One of the primary reasons for the Procurement Act 2023 is the simplification of the public sector procurement process for all stakeholders, but with a special focus on SMEs and increasing their participation in the market.
There’s a lot to be gained by increasing the number of SMEs in public sector procurement. They constitute well over 90% of all businesses in the UK, but are under-represented in the public sector, where they could enhance the national and local economies and drive social value projects that keep the country on track for its net zero goals.
This post will look at how the changes in the Act impact small business contracts with the government, and how they can optimise new opportunities.
Bid Writing for Public Sector Contracts
The UK government will introduce a new Central Digital Platform (CDP). It enables small businesses to register and store critical business details, which can be used whenever they bid on public sector contracts. This saves a fair bit of time when preparing a bid, which can be used to refine tender responses.
On-Time Payments
Delayed payments tend to impact small and medium-sized enterprises more than larger companies because they don’t have the cash flow or cash cushion to go 90 days without invoices being paid. The Act stipulates that public sector buyers and government departments must settle their accounts with SMEs within 30 days.
This provides the financial security small businesses need to continue their foray into public sector procurement.
Simplified Procurement Procedures
The Act has reduced the number of procurement procedures under the EU directive to just three post-Brexit.
- Direct award
- Competitive flexible procedure
- Framework agreements
Let’s look more closely.
1) Direct Award
The direct award procedure is when public sector organisations award contracts to suppliers without a full tendering process. However, public buyers must still publish a transparency notice to inform interested parties that they intend to award a contract directly.
Contracts can only be directly awarded in certain circumstances.
- When failure to do so would endanger physical life
- For certain defence and security contracts
2) Competitive Flexible Procedure
Contracting authorities have more control over this procedure than the others. They can design procedures to suit their needs (complying with the primary principles, of course).
According to the government’s official Guidance for Competitive Tendering Processes, this means that they can limit the number of eligible suppliers and use as many processes as they believe necessary, for example, dialogue, negotiation, and demonstration.
3) Procurement Framework Agreements
Frameworks eliminate the need for open tenders. Suppliers that meet eligibility criteria bid on government contracts published within the framework. It’s like a procurement shortcut because most of the time-intensive admin tasks are removed. This makes framework agreements cost-effective low-risk options when services or products are needed ASAP.
According to the new Act, contracting authorities must open the framework to new bidders at least twice during an eight-year contract. This gives suppliers more opportunities to win government tenders without going through the whole tendering process again. These additional tender opportunities can make frameworks lucrative for small businesses.
Transparency & Fair Play
Procurement now involves much more than publishing a contract and contract award notice. The Act has introduced many new Notices to enhance the transparency of the procurement process, which keeps everything fair among bidders and all stakeholders.
The new notices play an important role in helping new SMEs better understand the procurement process, especially for preparation and timing.
Insurance After NOT Before Contract Award
This is another change that is significantly in the suppliers’ favour. Under the current regime, SMEs are required to show proof of insurance during the bidding stage of procurement. Now, they only need to provide evidence when they win government contracts.
This means SMEs don’t have to come up with proof of their insurance status on the chance they’ll win a contract.
However, buying insurance is still a pretty good idea for many reasons. Government departments are more confident working with suppliers who are financially protected should the contract go pear-shaped. Insurance demonstrates proactive risk management, which is attractive to the risk-averse public sector.
The types of insurance that suppliers should consider include:
Professional Indemnity Insurance
This is usually the minimum that government departments will accept. It’s a safety net for both parties, but it helps protect SMEs’ reputations against allegations of negligence and incompetence.
Public Liability Insurance
This is pretty important if your business has any inherent risks or dangers, like manufacturing and construction. It covers small and medium-sized businesses should a third party be injured or property damaged at any point during contract delivery.
Cyber Security
This is a biggie because the public sector works with a lot of sensitive, private, and confidential data. There’s a lot at stake so it’s essential to have a good cyber security insurance policy. It’s another way to show buyers that you take risk management seriously and can be trusted with high-value contracts.
Product Liability Insurance
SMEs need Product Liability Insurance if they provide goods to government departments. Even the highest quality goods can leave the production line with a defect. This insurance protects SMEs against allegations of damage or injury as a direct result of said defect.
Making it Work
Things aren’t going to fall neatly into place on 24 February 2025. There will be teething problems as buyers and suppliers figure out how to adjust contract requirements to meet the criteria in the new tendering process.
It’s up to SMEs to ensure they are well placed to grab the contract opportunities that present themselves and start building a reputation for quality and reliability that stands out from other businesses.
With the right preparation, SMEs can successfully bid for government contracts in the public sector market.
You don’t have to navigate the changes on your own. Delta eSourcing is an eSourcing portal that supports suppliers and buyers in public procurement with services that include profile and tender response management, analytics, and seamless integration with existing systems.
Further guidance includes G-Cloud 14 registration and how to increase your eligibility criteria to attract the interest of public sector buyers.
Book a free demo to find out how we tailor our services to your exact needs.
