Second supplementary memorandum by the
Further to last Tuesday's Committee hearing,
there were several areas for which I agreed to provide the Committee
with further written clarification.
I have written to you separately regarding areas
relating to DTI financials, but I also agreed to provide the Committee
with a note addressing questions and providing further clarification
on public procurement and small business, details of DTI's support
for the construction sector including the latest position on the
review of the Construction Act and comparative regional spend
per head between Scotland and the West Midlands. I also agreed
to provide you with a copy of the Technology Strategy Board's
Annual Report and an explanation of the Whitehall Innovation Platforms.
The answers and further clarification are set
The Government is committed to engaging small
businesses in the public procurement process. Work is ongoing
to create a more level playing field for small businesses through
various initiatives that are designed to give them greater opportunities
to sell to the public sector.
With Government support, two pilot studies were
held in London and the West Midlands to look at ways of easing
access to public procurement contracts. The pilots were successful
in offering practical help and advice to small businesses and
breaking down some of the barriers facing them when they try to
do business with Government and local authorities. They also confirmed
that providing procurement support for small businesses can help
boost the local economy and deliver wider community benefits.
I enclose copies of the evaluation reports
for both these pilots that give further details of their findings
Current initiatives to engage small business
in the public procurement area are showing encouraging signs that
Government assistance is being better targeted. These include:
The launch in March 2006 of the www.supply2.gov.uk
national opportunities web portal advertising all smaller value
public sector contracts. Around 28,000 suppliers and 2,900 buyers
have signed up to the portal.
A simplified national pre-qualification
questionnaire has been introduced to reduce the time spent by
business completing such forms.
Over 3,000 small businesses have
been trained in how to sell to the public sector through the Regional
Over 110 local authorities have signed
up to the "Small Business Friendly Concordat" which
set out what small firms and others supplying local government
can expect when tendering for Local Authority contracts.
Over 800 procurers have been trained
in how to make procurement opportunities more accessible to small
Guidance on supply chain management,
designed to help explain how procurers can ensure the supply chain
is managed efficiently. It encourages prime contractors to consider
using small businesses and to work with top suppliers on opening
their supply chains to small business involvement.
Innovation Platforms provide an opportunity
to bring business and Government closer together to generate more
innovative solutions to major policy challenges such as in transport,
network security, health, and sustainable consumption and production.
The platforms are designed to deliver simultaneously
an improvement in the quality of public services and in the ability
of UK businesses to provide innovative solutions for the challenges
facing the global marketplace, in particular:
UK Government will obtain more innovative
public service solutions at reduced risk.
UK business will be better positioned
for global opportunities either as a result of UK Government procurement,
or as a result of risk sharing in development with both the public
and private sectors.
Key features of an Innovation Platform are that
it brings together government and business with an interest in
the specific platform, it identifies the appropriate research
enablers to use, and through aligning funding streams from separate
sources, it seeks to link research to market, for example through
Two pilot Innovation Platforms have been established
in the areas of "Intelligent Transport Systems" and
Intelligent transport systems
More "intelligent" transport systems
provide the opportunity to manage traffic flow more efficiently
through traffic demand management and greater availability of
traffic information, thus reducing congestion and pollution. To
support the development of transport schemes that feature demand
management, the Secretary of State for Transport launched the
Transport Innovation fund, where funding of £290 million
will be available in 2008, increasing ultimately to £2.5
billion by 2014.
This Innovation Platform is intended to support
the uptake of innovative approaches in the Department for Transport
(DFT) programme and to optimise participation by UK business.
Progress so far:
In August the South East England
Development Agency (SEEDA) launched, in conjunction with the Platform,
a £2.3 million call for collaborative projects to provide
businesses or consumers with improved services, including transport
logistics and congestion.
DFT, DTI and the Engineering and
Physical Sciences Research Council (EPSRC) have, as part of the
Platform activities, announced joint funding of £9 million
for research into future intelligent transport systems.
DTI and DFT have agreed an integrated
approach involving £10 million of DFT demonstrator funding
and £7 million of DTI Collaborative R&D funding for technology
insertion. Successful projects funded by the DTI will have preferential
access to the DFT demonstrator programme.
Network Security is concerned with the resilience
of a network's communications infrastructure and with the security
of the information being transmitted across a network. This will
inevitably include the people using the network, and it is therefore
relevant to include the usability of such systems, including human
factors, beliefs and interfaces such as identity management and
Government requirements for Network Security
include identity cards, e-borders, the Ministry of Defence's networking
of assets; and many other Departments (eg DFT, the Department
of Health, Department for Work and Pensions, and the Department
for Education and Skills (DFES) are major prospective users of
secure networks. Additionally, there are significant global requirements
in the banking and financial services sectors, as well as in the
retailing, oil and gas sectors, indeed, across any global supply
chain where sensitive data is being exchanged.
This Innovation Platform is intended to promote
the exchange of innovative approaches between UK government and
industry, to ensure that UK Government is able to make use of
the most secure networks and to strengthen the ability of UK companies
to compete in a global market.
Progress so far:
DTI and the Economic and Social Research
Council (ESRC) have agreed to launch a call on Human Vulnerabilities
in Network Security as part of the Technology Programme.
A workshop has been held to develop
the government and industry engagement and to identify the future
priorities for the Platform.
DTI and EPSRC have reached agreement
to run a co-funded "think-tank" on a topic owned by
another Government department.
Future Innovation Platforms
Discussions are proceeding with other government
departments to identify themes that would offer the most profitable
interaction, most notably with the Department of Health, the Department
for Environment, Food and Rural Affairs and the Department for
Communities and Local Government.
I enclose a copy of the Technology Strategy
Board's Annual Report.
DTI's Construction Sector Unit (CSU) covers
construction materials and products, suppliers and producers,
building services manufacturers and installers, contractors (main,
sub and specialist), consultants and the professions, and construction
clients. It works under the main headings of enterprise, innovation,
regulation and skills. Below are some examples of the unit's work
CSU works with key players in the
industry (eg the Strategic Forum for Construction) to deliver
the industry's productivity improvement agenda and deliver the
considerable potential year on year savings (eg 10% reduction
in construction time, 20% reduction in defects, 10% increase in
productivity) identified in Sir John Egan's "Rethinking Construction"
It has funded the development of
a set of key performance indicators by the industry so that the
industry can monitor its performance.
CSU was a catalyst in the adoption
of the "2012 Construction Commitments" to ensure best
practice in the delivery of the Olympics.
Trustmark was launched at the start
of 2006 to raise standards and empower customers in the domestic
repair and improvement market. Nearly 8,000 firms have been recruited
to Trustmark, which should be self-standing by March 2007.
CSU has developed with the Department
of Health a project to promote innovation and knowledge transfer
across Local Investment Finance Trusts (LIFT) in the health sector.
Initial estimates are that it should yield cost savings of 10%
pa and added value of 10% pa, yielding £40 million pa benefit
over the predicted 20 year LIFT programme life cycle.
Over the next year CSU is developing
a strategy for sustainable construction.
CSU has set up a "Knowledge
Transfer Network" and a "National Platform on the Built
Environment" to develop a strategic view on construction
CSU has worked with the Health and
Safety Executive to ensure the revised CDM (Construction Design
and Management) Regulationswhich relate to safety performanceare
more reflective of business views.
CSU has worked with industry to save
more than £100 million pa through the Waste and Resources
Action Programme (WRAP).
CSU owns Constructionline, set up
at the construction industry's request, to cut the cost of bureaucracy
from the prequalification process.
CSU has worked with DFES, the Sector
Skills Development Agency and industry to ensure the skills and
recruitment needs of industry are met. The number of employees
qualified to NVQ Level 2 or higher has increased from 30% in 2004
to 40% in 2006.
Part II of the Housing Grants Construction and
Regeneration Act (the Construction Act) is a key component of
the construction industry improvement agenda. The review of the
Act was announced in the 2004 Budget. Since then:
Sir Michael Latham has conducted
a review of the Act with key members of the sector. This review
was published in September 2004. No strong consensus emerged across
the industry on many issues.
A consultation document "Improving
Payment Practices in the Construction Industry" was launched
in March 2005it elicited over 350 responses, with consensus
on some issues though not on others.
Consultation analysis was published
in January 2006. In addition to a statistical analysis of the
responses this set out, in broad terms, the proposals DTI was
minded to take forward.
A "sounding board" was
drawn together in January 2006 to advise DTI on the detail and
practical effect of its proposals.
It is the intention to introduce these proposals
using powers contained in the Regulatory and Legislative Reform
Bill, which is currently completing its passage through Parliament.
The second consultation will be launched around the turn of the
The table at Annex A8 of the Departmental Report
shows estimated spend per head in Scotland of £176.2 compared
with the West Midlands of £78.0. Both of these figures are
based on estimated spend for 2005-06. The main difference arises
as a result of where the Department deploys its resources with
respect to nuclear decommissioning. After making adjustments for
this, and using the most up to date information for 2005-06, the
level of spend is more comparable, with the adjusted figure for
Scotland being £88.9.
THE 2006 DEPARTMENTAL
On the errors in the 2006 Departmental Report,
I acknowledge that there were more errors than I would have wanted.
There were an unusual number of amendments needed in the period
prior to the publication deadline of 12 Mayfor example
to ensure that the 5 May reshuffle was properly reflected in the
Reportand this diverted effort from normal checking procedures.
We intend to learn the lessons from this and will be changing
procedures for next year's Report.
8 November 2006
1 "Final Evaluation and Report for Trade Local
and Haringey SME Procurement Pilot" and "West Midlands
SME Procurement Pilot" not printed. Back
"Technology Strategy: Annual Report 2005" not printed. Back