How public sector procurement can accelerate SME growth

Public procurement is a big deal. The public sector is the biggest purchaser of goods and services in the UK, but many small and medium businesses struggle to win contracts in the face of competition from much larger businesses. With public procurement rules set to change in February 2025, SMEs are expected to benefit from one of the largest shake-ups to procurement regulation since the 1970s.

The new Procurement Act 2023 (the Act) includes provisions that are intended to support small and medium-sized enterprises in winning a greater share of the public sector’s approximately £300bn expenditure per year.

Alison Walton, head of procurement, discusses what this means for businesses in Teesside and what you can be doing to get ready.

Greater access to public sector contracts

Alison says bidding for public sector work can sometimes seem like an uphill battle for SMEs: “When a quick glance at a tender’s current providers shows that you’re up against larger businesses with access to huge resources, it can be frustrating, especially when you know you can do the work and do it well. The Act aims to level the playing field, requiring public sector bodies to consider whether SMEs may face barriers to participation and whether these barriers can be removed or reduced.

“As an SME ourselves, Muckle has been fortunate to be appointed to a number of national and local frameworks over the years, including TVCA and most recently NEPO, the North West Legal Consortium (NWLC) and national academy framework Pagabo, which itself had provisions for SMEs in its bidding process.”

Transparency and fair competition

One of the key changes is a focus on increased transparency throughout the life of a contract, not just in the procurement stages. Bidders will be able to see who else is bidding for contracts, what their competitors’ contracts look like, how they’re performing, which contracts are being directly awarded, to whom and for what reason. Alison said: “The transparency of how public money is spent is a good thing, and hopefully, the more open the process, the more it will help SMEs understand decisions and bid more successfully going forward.

The Act also stipulates contracting authorities should not place onerous requirements on suppliers; for example, organisations will only have to show proof of insurance after contact award rather than during bidding, sparing SMEs from carrying unnecessary costs pre-award when it's not guaranteed they’ll need them.

Alison continues: “More transparency over procurement pipelines and a requirement to report on pre-procurement market engagement means SMEs can start preparation for tender processes earlier.”

Social value

To the surprise of many, the Act does not explicitly mention social value, especially because, up until now, there has been an emphasis on public sector organisations to consider how contract awards will benefit the wider community outside the scope of the delivery of the work.

Alison says: “Although there aren’t any specific provisions for social value in the Act, there is a clause requiring public sector contract to maximise public benefit, so it’s still something that businesses should be mindful of.

“Social value will continue to be front and centre of public procurement policy via the National Procurement Policy Statement, which authorities will have to keep in mind when designing their procurement processes. This is an area where SMEs can really set themselves apart from larger organisations – they tend to be already part of the community, understand local priorities and can directly influence things like job creation, local emissions and innovation on a local level.

“Muckle already carries out a lot of social value in our area and we were awarded B Corp certification at the start of 2024. We’ve been doing this for as long as the firm has been in business and will continue to do so, despite our public sector commitments – but it does set us apart during the bidding process.”

Prompt payments

Alison says: “Delayed payments can be a financial burden for any organisation, but it is especially hard on SMEs. Under provisions in the Act, public sector bodies are required to make payments within 30 days, alleviating the pressure and making bidding for contracts more attractive to smaller businesses.”

Opening up opportunities

The government recognises that SMEs are the backbone of the UK’s business community, and opening up opportunities to bid for public sector contracts will help stimulate local economies and translate into job creation and increased social value.

For more information, please contact Alison Walton at [email protected] or call 0191 211 7850