Tussell: Trusted insights on government contracts and spend · 2020-06-04 · Tussell: Trusted...

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?—


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?—


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—


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—


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—


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—


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—


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—


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—


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?—


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


£30M

£26M

£13M


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.


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—


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


Contact

Miranda Evans - Head of Research

Phone: +44 (0)20 3965 2232Email: [email protected]: tussell.com

http://tussell.com

http://tussell.com/

Tussell: Trusted insights on government contracts and spend · 2020-06-04 · Tussell: Trusted...

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