Annex E How government calculates SME spend figures
The department’s SME target is made up of both direct and indirect spend with SMEs, and below we set out how the published figure is calculated. The government wants small and medium-sized enterprises (SMEs) to benefit from central government procurement spend, either directly or indirectly via the supply chain. Reports on this aspiration are represented as the sum of two figures: direct spend and indirect spend, as the figures are calculated using different methodologies. Their addition provides the figure against which the overall aspiration is measured. Methodology These figures on SME spend are management information published in the interests of transparency. The data sources for direct and indirect spend are described in more detail below. Given the differences in methodology between direct and indirect spend and changes in methodology between years, caution should be exercised when making comparisons over time. Methodology: Direct Spend To calculate direct spend, we use Dun and Bradstreet, a leading provider of business information, to classify all government suppliers as either SMEs or non-SMEs in line with consistent definitions. We then use the departments’ accounting systems to calculate how much money has been directly spent with those SMEs. Departments are asked to include the core department and its Executive Agencies and Non-Departmental Public Bodies (NDPBs). Returns are reviewed and signed off by Commercial Directors. Methodology: Indirect Spend Indirect spend with SMEs via the supply chain was collected through a survey issued by departments to their suppliers. For each department, we calculated the percentage of their procurement spend with large suppliers which had been captured by supplier responses. For those departments with over 70% of spend captured (i.e. with high levels of confidence in the supply-chain data) an extrapolation has been applied over the remaining spend to obtain a more complete picture. The most recently published government estimates of departments’ spend with SMEs is available here: SME Spend 2019 to 2020. The Cabinet Office publishes these estimates on an annual basis.