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Rob Rees, Divisional Director of insurer Markel Direct, explains what the new Act means for SMEs and shares advice on how to increase chances of success when bidding for government contracts.
Public procurement is one of the largest areas of government spending in the UK, with approximately £300 billion of taxpayers’ money being used to purchase goods and services across sectors such as healthcare, infrastructure, and more. In 2021/22, small and medium enterprises (SMEs) secured around £21 billion in direct government contracts, and this figure nearly doubled in 2022/23, reaching £39.7 billion.
As part of broader reforms aimed at lowering barriers to SMEs obtaining public sector contracts, the UK government will introduce the Procurement Act (the Act) from 24 February 2025.
The Procurement Act 2023 is being introduced to consolidate several existing regulations, such as the ‘Public Contracts Regulations’ and ‘Concessions Regulations’, into one set of rules. The aim of doing this is to benefit SMEs by increasing transparency, streamlining procurement processes, and generally creating more opportunities to access government contracts, all of which should allow small businesses to compete more fairly with larger organisations
Simplified bidding processes
The current rules, based on EU directives, consisted of complex procedures that put SMEs off from participating in bidding processes. The new Act will assist in streamlining the tenders, making it easier for SMEs by introducing a simplified digital bidding platform where suppliers can register their company’s details, bid on contracts and track all opportunities in one place.
One of the current pain points is the lack of transparency. Businesses were often left without any explanation as to why certain bidders were chosen instead of others, which led to concerns about favouritism. The new framework aims to enhance transparency throughout the entire process, fostering greater trust and fairness in the system, with the intention of encouraging more SMEs to bid for public contracts.
In the current framework, SMEs often struggle to access public contracts due to rigid thresholds and complicated eligibility criteria that go in favour of larger companies. The purpose of the Act will be to help reduce these barriers by simplifying documentation and application requirements to be more encouraging for SMEs.
Shift in focus
Currently, many tenders’ success criteria are focused on price - however, the new Act shifts the criteria from the "Most Economically Advantageous Tender" to the "Most Advantageous Tender”. There will be a greater focus on sustainability and social values in the decision making process, such as reducing carbon footprints, supporting local communities, and ensuring ethical business practices.
This change gives SMEs a better opportunity to secure government contracts by highlighting their contributions for ‘good’ beyond just cost alone, allowing them to compete with larger businesses who may have previously benefitted from economies of scale.
How can SMEs prepare for the new act?
With the new Act there will be new developments and regulations, as well as opportunities, and government procurement is no exception. Make sure that you, or someone in your business, is responsible for staying informed of these changes. This can be achieved through participating in workshops with industry trade associations, reviewing government guidance and networking with other SMEs.
If you haven’t already, start building relationships with key stakeholders. These include contractors, contracting authorities (such as government agencies or councils) and other SMEs, all of which can help with business opportunities. Although the Act aims to make it easier for SMEs to access these contracts, fostering collaborations could prove invaluable.
Develop your company’s public image
If you are an SME owner, now is the time to focus on developing your business’ public image to position your company as strongly as possible in the eyes of public sector buyers. Ensuring your business’ financial credit score is in good health and all accounts are up to date with Companies House is a good starting point.
It is important to also consider what the goals are of the contracts you will tender for, and to start investing in areas that could be viewed as favourable to these buyers before the Act comes into full force. This could include certifications or frameworks such as:
The Crown Commercial Service provides more information about being a supplier to the public sector on its website.
Many government contracts require SMEs to have adequate insurance. Having the right insurance in place for your business can alo help with a number of aspects of submitting a bid in a competitive tender:
The main types of insurance you may be require to provide are Public Liability Insurance, Professional Indemnity Insurance, Product Liability Insurance, and Cyber Insurance.
The new Procurement Act provides a great opportunity for smaller merchants to access new revenue streams by becoming suppliers to the government. A relatively small amount of preparation could bring big rewards.
