New UK procurement regulations to support and protect SMEs

New UK procurement rules have become law today, aiming to deliver simpler, more effective public sector procurement and helping SMEs access a greater share of approximately £300bn of expenditure per year.

Procurement is the process of finding, obtaining and securing goods or services a company needs to operate effectively.

The Procurement Act will establish a new public procurement regime following the UK’s exit from the EU. It aims to support growth in the economy by creating a simpler and more transparent system that reduces costs for businesses.

The new rules will also protect SMEs against national security risks in public contracts.

High-risk suppliers will be put on a public debarment list and prevented from bidding for some categories of goods or services – such as areas related to defence and national security – while allowing them to continue to bid for contracts in non-sensitive areas.

“This Act is all about supporting British business using the opportunity of Brexit, as we change the way [the] government works so it delivers better for people across the country,” says Alex Burghart, parliamentary secretary for the Cabinet Office.

“In particular, we draw on the new freedoms available to us by leaving the European Union to embrace and best support our small and medium sized businesses.”

A shift in approach

The new Act promises to streamline the way that companies bid for public contracts and give procurers more room for negotiating prices and innovative solutions with these companies.

It will also be possible to exclude suppliers from bidding for contracts – not only if they’ve performed badly on other contracts in the past, but also based on modern slavery or professional misconduct grounds.

The Act also introduces a new duty for ministers to proactively consider suppliers for potential debarment investigations.

To achieve this, the government will introduce a new National Security Unit for Procurement – the unit’s aim is to protect people across the country by investigating suppliers who may pose a risk to national security, and assess whether companies should be barred from public procurements.

Contracting authorities will need to take account of the national strategic priorities set out in the National Procurement Policy Statement – examples include job creation, enhancing supplier resilience and fostering innovation.

The changes of the Act are expected to come into force once secondary legislation is approved and after a six-month implementation period concludes.

Is it enough?

The Procurement Act is a step in the right direction, but will it achieve enough to meet targets that are already years late?

In a report published by the National Audit Office (NAO) in 2016, the government set a target for 33% of spending to reach SMEs by 2020. Despite these ambitions, in 2023 – three years later than its target year of 2020 – government spending in SMEs is still falling short of its seven-year-old target of 33%.

In 2020/21, a breakdown of departmental spending showed that 26.9% of total spend went to SMEs – and in the financial year 2021/22, this figure actually decreased to 26.5%. For the latter, 14.1% covered indirect spending and just 12.3% was direct.

It’s imperative that the government continues to communicate with SME leaders to ensure future legislation supports their struggles – especially as the impact of Brexit rumbles on.

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Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, TNW, UKTN, The Business Magazine and Maddyness UK. She also works closely with agencies such as CEW Communications to develop content for their startup and scaleup clients.