In just a few more days, the new Procurement Act 2023 will go live and all the preparation for the changes will finally start to bear fruit. Stakeholders in public procurement will find out if the Act’s goals are realistic, especially considering fears that new administration requirements will increase the burden on government departments. These include the new contract notices that must be published and the mandatory feedback for all suppliers who submitted bids, whether they were successful or not.
However, SMEs should have no complaints as many of the reforms are designed to increase their participation in the market and enhance their chances of winning public sector contracts. That doesn’t mean contracts are going to land in their laps, signed and ready to go. It’s up to them to understand how they can leverage the changes to optimise their procurement strategies to win government contracts.
A New Era for Public Sector Procurement: Key Reforms
Just how has the new Act simplified procurement processes for small and medium-sized enterprises?
For a start, it cut the number of procedures used in the EU directive down to three:
- Single-stage procedure: An open procedure that allows all interested parties to bid on government contracts.
- Competitive flexible procedure: Public sector buyers design their own procurement procedures in line with the Act’s regulations. This is often a two-stage process and can include bid evaluation, negotiation, and demonstrations.
- Direct award: Contracts are awarded directly without going through the tendering process. This option is only available under special circumstances, like when immediate action is necessary to protect human, animal, and plant life.
The upshot is less time on administrative tasks and more time on refining proposals.
New SME Thresholds
SME thresholds will increase effective from April 2025. The aim is to simplify financial reporting for micro, small, and medium-sized enterprises. But, it has other benefits too.
First, let’s look at the thresholds.
Current
| Size | Revenue | Total Assets | Employees |
| Micro | £632K | £316K | 10 |
| Small | £10.2 million | £5.1 million | 50 |
| Medium | £36 million | £18 million | 250 |
New
| Size | Revenue | Assets | Employees |
| Micro | £1 million | 500K | 10 |
| Small | £15 million | £7.5 million | 50 |
| Medium | £54 million | £27 million | 250 |
The impact on SMEs is significant because tens of thousands of businesses will move down a category, which simplifies their accounting requirements, including auditing and reporting. It also means that more businesses will benefit from the drive to increase SMEs in public sector procurement.
Prepping the Ground for SMEs in Government Procurement
We’ve talked about the government’s aim to increase SME participation in public sector procurement, but we haven’t gone into any specifics. That’s about to change.
The UK government’s commitment to supporting SMEs is evident in its intention to spend over 30% of its procurement budget on small businesses. Moreover, many aspects of the new Procurement Act are designed with SMEs in mind. For instance, public sector organisations must consider each contract to see if any obstacles prevent SMEs from bidding on public sector contracts. If there are, they must try to remove them. This could include allowing several SMEs to form a consortium to bid for government contracts.
The focus on overall value rather than price also benefits small businesses. MAT – Most Advantageous Tender – is about the extra value suppliers can provide, over and above the contract’s worth. This favours SMEs because they’re often more innovative, flexible, and agile than large companies.
When it comes to local government tenders, SMEs are more familiar with the business environment and can leverage their networks to enhance their products or services and save costs for buyers.
In fact, leveraging local business networks is one of the Act’s aims because a strong local supply chain can create jobs, support the local economy, and encourage competition, which drives innovation and leads to further benefits for buyers and suppliers.
Up the Game with Social Value
The Social Value Act 2012 is evidence that social value has been a consideration in public sector procurement for a jolly long time. However, the Act elevates it from merely a consideration to mandatory with a minimum weighting of 10%.
SMEs can score (relatively) easy points by incorporating local social value initiatives in their proposals. Contracting authorities point suppliers in a direction that reflects the contract’s requirements – like energy efficiency. Suppliers run with it.
SMEs’ local knowledge and contacts enable them to get a full understanding of communities’ needs. Their initiatives can get to the root of a problem instead of addressing symptoms.
For example:
The contract is for supplying local outreach clinics with PPE and other medical supplies. The clinics have noticed a disturbing increase in the number of old folks diagnosed with depression. With a little research, suppliers found that the uptick in cases started soon after mobile library services were cancelled.
The problem is not the lack of books or reading opportunities. The problem is that old folks lost their weekly social outings and felt lonely and isolated.
A potential solution is to start a weekly book swap at a community centre. Suppliers arrange the transport, set up the hall with chairs, tables, tea, and light eats, and ensure there is always a fresh selection of second-hand books available.
It’s cost-effective and easy to manage, and the clinics report a sharp drop in depression among the elderly.
The Role of Low-Value Contract Opportunities in SME Participation
Low-value contracts are another way the Act encourages small business contracts with government. Not only are low-value contracts more affordable and viable for small businesses, but they’re safe from larger suppliers that barely glance in their direction. Their eyes are on bigger, more lucrative contract opportunities.
SMEs compete with businesses that are comparable in size and capacity – the playing field for government tenders is officially levelled.
Tips to Navigate the New Procurement Landscape
Perhaps the biggest tip is to arm yourself with as much knowledge as possible. This includes the Act, obviously, but also market and competitor research, and early engagement with the buyers in government departments. Knowing your environment can give you the confidence to take a few considered chances that could pay massive dividends.
The next tip is to devote some time and resources to innovation. Innovative solutions will set you apart from all the other SMEs competing for the same contracts as you. It’s also how you provide the extra value to boost your A in MAT.
Remember, it’s not always about beating the competition. Sometimes collaboration is the best way to get ahead, especially if you know you can deliver the heck out of one of the contract’s elements, but the others … not so much.
An uber-important tip is to register on a contracts finder or eProcurement platform, like the government’s Contract Finder and Find a Tender. Supply2Gov is an independent contract alert platform that is backed by the largest database of government tenders in the UK and the Republic of Ireland. If a contract notice has been published, Supply2Gov is where you’ll find it.
Compliance with the Procurement Act 2023
The Procurement Act is law and laws demand compliance. The new Act demands:
- Equal treatment for all suppliers, regardless of size and prior experience.
- Transparency at each stage of the process, to promote accountability and develop trust among all stakeholders in the tendering process.
- Fair competition that encourages diverse suppliers to enter the market and bid for government contracts.
- Proportionality means that procurement procedures should match the contract’s complexity; a simple contract = simplified procurement processes.
- Publication of contract notices at each stage of the process, including the initial intention to tender, the tender, amendments to the tender, the contract award, and contract termination.
Failure to comply can result in financial penalties, legal action, and debarment from the supplier list.
It’s a good idea to look into accreditation options, even if none are required. Cyber Essentials and Cyber Essentials Plus are the minimum requirements for cyber security, but there are plenty of other accreditations and certifications suppliers should consider, including the ISO suite of international quality standards.