How does the Procurement Act (2023) benefit SMEs?

As part of our Procurement Act expert blog series, Heidi Parker. Technical Procurement Specialist at TLT LLP, shares everything you need to know about the legislation and action you can take to make the Act work in your favour.

The Procurement Act 2023 has been promoted as a means for opening up the market and creating greater transparency in the public procurement process for small-medium enterprise (SMEs).  It aims to do this through the changes to the tendering processes, changes around the conditions of participation, the introduction of the Central Digital Platform, the introduction of open frameworks, obligations relating to payment terms, and more generally, an increased level of transparency. 

In this blog, we will explain why this topic is of importance and then we will consider how these changes should be used to support SMEs, as well as detailing what SMEs need to be aware of going forward.

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Why SMEs are important for public sector procurement 

Latest gross spending on public sector procurement was reported as £407 billion in 2023/2024 across the UK2 – that’s nearly 1/3 of total public sector spending! 

SMEs account for 99.9% of the UK business population3, therefore it’s crucial that they are considered during the public procurement process.  

In recognition of this, the Procurement Act includes an objective to, ‘have regard to the fact that small and medium-sized enterprises may face particular barriers to participation and consider whether such barriers can be removed or reduced’ which should make it easier and less expensive for SMEs to tender for public sector procurement opportunities. 

This objective is further supported by the Government’s industrial strategy to foster ‘a resilient economy that supports British businesses and creates good jobs in communities across the country’4. By opening up the playing field for SMEs, the Procurement Act 2023 boosts their business prospects and opportunities to win work over larger players and long-term incumbents.

What are the benefits for SMEs within the Procurement Act (2023)?

New Procedures

The Procurement Act now only includes three procedures;  

• Open (which has not changed) 
• Direct Award (with some slightly amended rules) 
• Competitive Flexible Procedure (CFP) – new 

The rules around the design of this new procedure should be of real interest to SMEs as legislation (and guidance) make clear that ‘the design of a CFP MUST be proportionate to the nature, complexity and value of the contract’, and when combined with the above referenced objective, means authorities should be keeping things as simple and easy as possible. 

Conditions of Participation 

Although on the surface the wording around conditions of participation (selection criteria) appear to repeat what was in the previous legislation there have been a few important changes which should benefit SMEs. These include: 

• insurance requirements only needing to be met/ evidenced if successful,  
• financial turnover thresholds should be aligned to risk of failure (best practice/ guidance)  
• they do not need to be assessed at the beginning of the process, e.g. SMEs could be given until the point of award to demonstrate they hold a particular accreditations/ membership where it is possible to achieve such a requirement within the timescale of the procedure.

Central Digital Platform 

There is now a central digital platform (CDP) for supplier registration that seeks to simplify the process relating to Conditions of Participation so that suppliers only have to submit company specific data (e.g. accounts) once for use in any public sector procurement.  

However, it is worth noting that many Authorities are still using their own Conditions of Participation forms whilst allowing suppliers to submit exported information in response to some elements. Also, for construction contracts, in line with PPN 03/24, Authorities are still using the Common Assessment Standard (and not PAS 91) and many Authorities are encouraging suppliers to be accredited by organisations such as Constructionline. 

This platform also combines the previous Contracts Finder and Find a Tender Service in one place, and where Authorities advertise via their own portals, the information of such opportunities can also be accessed here for free. 

Open Frameworks

The Procurement Act now includes a new framework arrangement, and this should be of benefit to SMEs. Whereas before a framework was awarded for up to four years and that opportunity was then closed, the new Open Framework is designed to ‘open’ periodically and give others an opportunity to join.

Faster payments

The Procurement Act states the Contracting Authority must pay its suppliers within 30 calendar days of the date on which a valid/ undisputed* invoice is received, or the date on which the payment becomes due. It also mandates the acceptance of electronic invoices. This provides suppliers with greater financial stability, instead of having to follow up for payment. 

Quite simply; not paying means breaking the law and could result in a supplier being entitled to interest being payable in line with the Late  Payment and Commercial Debts (interest) Act 1998

See late commercial payments: guidance for further information.

*where a standard form construction contract is being used, the requirements for this will be in line with the contract.

Improved transparency 

The Procurement Act has brought in a requirement for Authorities to publish a variety of notices and in some cases, the awarded contract (minus sensitive commercial information or personal data). 

This means greater visibility in who the contracts are being awarded to, changes made to those contracts and where over £5m, performance under those contracts and if terminated early, the reason for and the extent of that termination.  

This information may be useful for challenging a Contracting Authority that may have in the past applied extension upon extension to a contract or has taken the easier option of extending a contract with a poorly performing incumbent rather than running a new procurement. 

Are there any drawbacks for SMEs because of the Procurement Act? 

Despite the above, it is not all positive for SMEs:

No consistency 

The procedural flexibility changes serve to give greater control to public sector organisations in how they conduct their procurement. However, with each Contracting Authority creating their own Invitations To Tender (ITTs) with their own processes, and owning their approaches in how they’ll procure things, this creates a lack of consistency and confusing documents within the market. This may make it difficult for SMEs to distinguish what some Contracting Authorities require, creating uncertainty and confusion in what the rules are regarding procedures and clarifications. 

If an ITT is unclear, get in touch with the Contracting Authority, otherwise you’ll be held to account. If the Contracting Authority doesn’t remedy it, seek legal advice to – don’t wait for the Assessment Summary/ Contract Award Notice to be issued! 

Equally, there is no longer a mandated/ standardised Selection Questionnaire, other that the information populated into the Central Digital Platform, Contracting Authorities can determine for themselves what other conditions/ questions they ask (although use of the Common Assessment Standard for works should still ensure some standardisation).

More administration 

With more information published and available in the public domain, it creates an administrative burden for SMEs searching for opportunities. With no standardisation to documents across different public sector teams, it can become difficult to track what information is required for a tender and in what format. 

Management information or KPI? 

The Act now includes an express obligation for Contracting Authorities to publish KPIs (key performance indicators) for contracts over £5m, however some authorities still don’t know the difference between KPIs and management information and this could become onerous for SMEs. 

Suppliers are encouraged to participate in market engagement and work with the Contracting Authority to agree a proportionate approach to what information is to be gathered and then reported on in performance notices. 

Extended Contract Management processes

Market competition effectiveness 

Finally, if tenders aren’t designed carefully and realistically with the construction industry/ nuances in mind, in particularly around the application of discretionary grounds, Contracting Authorities may find a limited market of quality suppliers applying to bid for their tender, so Suppliers are encouraged to question disproportionate approaches and expectations. 

If you think that the procedure design is prohibitive of your participation, you aren’t given the opportunity to meet a conditions of participation by the end of the construction procurement process, or the reporting expectations are too onerous, please get in touch with the Contracting Authority and share your concerns – we are all learning and we will learn faster together……..

How Constructionline can help 

• Explore our subcontractor compliance memberships 
• Pre-qualify for projects for top tier construction contractors! 
• Keep documentation in one place, such as PQQ information and certificates 
• Access to Marketplace: Find construction work near you, on one platform 
• Opt for a Gold or Platinum membership and align to the Common Assessment Standard 
• Complete our BSA Assessments: Demonstrate you meet some of the highest measures of building safety

Existing customers: Login and find leads today

New customer? Find the right membership for you 

Looking for your next construction tender? Check out our subcontractor compliance memberships and gain access to Marketplace – pre-qualify search through the latest construction leads near you!

About Heidi Parker

Heidi Parker is a technical procurement specialist at TLT LLP. With over 20 years’ experience across the public sector and construction industry, Heidi specialises in designing and delivering technical/bespoke procurement training to support any of the above service. Heidi has a passion for designing procurements that are accessible to the market and optimising competition through the development of effective award questions whilst supporting social value and being commercially focused. Heidi also has extensive experience in conducting commercial service reviews and implementing updates and improvement in line with legislation changes, best practice, and policy considerations. Heidi also has experience in supporting suppliers in bringing successful procurement challenges (above threshold) so should you require assistance, please get in touch. Heidi.Parker@tlt.com

About TLT

TLT LLP is a legal business law firm with locations across the UK, Europe, India and the United States. In an unpredictable world, your business adapts and evolves to succeed, and so do we. Bringing together our expertise with efficient processes and integrated technology, we’ll anticipate change to keep you ahead of your challenges. Whether it’s building relationships or the sustainability of our actions, we think long term – collaborating with you to put people, communities and the environment at the forefront. Your success is our responsibility. No half measures, part of your team and with you every step of the way. Further information about TLT LLP and Procuring 360 can be found here.