The Crown Commercial Service (CCS) is reviewing its decision to ramp up the insurance cover needed by prospective suppliers on its flagship cloud computing framework, G-Cloud, by £20m after being criticised about how anti-small business the change would be.
The situation has seen at least one government minister pledge to investigate since Computer Weekly first reported the change on 28 February 2024, on the basis that these uplifted insurance costs would make participating in the framework cost-prohibitive for many smaller government IT suppliers.
One of the ministers known to be involved is small business minister Kevin Hollinrake, who replied positively to a post on the social networking site X asking him, in his dual role as the chair of the government’s newly launched Small Business Council, to “urgently” intervene.
The change is known to have caught the G-Cloud supplier community flat-footed, with CCS accused of failing to communicate during the market engagement phase of the G-Cloud 14 procurement cycle that the framework’s insurance requirements would be revamped.
It is claimed the first suppliers knew of this change is when CCS published the procurement documents for G-Cloud 14 on 19 February 2024, which confirmed prospective suppliers would need insurance cover totalling at least £25m to participate.
The required insurances include a £10m public liability insurance cover, another £10m in professional indemnity cover, and a £5m employers’ liability policy.
Been told by the Cabinet Office that the matter is in hand and a statement will follow shortly
— Kevin Hollinrake MP (@kevinhollinrake)
March 1, 2024
The current version of the framework, G-Cloud-13, only required participating suppliers to have up to £5m in employers’ liability insurance in place before it commenced.
Nicky Stewart, former head of ICT at the UK’s Cabinet Office, told Computer Weekly the changes CCS has proposed “send a very clear message to the industry” that the government is “not open for business” to smaller cloud service providers.
CCS previously told Computer Weekly the insurance changes were necessary to bring G-Cloud into line with the contents of the Public Sector Contract, which is the standard template the organisation uses when drawing up framework agreements.
However, the Public Sector Contract does, as stated on its website, allow CCS to “customise documents for individual procurements”, which suggests the organisation could have made the insurance requirements more weighted in the favour of small to medium-sized enterprise (SME) suppliers if it wished.
“The industry needs to understand the rationale and deserves some transparency from CCS and the Cabinet Office,” said Stewart. “I would be interested to hear the views of the Cabinet Office SME Council and the recently launched Small Business Council on this matter.”
The uplift in insurance costs has also described as disproportionate and overkill, as data shared with Computer Weekly from public sector analyst firm Tussell confirmed the average deal size on G-Cloud 13 was £951,149.
When Computer Weekly first reported on the issue, CCS said the level of public liability cover for the agreement was “in review”, but the more extensive insurance arrangement would give “appropriate assurance to public sector customers for an agreement of this magnitude”.
Computer Weekly has since received an updated statement from a CCS spokesperson that appeared to confirm all of the insurance requirements for the first three Lots of G-Cloud 14 are now “under review”.
Lot 4: What’s it good for?
The insurance requirements for G-Cloud 14’s fourth and final Lot total £25m and are the same as those CCS has proposed for the framework’s first three Lots.
The CCS statement confirmed that Lot 4’s insurance requirements would remain as they are, but the wisdom of that decision has also been called into question, after CCS confirmed Lot 4 of G-Cloud 13 has only had £25,000 of spend put through it since it went live in March 2023.
The start date for G-Cloud 13’s Lot 4 was delayed by three months, having originally been pegged to go live in December 2022. There is also a degree of crossover between the services offered on Lot 3 of the framework, which might also have been a factor in why so little spend has gone through Lot 4.
G-Cloud 13 was the first iteration of the framework to feature Lot 4, which was introduced as a means for public sector buyers to access the support, security and migration services needed to carry out larger-scale transitional cloud projects.
Unlike G-Cloud’s other Lots, there is no direct award capability in Lot 4, meaning suppliers have to compete for tenders, which is also thought to have affected the amount of spend awarded through Lot 4.
“No one wants to run competitions [for cloud contracts] when they can direct award them via Lot 3,” a G-Cloud supplier source told Computer Weekly.
Owen Sayers, a senior partner at IT security consultancy Secon Solutions, said in light of how little business has been transacted through Lot 4, the amount of insurance CCS is looking for seems disproportionately high.
“Lot 4 has always been something of an outlier in G-Cloud, arriving late and for an unclear purpose,” he told Computer Weekly. “The fact it has processed only £25,000 of business is therefore both surprising and yet not.”
There are 41 suppliers listed on Lot 4 of G-Cloud 13, which includes a mix of cloud consultancy firms and systems integrators.
This time around, the number of suppliers on Lot 4 could be higher, though, because it might attract companies that have been rejected from CCS’s Cloud Compute 2 framework after Microsoft declined to give third-party suppliers the right to resell its cloud services through it, added Sayers.
“It is possible Microsoft’s decision to limit resellers [on Cloud Compute 2] might result in some displaced providers conceivably seeking to regain some ground by being on Lot 4,” he said.
That being said, the entry requirements for Lot 4 are also likely to prove off-putting for a lot of SMEs, continued Sayers.
“In addition to the insurance requirements, which are hard to fathom, the need to present two recent large-value contract references in the Certificate of Technical Proficiency is also a cause for concern among suppliers,” he said.
“I know of several SMEs who have decided not to bid simply because the overheads of getting on Lot 4 are higher than the likely business benefits or revenue they’ll receive.”