A recent report by the British Chambers of Commerce and Tussell has brought to light the persistent challenges faced by the public sector in reaching its procurement targets for small and medium-sized enterprises (SMEs).

Despite ongoing efforts by the UK government to increase the procurement of goods and services from SMEs, the latest figures indicate a continuing shortfall. In 2023, SMEs received just 20% of the public sector’s direct procurement spend, totalling £39.7 billion out of a total £194.8 billion.

The Current Landscape

While the overall value of public sector procurement with SMEs has risen by 77% over the past six years, the proportion of total spend directed towards SMEs has remained stagnant. Local government has performed better in this area, with 34% of its procurement expenditure going to SMEs, compared to just 2% in certain central government departments.

The conclusion from this data is clear: SMEs still face significant barriers when it comes to winning public sector contracts. Complex procurement processes, high bidding costs, and the increasing dominance of large procurement frameworks have made it challenging for smaller businesses to compete with larger, more established suppliers.

Will the Procurement Act Be the Solution?

The Procurement Act, which received Royal Assent in October 2023 and is set to come into effect in October 2024, aims to address these issues by improving public procurement opportunities for SMEs and social enterprises. The Act proposes a more flexible and efficient procurement system, underpinned by a focus on transparency and fairness.

Key highlights of the Procurement Act include:

  • A Central Digital Platform: This new platform will provide comprehensive details of all public sector tenders, enabling SMEs to more easily identify and compete for relevant opportunities.
  • Streamlined Processes: The Act aims to simplify procurement procedures, reducing the complexity that currently deters smaller businesses from engaging.
  • Mandatory Feedback for Unsuccessful Bids: Public bodies will now be required to provide feedback to SMEs that fail to win contracts. This will help smaller businesses understand how to improve their future bids.
  • National Procurement Policy Statement: This policy will guide contracting authorities in levelling the playing field for SMEs, eliminating unnecessary barriers and avoiding disproportionate contract requirements.

Practical Steps for SMEs

If the Procurement Act is successful in reshaping public sector procurement, it could present valuable new opportunities for your business. Here are some practical steps you can take to position yourself as a public sector supplier:

  1. Stay Informed About the Procurement Act: Understanding the changes introduced by the Act will be critical. Keep up-to-date with the latest developments and prepare to utilise the new digital platform once it launches.
  2. Engage with Procurement Frameworks: While these frameworks have been seen as an obstacle, they also offer potential opportunities. Gain an understanding of how these frameworks operate and consider how you might join them, possibly in partnership with other businesses.
  3. Invest in Bid Preparation: The quality of your bid can make or break your chances of securing contracts. Invest in improving your bidding process, including understanding the unique requirements of public sector contracts and how to meet them effectively.
  4. Take Advantage of Feedback: Make use of the mandatory feedback provisions under the new Act. If your bid is unsuccessful, the insights you gain will help you refine your approach and improve your chances in future tenders.
  5. Network and Collaborate: Building relationships with larger suppliers or other SMEs could lead to subcontracting opportunities or joint bids, which can be advantageous when targeting larger contracts.
  6. Leverage Local Government Opportunities: Since local governments direct a larger proportion of spending towards SMEs, focusing on local authorities may provide a more accessible entry point for your business. Develop relationships with local authorities and pursue contracts that align with your business’s size and capabilities.

Moving Forward

Although the public sector continues to miss its procurement targets for SMEs, the forthcoming changes under the Procurement Act could unlock significant opportunities. By understanding the new legislation and taking proactive steps, you can better position your business to win public sector contracts and support its growth in this evolving market.

For more insights, visit: https://www.icaew.com/insights/viewpoints-on-the-news/2024/sep-2024/sme-public-sector-procurement-spend-stalls-despite-pledges