Who could be the next Strategic Suppliers?

Who could be the next Strategic Suppliers?

Posted by James Piggott Picture of James Piggott on 07 June 2022
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The UK 'Strategic Suppliers' are a group of companies who provide such vital services to government that the Cabinet Office takes a more hands-on approach to managing procurement with them.

Organisations exiting and entering the Strategic Suppliers list is an important moment for UK public procurement; in 2021, two defence suppliers, BAE Systems and Thales, joined the list, bringing the total number of Strategic Suppliers to 40 as of June 2022.

In our latest report analysing the public sector revenue earned and contracts won by the Strategic Suppliers, we noted how several firms make just as much public revenue as the Strategic Suppliers but aren't in the exclusive club. Who are they?

In this blog, we analyse 10 of these 'Challengers' to the Strategic Suppliers to understand what role they're playing in delivering public services, where they're earning their revenue from, and how they stack against the 40 incumbents.

 

Download the Strategic Suppliers Report

 

How do you become a Strategic Supplier?

But first, it's important to understand how an organisation joins the club.

There are no strict legislative or numeric requirements as to when the Cabinet Office designates a company as a Strategic Supplier.

There is a general consensus, however, that once an organisation earns over £100 million per annum from government, they're in the running to become a Strategic Supplier. Beyond this, the designation becomes much more subjective.

In essence, the Cabinet Office deems a supplier as 'Strategic' if the government is heavily reliant on the goods and services it provides. To manage the risk of suppliers being so heavily involved in the delivery of public services, a more hands-on approach is deemed necessary.

In judging this reliance, the Cabinet Office may ask themselves:

  • How heavily involved is this supplier in providing government services, both in terms of breadth and depth?

  • How easily could we replace the supplier if something went wrong?

  • Does the supplier provide a product or service that is essential to government which we can't easily find somewhere else?

If it's decided an organisation should be a Strategic Supplier, they are designated a Crown Representative, a civil servant who acts as the organisation's liaison in government.

 

The 'Challengers' to the Strategic Suppliers

Below is a dissection of the 10 suppliers to government that earned just as much public sector revenue in the 12-months to September 2021 as the 40 Strategic Suppliers, but aren't designated Strategic Suppliers.

This analysis was conducted using data from Tussell's market intelligence platform; to understand the Strategic Suppliers in more depth, read the 2022 Interim Report.

Please note that revenue totals and top customers exclude spend from a number of contracting authorities that have yet to publish their spend data up until September 2021; this includes National Highways, NHS England, the Ministry of Justice, HMPP and HMCTS and others.

9(2)

Equal Experts

Sector: Consulting

Revenue earned (in 12 months to Sept 2021): £57mn (+40% vs. prior 12 months)

Strategic Suppliers 'Rank': >40th place

Top customers (in 12 months to Sept 2021):

  • HM Revenue & Customs (£48mn)

  • Home Office (£5mn)

  • Crown Prosecution Service (£2mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Equal Experts provide a sizeable amount of technology-related services to a key government department, HM Revenue & Customs, namely the design and delivery of online platforms.

 

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McKinsey & Company

Sector: Consulting

Revenue earned (in 12 months to Sept 2021): £62mn (+105% vs. prior 12 months)

Strategic Suppliers 'Rank': 39th (1 place above Microsoft, 1 place below Oracle)

Top customers (in 12 months to Sept 2021):

  • Department of Health and Social Care (£33mn)

  • High Speed 2 Ltd (£5mn)

  • Ministry of Defence (£5mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

McKinsey & Company provide a wide variety of consultancy-based services to a number of public bodies, including National Highways, the FCDO and the Department for Health & Social Care. Over the pandemic, McKinsey was involved in many PPE-related projects.

 

10(1)

Leonardo

Sector: Aerospace & Defence

Revenue earned (in 12 months to Sept 2021): £180mn (-5% vs prior 12 months)

Strategic Suppliers 'Rank': 27th (1 place above Sopra Steria, 1 place below ISS)

Top customers (in 12 months to Sept 2021):

  • Ministry of Defence (£167mn)

  • Home Office (£11mn)

  • Defence Science & Technology Laboratory (£7mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Leonardo have a long-standing, valuable relationship with the MOD, providing operational support to some of the British Army's and Royal Navy's key aircraft.

 

15(1)

Suez

Sector: Outsourcing & Facilities Management

Revenue earned (in 12 months to Sept 2021): £340mn (0% vs. prior 12 months)

Strategic Suppliers 'Rank': 20th (1 place above IBM, 1 place below Fujitsu)

Top customers (in 12 months to Sept 2021):

  • Greater Manchester Combined Authority (£83mn)

  • Lancashire County Council (£38mn)

  • Royal Borough of Kensington & Chelsea (£22mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Suez provide vital waste collection, recycling and treatment services to a long list of local contracting authorities; their work with central government, however, is much smaller.

 

11-2

Softcat

Sector: Technology

Revenue earned (in 12 months to Sept 2021): £365mn (+27% vs. prior 12 months)

Strategic Suppliers 'Rank': 20th (1 place above IBM, 1 place below Fujitsu)

Top customers (in 12 months to Sept 2021):

  • Department for Work & Pensions (£60mn)

  • NHS Digital (£48mn)

  • HM Revenue & Customs (£36mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

A good proportion of Softcat's public sector revenue stems from providing Microsoft licenses and support to a number of prominent departments, but also cloud provision and IT & hardware support.

 

16-3

Boeing

Sector: Aerospace & Defence

Revenue earned (in 12 months to Sept 2021): £391mn (+13% on prior 12 months)

Strategic Suppliers 'Rank': 20th (1 place above IBM, 1 place below Fujitsu)

Top customers (in 12 months to Sept 2021): 

  • Ministry of Defence (£391mn)

  • South Yorkshire Mayoral Combined Authority Group (£946k)

  • UK Research & Innovation (£100k)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Like Leonardo, Boeing provide vitally important 'life support' services for a number of the MOD's aircraft; their largest MOD contract - to provide support services for the AH-64E helicopter - is not due to expire until 2040.

 

12-2

Costain

Sector: Construction & Engineering

Revenue earned (in 12 months to Sept 2021): £512mn (-1% on prior 12 months)

Strategic Suppliers 'Rank': 14th (1 place above Capgemini, 1 place below Engie)

Top customers (in 12 months to Sept 2021):

  • Department for Transport (£186mn)

  • High Speed Two Ltd (£130mn)

  • Lancashire County Council (£66mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Costain help deliver a number of high-value infrastructure endeavours, namely a number of 'Smart Motorway' projects, improvements to existing roadways, and 'enabling works' for HS2.

 

17-3

Veolia

Sector: Outsourcing & FM

Revenue earned (in 12 months to Sept 2021): £653mn (+4% vs. prior 12 months)

Strategic Suppliers 'Rank': 10th (1 place above Deloitte, 1 place below G4S)

Top customers (in 12 months to Sept 2021):

  • Hampshire County Council (£66mn)

  • Westminster City Council (£57mn)

  • East Sussex County Council (£47mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Like Suez, Veolia also provide a large array of FM-related services - including waste collection and treament, recycling and street cleaning - predominantly to local contracting authorities.

 

13(1)

Siemens

Sector: Construction & Engineering

Revenue earned (in 12 months to Sept 2021): £863mn (+41% vs. prior 12 months)

Strategic Suppliers 'Rank': 8th (1 place above Kier, 1 place below Capita)

Top customers (in 12 months to Sept 2021):

  • Network Rail Infrastructure (£386mn)

  • Transport for London (£138mn)

  • Crossrail Ltd (£81mn)

Top contract awards (from Jan 2016 to Sept 2021):

What role do they play in delivering public services?

Siemens has an large presence in public procurement, having worked with scores of public bodies to provide infrastructure-related services. Much of their work has been with Transport for London on London Underground-related projects.

 

18(1)

Skanska

Sector: Construction & Engineering

Revenue earned (in 12 months to Sept 2021): £1bn (+39% vs. prior 12 months)

Strategic Suppliers 'Rank': 6th (1 place above BAE Systems, 1 place below Babcock)

Top customers (in 12 months to Sept 2021):

  • High Speed Two Ltd (£645mn)

  • Network Rail Infrastructure Ltd (£119mn)

  • Hampshire County Council (39.1mn)

Top contract awards (from Jan 2016 - Sept 2021):

What role do they play in delivering public services?

At the top of the challenger list, Skanska earn more public sector revenue than 85% of the Strategic Suppliers. They've played a leading role in one of the government's most important infrastructure project, HS2, as well as delivering a number of sizeable road and rail projects across the country.

 

*

Despite not being members of the Strategic Suppliers club, these 10 organisations still earn billions of pounds every year from the public sector for their delivery of key goods and services.

Predicting who might become a Strategic Supplier is more of an art than a science: ultimately, it's the Cabinet Office's own judgement of government's 'reliance' on a given firm that decides whether their join the list. Total revenue earned is just one of many factors considered when weighing this relationship.

To understand the current Strategic Suppliers - including who's gaining and losing market share, and which public bodies rely on them the most - download our latest FREE analysis of the Strategic Suppliers here. 

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