TRIG provides early-stage funding for science, engineering or technology innovation, delivered by DfT’s project delivery partner the connected places catapult (CPC). TRIG is open to any UK organisation - typically micro, small and medium-sized businesses or academia - to support proof-of-concept projects that could lead to the development of successful new transport products, processes or services. TRIG is designed to support SMEs by providing easily accessible grants, alumni and wrap around support from CPC to bring innovations closer to the market and close links with DfT officials. Since 2014, circa £10 million has been awarded to 294 projects.

TRIG aims to:

• stimulate the development of new technology solutions to DfT challenges

• provide innovators with support to try out new ideas – to show early promise, or fail fast

• join up innovators with DfT colleagues in a safe setting and allow them to learn together

• help create future leaders in transport, whilst driving jobs and growth

An example of one of many successful alumni of TRIG is RideTandem. This SME was funded in 2019 to create a tailored transport service for towns and small cities and has now raised £1.8m in seed funding.

Since 2014, 169 grants have been awarded to SMEs, 85% of the total awarded.

For more information visit TRIG.

Department for Transport’s intelligent mobility accelerator

DfT are currently piloting involvement in an SME accelerator, testing how DfT support can help SMEs to scale technology more rapidly. SMEs each need to have a proven technology solution which directly supports one or more of DfT’s strategic objectives, such as reducing the environmental impact of transport or growing and levelling up the economy. The accelerator is designed to complement TRIG - where innovative SMEs are helped to prove technology concepts - by helping the best grow quickly.

Connected Places Catapult and DfT relationship

The Connected Places Catapult (CPC) is DfT’s project delivery partner for the TRIG and the intelligent mobility accelerator. CPC adds value to TRIG above initial funding through a comprehensive programme of commercial support. CPC assesses the business needs of each award winner to ensure they receive the right market and policy insights, commercial introductions and support to accelerate the commercialisation of their research and technology. TRIG alumni also get additional innovation support and networking opportunities through an upcoming community platform and the SME network programme.

First of a kind

First of a kind is a yearly competition, funded by DfT and delivered in partnership with Innovate UK and knowledge transfer network. The competition focuses on funding unique innovations within rail.

From 2017 to 2020, 124 out of 182 organisations supported (68%) were identified by Innovate UK as between micro and medium-sized businesses.

View last year’s winners

Network Rail

The pitch platform is a new initiative to encourage suppliers to pitch their innovative products and services to key stakeholders across the organisation. In a Dragon’s Den style approach, successful entrants can benefit from specialist support and/or funding to develop their ideas for the railway and fast-track the procurement process.

Find out more about pitch platform.

High Speed 2 Ltd

The HS2 accelerator is a partnership between Connected Places Catapult, HS2 Ltd and Innovation Birmingham, the leading location for Birmingham’s digital and tech community. Focused around HS2’s three innovation challenges: productivity, the environment and the circular economy. Innovation accelerator is a call-to-arms for individuals or firms with bright ideas to drive efficiencies across Europe’s largest infrastructure project. Find out more about the project.

Case studies

Scheme delivery framework (SDF) was introduced by National Highways to provide more choice, competition, and consistency across the regions. They worked with key government partners and suppliers to revolutionise their procurement process, providing a level playing field for suppliers of all sizes. As a result, approximately 23% of the overall framework value has been awarded to SMEs, creating a secure pipeline of work, and increasing innovation across the board.

The 6-year framework enables the delivery of renewals across a range of activities, including substantial civils work on barriers and drainage, traffic management activities and design services for a range of projects.

National Highways knew that smaller SMEs were confused over the requirements for placing a bid. To make the process more accessible and diverse, they converted all their tender documentation from lengthy word documents into narrated presentations that explained the process, provided hints and tips, and explained the company’s culture around areas such as carbon and social value. Previous tenders for similar work had resulted in a maximum of 25 suppliers across the country providing these works. By redesigning the tender process, simplifying the documentation and walking suppliers through the process, SDF has resulted in 50 suppliers, a third of which were already known to National Highways, a third were in their second-tier supply chain and a further third were new.

When asked about their experience of joining SDF, Littlewood Fencing said:

Everyone at National Highways has been very supportive when we are trying to understand how the systems work.

To create a level playing field across the country, National Highways recognised that the framework would need to be tiered. To do this they created four bands (including civil works, specialist services, specialist works, and design) and asked supplier to preference the regions that they would like to work in, allowing smaller suppliers to win in local areas where they can really make a difference. Award values for the 50 suppliers varied between £1m and £144m, highlighting how the framework enables SMEs to operate side by side with larger companies.

Throughout the procurement process, National Highways:

• hosted tender clinics to brief bidders on the process. These clinics were proven to drive participation, showcase priorities, such as health and safety, and social value, and fostered an open and transparent atmosphere throughout the supply chain

• engaged with both prospective and existing suppliers across a range of mediums. They expanded their use of social media (LinkedIn) to promote the procurement opportunity and process. This enabled National Highways to reach a much larger audience and led to inquiries from brand new suppliers

This open and transparent relationship is paying dividends as larger suppliers now work together with smaller suppliers to provide a resilient approach for National Highways.

Rob Cook, civils and infrastructure director at Winvic Construction Ltd said:

Since our SDF framework award Winvic Construction believe the framework works very well by adding additional suppliers to National Highways from adding small to large suppliers working in collaboration and also it furthers the step of the CWF framework by giving continuity to the SDF suppliers and their supply chain.

We have a steady pipeline of work under SDF for the next 48 months which will enable us to grow and develop our employees and provide National Highways the resilience to deliver across the country. We believe the SDF will bring the supply chain closer than ever before.

This gold standard framework is the starting point for future National Highways procurements with the lessons learnt being embedded into all future procurement strategies

HS2 Ltd produces case studies of SMEs who have been successful in winning work and growing and developing their business. Find out how they did it by viewing the case studies section of the HS2 website.

Email the HS2 supply chain team at [email protected] if you are delivering work on HS2 and wish to be considered for a future case study, or for any other business enquiry.

Future Actions

In December 2021, Procurement Policy Note 11/20: Reserving below threshold procurements) was published on Gov.UK. The procurement policy note sets out information and associated guidance on the options available to contracting authorities to streamline and simplify procurement under these thresholds, and also tackle economic inequality, create new businesses, jobs and skills, as well as increasing supply chain resilience, encouraging entrepreneurship, and attracting new entrants to government market. The DfT(c) SME champion has formed a DfT reserved contract working group to identify and mitigate potential risks, working with key stakeholders across the department and Whitehall to ascertain the optimal ways for SMEs and the department to procure below threshold contracts, monitor the effectiveness of new measures to enhance spend and engagement with SMEs and report findings to the DfT commercial director for discussion at the commercial function leadership group.

The DfT SME champion SMEs, Cabinet Office and key stakeholders to develop new measures to support start-ups and small businesses via government procurement and commit to paying them on time.

Conclusion

The DfT group has a vast and diverse range of businesses in its supply chains and has made significant progress embedding the SME agenda through its procurement and commercial activity. The department will enhance engagement and spend with SMEs through the DfT SME working group to identify and resolve barriers, ensuring early market engagement, providing greater visibility of opportunities and the structure frameworks, where it adds value, that are accessible to SMEs.

Key milestones 2022/23

Action	Target date
Refresh SME action plan	April-August
Measure and monitor the plan objectives	Quarterly
Chair SME working group	Quarterly in June, September December and March
Host hybrid SME/supplier engagement events	September/October
Collate category spend for 2021/22	April-July
Analyse and measure effectiveness of internal and external data	Quarterly
Report direct SME spend to Cabinet Office	Quarterly
Share indirect SME spend survey with Cabinet Office	August-December
Reserved contract working group to identify and resolve risks to PPN 11/20	All year