Section 12 of the Procurement Act 2023 (“PA23”) sets out the core objectives of all covered procurements. Amongst other priorities, section 12 requires that contracting authorities (a) have regard to the fact that small and medium-sized enterprises may face particular barriers to participation, and (b) consider whether such barriers can be removed or reduced.
There is a similar obligation in section 86 for regulated below thresholds contracts, recognising that lower value contracts may especially be of interest to SMEs. While there is nothing new about the barriers to SMEs participating in procurement, nor the ambition to do something about those barriers, section 12 creates an expectation on contracting authorities that, to some at least to whom this has not previously been a strategic priority, will feel new.
Annex A to the Cabinet Office’s guidance on covered procurements contains some useful feedback from SMEs on what they consider the barriers to accessing public procurement actually are:
- Lack of market engagement
- Not aware of opportunities
- Complex procurement process
- Unconscious bias
- Too specific or too vague requirements
- Unachievable financial thresholds
- Short tender timescales
- Resource heavy
- Lacks innovation
- Unnecessary risk allocation
- Complex terms and conditions
- Lack of constructive feedback
There will, of course, be other barriers that are more particular to the contracting authority, its area, or to the individual SME. But local authorities could do worse than start by seeking to address this list in its procurement and commissioning processes. There are some practical steps all contracting authorities could take to immediately start levelling the playing field.
Market Engagement
Consider how and when you engage with your markets – early market engagement will almost always pay off, and can help to raise awareness of future opportunities, encourage innovation, and find realistic common ground between a contracting authority’s aspirations and the market’s ability to deliver. This helps to ensure that resulting procurement exercises are ambitious but realistic, and targeted at the appropriate markets.
Good market engagement will involve a two-way conversation, and goes beyond “meet the buyer” events. It is as much about listening to the market as it is about telling the market what the local authority is seeking.
Simplify Procedures
Review and revise your “standard” approaches to procurement – simplify procedures where appropriate to do so, with a particular focus on areas of spend which might be appropriate for SMEs to bid for. Multi-stage procurements are a significant investment for a small business and, while entirely appropriate for larger or higher risk contracts, aren’t always necessary.
Consider as well the circumstances in which any standard approaches to selection and evaluation (for example to economic and financial standing – including insurances) might inadvertently and unnecessarily exclude small businesses. It might be possible to permanently change your standard approach so that barriers are not erected in the first place.
Plan ahead
The PA23 requires contracting authorities who consider that they will, in the coming financial year, pay more than £100 million under relevant contracts (broadly, all supplies, services and works contracts that aren’t exempted contracts) to publish a Pipeline Notice on the central digital platform. The first step will be to identify whether the local authority does expend over £100 million on public contracts in any given year – we anticipate this will apply to some but by no means all local authorities – although there is no barrier to publishing Pipeline Notices voluntarily.
The Pipeline Notice shares details of any public contract with an estimated value of more than £2m over an 18-month period. Regulation 15 of the Procurement Regulations 2024 expands on this with minimum information requirements for those Pipeline Notices –which (in brief) requires contracting authorities to explain what procurements are anticipated during that 18-month period, their subject matter, and the estimated dates of proposed notices concerning their procurement.
This fosters an expectation of transparency and forward-planning which could usefully extend beyond contracts above £2m in value. Consider what additional transparency you can provide about anticipated spends and procurement processes, and share that information at the earliest opportunity.
Highlight suitable opportunities
The PA23 requires contracting authorities to highlight in their Tender Notices whether they consider the contract (or individual lots forming part of the procurement) may be particularly suitable for award to SMEs or value-driven non-governmental organisations that principally invest their surpluses to further social, environmental or cultural objectives.
More generally, consider the use of not just Tender Notices (at the start of a procurement) but also Planned Procurement Notices, Preliminary Market Engagement Notices, and Below-Threshold Tender Notices to highlight when opportunities might be suitable for SMEs – and think about how else you provide information for the marketplace to signpost SMEs toward the central digital platform.
Set suitable award criteria
The requirements for setting award criteria for competitive tendering exercises are described in section 23 of the PA23 and must:
- relate to the subject-matter of the contract;
- be sufficiently clear, measurable and specific;
- not break the rules on technical specifications in section 56; and
- be a proportionate means of assessing tenders, having regard to the nature, complexity and cost of the contract.
Be conscious of the impact that inappropriate award criteria can have, particularly on SMEs, and the barriers that these create. Be alive in particular to award criteria and scoring methodologies that are disproportionate to the nature, complexity and cost of the contract.
For light touch contracts, the reference to the subject matter of the contract can also include reference to:
- the views of an individual for whose benefit the services are to be supplied (a “service recipient”), or of a person providing care to a service recipient, in relation to:
- who should supply the services; and
- how and when they should be supplied;
- the different needs of different service recipients; and
- the importance of proximity between the supplier and service recipients for the effective and efficient supply of the services.
It is worth paying attention to the differences between these regimes, particularly recognising that SMEs may be especially capable of delivering contracts for “light touch” services.
Break down your contracts
Section 18 of the PA23 makes it clear that before publishing a Tender Notice at the start of a procurement, contracting authorities must consider whether the subject of the contract could reasonably be supplied under more than one contract, and especially whether breaking down the procurement into lots is appropriate. This can be a simple but impactful way of breaking down barriers to SMEs, by enabling SMEs to tender for separate lots which are smaller, more specialist, or geographically limited.
It can create a mixed economy of suppliers for the contracting authority which both increases spend to SMEs and distributes risk more proportionately.
Consider ringfencing competition
Reflective of equivalent provisions in the previous Public Contracts Regulations 2015, the PA23 provides the opportunity to “reserve” contracts to supported employment providers – organisations that operate wholly or partly for the purpose of providing employment to disabled or disadvantaged individuals. While not all supported employment providers will be SMEs, many are, and the rules set out in section 32 of the PA23 provide an opportunity to prioritise spend on organisations with this specific social purpose. This can chime with a contracting authority’s wider strategic ambitions to increase employment and support disabled or disadvantaged individuals within their communities.
Talk more
Many procurements fail to provide opportunities for SMEs to engage not because there is an unwillingness to do so, but rather because the right decisions are not made early enough in the commissioning cycle, and by the time the Tender Notice is published and the procurement commenced, there is little chance that the barriers experienced by SMEs can be broken down. More than anything else, therefore, contracting authorities and SMEs alike are encouraged to engage in conversation – at the earliest possible opportunity.
For more information
For more information, contact Gayle Monk and Chanel Quigley.
