The government is "nowhere near" meeting its SME spending targets, according to Zoe Cunningham, managing director of software company Softwire.
The government has an 'aspiration' for SMEs to gain 25 percent of Whitehall spending. It updated this in August 2013, saying it aims for 'at least' 50 percent of spending on new government IT to go to SMEs.
However, at a roundtable on Labour's digital government review hosted by TechUK, representatives from technology SMEs warned that the government has not changed buyer behaviour enough to help them win more public sector work.
Cunningham said: "The government is not backing up the 25 percent target with engagement with SMEs. We haven't seen much progress with it. And they are being very overambitious with the 50 percent target.
"We're nowhere near it. SMEs are being put off bidding for government work, and they are not being listened to. It's still much easier for us to work with private businesses than government."
SMEs gained 20 percent of central government spending in 2012/13, although just 9.4 percent of that represents direct spending with SMEs themselves.
Cunningham's comments were made at meeting which was attended by shadow minister Chi Onwurah MP and over 20 representatives from SMEs who work with the public sector. The event was held under Chatham House rules. However, Cunningham and Unilink CEO Francis Toye waived their anonymity.
The majority of the government's spending with SMEs is channelled through larger suppliers and 'prime contractors'. This emerged as a contentious issue during the meeting, with one saying that they found it a "nightmare" being partnered with a systems integrator (SI).
He said: "The difference in mindset between SMEs and SIs is often too great. The strategy of partnering SMEs with SIs is mad. It won't work. They are too different."
One of the representatives said that their company can usually deploy within 10 to 20 days, but being partnered with an SI for a government contract slowed this down to nine months.
Another said that the strategy won't work as the commercial interests of SIs and SMEs are often in "direct conflict", for example, over pricing.
A chief executive added: "SMEs would much rather work with government directly. Going through an SI means we have to teach the SI what we do, who then has to teach the department. It doesn't make sense and delays the process hugely."
Onwurah said: "SMEs must feel triumphed by the government yet betrayed at the same time. The focus is on them, there's the 25 percent 'aspiration'. So there's a lot of talk about engaging SMEs, and yet we don't seem to get there.
"We want to identify the barriers and have policies in place to overcome them as much as possible. The genuine contribution of SMEs can't be overvalued. They offer innovation and value for money."
Onwurah identified a lack of skills within the civil service as the "key issue" holding back wider use of SMEs for government work.
Unilink's CEO Francis Toye agreed, saying: "Government doesn't know how to handle innovation. Procurement people often feel reluctant to buy anything unless they are 100 percent informed about it."
A managing director explained: "A big part of the problem is that much of the public sector's expertise has been transferred into SIs. It's unpicking this that is the hardest part and getting the management layer to work."
A CEO said: "The government's ability to procure and manage has deteriorated over the years. Unless the government is prepared to properly invest in commercial skills, it's hard to see how they'll ever get value for money from IT.
"There is currently a lack of intelligent purchasing or intelligent supplier management. It costs money."
An SME representative said: "There is an excessive and unjustifiable level of risk aversion in government procurement. It is harder work going beyond buying from a one stop shop so we urgently need to improve buyer skills."
However a chief executive suggested that risk aversion may be used as an excuse. She said: "Risk aversion is a wonderful barrier to put up. A lot of public sector procurement hides behind risk, as it allows you to avoid changing. Any company will tell you, risk genuinely articulated is usually not an issue."
Labour's 'Digital Government' review formally kicked off in March this year, and the deadline for submissions is 30 May. The consultation will help to forum the party's policies ahead of next year's general election. Labour will hold a national policy forum in mid-July and its conference will be held in September.
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