Post on 17-Jul-2020
Trusted Insight on Government Contracts and Spend
March 2020
2019 Update on Strategic Suppliers
Key Findings—
| UK Strategic Suppliers 20192
Two thirds of the Strategic Suppliers
saw reduced public sector
revenue in 2019
Three departments spent more than half of
their procurement budget with the
Strategic Suppliers
Collectively the firms signed new
public sector contracts worth
£17bn
Where does the data come from?—
| UK Strategic Suppliers 20193
All the data in this report comes from Tussell’s unique database of UK government contracts and spending. We aggregate procurement and spending data published by the public sector to create a comprehensive database of UK public procurement – essential for ambitious firms looking to grow their business and contribute to improving public services across the country.
All spending data is taken from the transparency reports published by over 150 Central and Local Government buyers. This is invoice level data allowing detailed analysis of what the public sector is buying, from whom, and for how much.
The contracts data in this report is drawn from the two main official sources – Contracts Finder and OJEU. This contract level data allows for a rich understanding of the relationship between the public sector and its suppliers, including when contracts are awarded, the services procured, and when they are due to expire.
The spending and contracts datasets are both matched to entities in Companies House and Moody’s FAME database, allowing for analysis by company sector, size and financials.
Who are the Strategic Suppliers?—
| UK Strategic Suppliers 20194
There are 35 companies that the UK government classifies as its ’Strategic Suppliers’. While some are household names, some may be relative unknowns to the general public.
But they are responsible for delivering some of the most essential public services, from fixing roads, building schools and hospitals, managing IT systems and much more.
These firms are also those which the government monitors most closely – each has a Memorandum of Understanding in place with the Cabinet Office to ensure it supplies the government with the information it needs to monitor and manage risks in its supply chain.
This report examines in detail the work these 35 firms conducted with the UK public sector in 2019.
Strategic Suppliers’ UK public sector revenue declined in 2019—
| UK Strategic Suppliers 20195
Last year evidenced spending* on private organisations by Central and Local Government was up 2% on 2018 to nearly £69bn.
Despite this slight increase in overall public sector spending, Strategic Suppliers’ revenue from the public sector decreased by £700m to £14.7bn. This is a 4.5% decrease on 2018, when they earned £15.4bn.
Still, at 22% of the total, this is still a considerable proportion of evidenced procurement spending. Recent data published by the Cabinet Office showed that only 12% of departmental spending went to SMEs – meaning that government is spending nearly twice as much with these 35 firms as with all SMEs in its supply chain.
*evidenced public sector procurement spending here refers to spending identified through transparency spending data published by 150+ Central and Local Government buyers. This spending data is then matched to Tussell’s database of UK public sector suppliers to remove intra-public sector spending. A full list of organisations included in the report is available upon request. Where some departments/authorities have not published a full year of spending data, estimates of their full year spending have been made based on that which has been published. Othercompanies
StrategicSuppliers
2018 2019Evidencedspendwithprivatesectorcompanies
£67.0B£68.4B
£53.7B
78%
£51.6B
77%
£15.4B
23%
£14.7B
22%
StrategicSuppliers'shareofevidencedpublicsectorprocurement
spending*-2018vs.2019
Losers and winners—
| UK Strategic Suppliers 20196
Two thirds of this cohort earned less from the public sector last year than they had in 2018.
By sector, every supplier in Outsourcing/FM saw a year on year revenue decline. In IT Services, only Capgemini and Accenture saw growth.
One sector which bucked the trend was
Consulting. Each of the Big 4’s revenues grew last year - led by Deloitte's 51% growth in revenue, the highest of all the Strategic Suppliers.
In Construction/Engineering, Kier came under strain but other companies fared well, in particular Mott Macdonald which saw 27% growth in public sector revenues.
Construction/
EngineeringOutsourcing/Facilities IT Telecoms Consulting
BalfourBeatty
Kier
Babcock
KBR
Jacobs
MottMacdonald
Atkins
Amey
Interserve
Engie
Serco
G4S
Mitie
Sodexo
ISSA/S
Capita
Fujitsu
Capgemini
Atos
DXCTechnology
SopraSteria
IBM
Oracle
CGI
Accenture
AWS
Microsoft
BT
Motorola
Vodafone
VirginMedia
PwC
Deloitte
KPMG
EY
£0.0B
£0.5B
£1.0B
£1.5B
£2.0B
£2.5B
Estimated2019PublicSector
Revenue
-50%
-25%
0%
25%
50%
%Changeon2018
£1,250M
£1,737M
£1,139M
£564M
£462M
£265M
£199M
£1,955M
£670M
£497M
£267M
£104M
£178M
£391M
£76M
£1,042M
£303M
£226M
£166M£418M
£391M
£181M
£112M
£88M
£98M
£35M
£42M
£439M
£579M
£170M
£68M
£108M
£225M
£152M
£113M
-23%
-11%
27%
15%
-1%
5% 5%
-10%-8%-5% -5%
-2% -1% -1% -1%
-39%
-27%-27%
-21%
-11%-6%
-9% -9%-4% -5%
8%5%
-12%
-6%
14% 14%
30%
38%
51%
2%
StrategicSuppliersestimated*2019publicsectorrevenueand%changeon2018
MeasureNames
PublicSectorRevenue*Estimate2019
-50.0% 50.0%
%Differenceon2018
Preparing for a bounceback—
| UK Strategic Suppliers 20197
While the Strategic Suppliers may have seen revenues shrink last year, in 2019 they have started re-building their market positions.
Last year they won 1,298 new contracts from the UK public sector worth nearly £17bn. This was a 56% increase on 2018.
These new contracts wins are a leading indicator that their public sector revenue will grow again in the years to come.
The Strategic Suppliers were also collectively named on 288 new frameworks created last year. These frameworks – essentially preferred supplier lists - will be crucial for them to continue winning business in 2020 and beyond.
StrategicSuppliers(orOther)
StrategicSuppliers
Contract
Framework
2018 2019
ContractValu
eDistinctContracts
£10.8B
£16.9B
1,2981,439
288258
StrategicSuppliers-valueandnumberofpublicsectorcontractswon2018vs.2019
Strategic Suppliers won 24 £100m+ contracts in 2019—
| UK Strategic Suppliers 20198
Each circle in the chart on the right is a contract that was won by the Strategic Suppliers last year, with the size corresponding to the value of the contract – including 24 £100m+ contracts.
Babcock and Serco were the big winners last year – both named on £2bn+ contracts.
Serco’s large contract wins were for asylum accommodation for the Home Office and custody services for the Ministry of Justice. Babcock’s were all with the Ministry of Defence, which named the firm on four contracts worth between £420m and £2.1bn.
While most of the large contracts were awarded by Central Government, the wider public sector also awarded some large contracts to these firms last year.
Sellafield awarded KBR a £750m contract to be the nuclear plants ‘integration partner’. HS2 awarded Balfour Beatty a £443m contract for work on the Old Oak Common station.
In Local Government, Balfour Beatty won a £638m contract for Highways repairs for Lincolnshire County Council, and Engie a £570m waste management contract from Somerset Council.
CGI
Motorola
£297M
BT
Kier
Interserve
£452M
Fujitsu
£498M
Capita
£526M
DefenceFire
KBR
£750M
Programmeand
Engie
£570M
Waste
Engie
Amey
£552M
Transforming
Amey
£632M
PrisonerEscort
BalfourBeatty
£638M
2183
Balfour
Beatty
Serco
£2,109M
AsylumAccommodationand
SupportServicesContract
(AASC)
Serco
£745M
PrisonerEscort
Babcock
£2,114M
FMSPSubmarineEngineering
atDevonportandClyde
Babcock
£860M
FMSPNavalBase
Servicesat
Babcock
£789M
FMSPShips
Babcock
£421M
PublicsectorcontractswonbytheStrategicSuppliersin2019
Construction/Engineering
Consulting
IT
Outsourcing/Facilities
Telecoms
In three departments the majority of spending went toStrategic Suppliers—
| UK Strategic Suppliers 20199
On average Central Government departments spent a quarter (26%) of their evidenced procurement spending on the Strategic Suppliers.
Some departments are more reliant on this cohort than others. Three spent more than 50% of their evidenced procurement spending with the Strategic Suppliers – the Home Office, HMRC and the Ministry of Justice.
The Scottish and Welsh governments are much less reliant on these firms, spending 14% and 10% respectively with them. BEIS is the only department that spent less than 10% of its evidenced procurement spending on the Strategic Suppliers.
While the Strategic Suppliers are a designation applying only to Central Government, Local Government also spends significant amounts with these firms – £3.8bn in 2019. This accounts for 26% of their identified public sector revenues (excluding the NHS). Four Strategic Suppliers earned more from Local Government than they did from Central in 2019.
HO
HMRC
MoJ
DWP
MoD
CO
DEFRA
DfT(inc.NR)
FCO
DfID
DExEU
DHSC
ScottishGovernment
HMT
DIT
DfE
WelshGovernment
MHCLG
HoP
BEIS
48%
59%
57%
35%
24%
25%
27%
23%
10%
10%
10%
61%
14%
41%
14%
13%
13%
21%
11%
6% Average:26%
Proportionofdepartmentalevidenced2019procurementspendingwithStrategicSuppliers
74%
£10.9B
26%
£3.8B
£14.7B
StrategicSuppliers'estimatedpublicsectorrevenue2019-
Centralvs.Localgovernment
CentralGovernment
LocalGovernment
Government telecoms spending dominated by Strategic Suppliers—
| UK Strategic Suppliers 201910
This chart examines what proportion of evidenced procurement spending went to the Strategic Suppliers by sector*.
Public sector telecoms work is massively dominated by the four Strategic Suppliers that operate in this sector – BT, Virgin Media, Vodafone and Motorola. 82% of all identified spending with telecoms companies went to these four firms.
The Strategic Suppliers are also embedded in other sectors -nearly half of identified procurement spending with IT companies went to the 12 Strategic Suppliers operating in that sector.
Construction/Engineering, on the other hand, is more diversified. Less than a quarter of public sector spending in this sector went to Strategic Suppliers.
Telecoms
IT/Tech
Outsourcing/
Facilities/Property
Consulting
Construction/
Engineering
38%
82%
47%
42%
24%
Proportionof2019publicsectorspendingoncompaniesineachsectorwithStrategic
Suppliers
*Sector spending is identified through the SIC code that companies must assign themselves when they register on Companies House. These SIC codes were then grouped into sectors to correspond with those that the Strategic Suppliers operate in.
ContractExpiry2023+
2020
2021
2022
2023+
IT & Telecoms most at risk from contract expiries—
| UK Strategic Suppliers 201911
The Telecoms and IT Strategic Suppliers are most at risk from contracts expiring in the near term, with 51% and 40% of the value of their contract portfolios due to
expire in 2020. Meanwhile the Strategic Suppliers in the Construction and Outsourcing sectors have longer-dated contracts running into 2023 and beyond.
StrategicSuppliers
Telecoms
IT
Consulting
Construction/Engineering
Outsourcing/Facilities
Other
Other
40%
65%
20%
39%
29%
77%
25%
27% 27%27%
16%51%
12%
8% 8%
9%
4%
4% 5%
7%
70%10%12%9%
StrategicSuppliers'contractroll-offbysector
Who might be in a position to challenge the Strategic Suppliers?—
| UK Strategic Suppliers 201912
The Strategic Suppliers, while an undoubtedly important cohort of companies, are not the only firms doing significant amounts of work with the government. Challenger firms exist in most sectors, who earn not far off the average amount earned by the Strategic Suppliers last year.
In fact, in the Construction/Engineering sector there are two companies which earned nearly as much as the average Strategic Supplier earned in that sector – BAE Systems and a joint venture between Costain and Skanska.
Strategic Suppliers in the IT sector should be watching competitor Computacenter closely – it earned more last year than seven of them did.
Unsurprisingly, the only sector where are there no firms really nipping at the heels of the Strategic Suppliers is in telecoms – the next biggest provider, Telefonica O2, earned just £30m from the public sector last year.
Co
nstr
uc
tio
n/
En
gin
ee
rin
g
BAESystemsPLC
CostainGroup/Skanska
GroupJointVenture
LeidosEurope,Limited
Ou
tso
urc
ing
/
Fa
cilit
ies/
Pro
pe
rty
Veolia
MearsGroup
MaximusHealthLtd
IT/
Te
ch
Computacenter
LinkGroup
TelentTechnology
Co
nsu
ltin
g
DAIEuropeLtd
BloomProcurement
ServicesLtd
IMCWorldwideLimited
Te
lec
om
s
TelefonicaO2UK
Limited
LinbrookeServices
Limited
Teleperformance
Limited
£802M
£446M
£787M
StrategicSupplieraverage-£802M
£336M
£142M
£231M StrategicSupplieraverage-£517M
£205M
£134M
£135M StrategicSupplieraverage-£259M
£80M
£70M
£49M
StrategicSupplieraverage-£150M
£30M
£26M
£13M
StrategicSupplieraverage-£314M
Top3non-StrategicSupplierfirmspersectorby2019publicsectorrevenue
Conclusions: What can be learned from theStrategic Suppliers?—The Strategic Suppliers are still incredibly important to UK public procurement – and will be for many years to come, with the £16bn worth of contracts they won last year.
However, this market position is not guaranteed.
As this report has shown, Strategic Suppliers’ revenue from the public sector shrank last year, even in the face of increased spending. Two thirds of the firms earned less in 2019 than they did in 2018.
And collectively, they have £4bn worth of contracts expiring in 2020 alone where competitors may try to displace them.
The Strategic Suppliers all commit significant resources to winning and delivering
contracts with the public sector. They recognise that the public sector is a valuable market in which to operate –not least in this precarious climate, when government has limitless capital to deploy and a strong incentive to spend it.
Due process around bidding can be onerous, but rules around competition and transparency make it an open marketplace for those firms willing to commit the resources.
Ambitious firms looking to win more business in the public sector could learn from how the Strategic Suppliers use market insight based on open data to plan strategically and act proactively. On the right are four examples of best practice in public sector business development.
| UK Strategic Suppliers 201913
Contact prospects at the perfect time - before a tender is published.
Use upcoming contract expiries to spark conversations and build your sales pipeline
Bidding on public sector contracts can be an onerous process.
A clear, data-led market strategy means you can target your limited business development resources in the best possible way
The public sector created thousands of frameworks in 2019. Being on the right ones is essential to winning business with the public sector.
Make sure you’re aware of the key frameworks in your sector to ensure you’re not locked out.
Many firms choose to collaborate on their public sector work – bringing together the experience and resources of larger suppliers or the innovation and agility of smaller ones.
Identify the right partner to go to market with, based on the public sector organisations they work with already.
Proactive business development
Framework management
Data-led market strategy
Partnership delivery
To be successful, you need to see the whole picture and join the dots—
| UK Strategic Suppliers 201914
Comprehensive data, essential insight
Tenders since 2012
£3.5 trillion
Contract awardssince 2012
£1.8 trillion
Spend receiptssince 2016
£1.9 trillion
Buyers
7,140Suppliers
93,411% UK GDP
13.6%
Tussell Database Coverage
Plan strategically, act proactively—
Generate leads
Understand buyers
Watch competitors
Build sales pipeline
Optimise pricing
Anticipate re-bids
Use Cases
Internal reporting
Save time
Gain insight
Be evidence-based
Be proactive
Allocate right resources
Benefits
Empower salespeople
Save time, gain insight, focus where you will win
| UK Strategic Suppliers 201915
Contact
Miranda Evans - Head of Research
Phone: +44 (0)20 3965 2232Email: miranda.evans@tussell.comWebsite: tussell.com