How SME Ecosystems Can Deliver Real Value in UK Government DDaT Programmes
Hanover Digital’s Perspective on Transforming an Often-Transactional Model
For several years, the UK Government has emphasised the importance of integrating Small and Medium Enterprises (SMEs) into major Public Sector procurements. In 2015, government set an ambition that £1 in every £3 of procurement spend should go to SMEs, either directly or through supply chains.
That ambition has been reaffirmed repeatedly, and recent analysis shows that while the absolute value of spend with SMEs has grown (around £45.4bn in 2024), the proportion has remained stuck at about 20%, well short of the 33% target.
On paper, this agenda is a powerful lever to:
- Diversify supply chains
- Stimulate innovation and competition
- Reduce dependency on a small number of large technology suppliers
- Nurture the SME base that underpins the future of “UK Plc”
Recent action plans from departments such as the Cabinet Office and (formerly) BEIS explicitly link SME participation to innovation, agility and better public services, and commit to reducing barriers to SME involvement in government supply chains.
In practice, however, the SME ecosystem still too often ends up constrained within a highly transactional delivery model, one that neither drives innovation nor helps SMEs meaningfully mature their capabilities.
At Hanover Digital, we believe this model can and must evolve. Over the last three years, we’ve invested deliberately to demonstrate what good looks like.
The Reality: A Transactional SME Ecosystem That Limits Innovation
Within today’s landscape, SMEs are typically introduced into Public Sector digital, data and technology (DDaT) programmes through large systems integrators, global firms that act as prime suppliers on complex government technology contracts.
However, the commercial and delivery model is frequently centred around
resource augmentation: SMEs provide skilled individuals; the prime contractor defines the delivery model, holds the customer relationship, and leads on transformation. The relationship begins and ends with filling roles.
This may satisfy the letter of SME inclusion requirements but not the spirit of the policy, which is about increasing innovation, competition, and resilience, and opening up more work to smaller suppliers.
Independent analysis has also highlighted structural issues in government’s technology procurement approach, such as over-dependence on a small number of large suppliers and missed opportunities to shape markets and encourage competition.
Taken together, these dynamics create several problems:
- A narrow, transactional relationship between primes and SMEs that discourages co-creation
- Limited incentive for SMEs to invest in delivery capability or innovation tools
- Few opportunities for SMEs to demonstrate genuine innovation, especially on large, business-critical platforms
- Minimal additional benefit for the end customer: UK Government departments and, ultimately, the taxpayer
This is where Hanover Digital has chosen a different path, one grounded in building capability, not just filling roles.
Hanover Digital’s Evolution: From Staff Augmentation to High-Value Delivery Partner
Three years ago, Hanover Digital primarily provided high-quality technology specialists into Public Sector DDaT programmes via prime partners. While this strong recruitment and talent capability remains part of our offer, it was clear that simply operating as a resourcing partner would not unlock the wider benefits SMEs can bring to government.
So we invested.
1. Building Delivery Capability—Not Just Headcount
We strengthened our leadership team by bringing in an experienced Engagement Manager with a track record of delivering complex Public Sector technology projects for a global consultancy. This was a deliberate move to deepen our understanding of how large government technology programmes are run, governed and measured.
We then hired an ex–global consultancy PMO specialist to establish a PMO function within Hanover Digital, adding structured planning, risk management, reporting and governance capability. This allows us to:
- Support our prime partners with robust delivery controls
- Speak the same “programme language” as major systems integrators and government clients
- Stand shoulder to shoulder with primes in discussions about scope, risk, delivery models and outcomes
In other words, we’ve invested in being a delivery partner, not just a supplier of individuals.
2. Implementing a New Delivery Model Across Major Government Platforms
This year, working closely with one of our prime partners, we helped implement a new delivery model across two major platforms within a large UK Government department.
This model doesn’t just support operational excellence, it deliberately embeds an engine for:
- Identifying opportunities to improve services and processes
- Harvesting and documenting innovation ideas from our teams on the ground
- Prioritising ideas based on value, feasibility and alignment with departmental goals
- Creating pathways for those ideas to move from concept into development and implementation
This focus on innovation is aligned with wider government ambitions to use technology better and to improve value for money on digital and AI-enabled programmes, areas where recent Parliamentary and NAO reports have highlighted significant challenges around legacy systems, supplier lock-in, and digital skills.
We are now working collaboratively with our partners to bring several of these ideas into delivery stages, a concrete demonstration of how SME involvement can become a source of real value, not just capacity.
3. Supporting Government Priorities on Social Value
Government contracts increasingly require suppliers to demonstrate and evaluate Social Value, particularly following the introduction of the Social Value Model via Procurement Policy Note (PPN) 06/20. Central government departments must explicitly evaluate social value in all relevant procurements, going beyond price and quality to consider broader economic, social and environmental outcomes.
Guidance aimed at SMEs stresses that smaller suppliers can effectively compete on Social Value, with the focus placed on the quality and relevance of commitments rather than their size or scale, an area where SMEs’ closeness to communities and agility can be a real strength.
Hanover Digital actively seek to contribute to Social Value by:
- Delivering presentations and workshops in schools to inspire the next generation of digital talent
- Supporting community education on everyday consumer technologies
- Helping older and vulnerable people build confidence with the digital tools that enable them to live more connected, independent lives
- Offering specialist skills to community initiatives and charities, not just financial donations
For us, Social Value isn’t a procurement hurdle or “tick-box exercise”, it’s a way to contribute meaningfully to society while building the digital capability and confidence the UK needs.
A Different Kind of SME Ecosystem Partner
The UK Government’s SME inclusion policy has enormous potential, but only if SMEs and prime suppliers embrace the opportunity to evolve beyond pure resourcing.
Hanover Digital’s approach demonstrates a model where SMEs:
- Invest in delivery capability and governance, not only recruitment
- Operate as value-adding partners, not just resource providers
- Help surface and shape innovation opportunities on the ground
- Contribute actively to Social Value in ways that are tangible and locally relevant
- Strengthen the resilience and diversity of government technology supply chains
At the same time, recent reports from the NAO, Parliament and industry bodies are clear that government must continue to reform digital procurement, balancing the role of large “big tech” suppliers with a more strategic use of SMEs, and making better use of data, competition and capability-building
This is the SME model the UK Public Sector deserves, one that genuinely supports innovation, capability building and better outcomes for citizens, while helping government move closer to its ambition of spending £1 in every £3 with SMEs in a way that delivers real public value.
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