Public procurement is one of the largest areas of government spending in the UK, with approximately £300 billion of taxpayers’ money being used to purchase goods and services across sectors such as healthcare, infrastructure, and more. In 2021/22, small and medium enterprises (SMEs) secured around £21 billion in direct government contracts, and this figure nearly doubled in 2022/23, reaching £39.7 billion.
As part of broader reforms aimed at lowering barriers to SMEs obtaining public sector contracts, the UK government will introduce the Procurement Act (the Act) from 24th February 2025. Rob Rees, Divisional Director of Markel Direct, the specialist insurer of small businesses, explains what the new Act means for SMEs and shares advice on how to increase your chances of success when bidding for government contracts.
Procurement Act 2023 – Changes that benefit SMEs
The Procurement Act 2023 is being introduced to consolidate several existing regulations, such as the ‘Public Contracts Regulations’ and ‘Concessions Regulations’, into one set of rules. The aim of doing this is to benefit SMEs by increasing transparency, streamlining procurement processes, and generally creating more opportunities to access government contracts, all of which should allow small businesses to compete more fairly with larger organisations.
Simplified bidding processes
The current rules, based on EU directives, consisted of complex procedures that put SMEs off from participating in bidding processes. The new Act will assist in streamlining the tenders, making it easier for SMEs by introducing a simplified digital bidding platform where suppliers can register their company’s details, bid on contracts and track all opportunities in one place.
Increased transparency
One of the current pain points is the lack of transparency. Businesses were often left without any explanation as to why certain bidders were chosen instead of others, which led to concerns about favouritism. The new framework aims to enhance transparency throughout the entire process, fostering greater trust and fairness in the system, with the intention of encouraging more SMEs to bid for public contracts.
Simplified access to contracts
In the current framework, SMEs often struggle to access public contracts due to rigid thresholds and complicated eligibility criteria that go in favour of larger companies. The purpose of the Act will be to help reduce these barriers by simplifying documentation and application requirements to be more encouraging for SMEs.
Focus on sustainability and social values
Currently, many tenders’ success criteria are focused on price – however, the new Act shifts the criteria from the “Most Economically Advantageous Tender” to the “Most Advantageous Tender”. There will be a greater focus on sustainability and social values in the decision making process, such as reducing carbon footprints, supporting local communities, and ensuring ethical business practices.
This change gives SMEs a better opportunity to secure government contracts by highlighting their contributions for ‘good’ beyond just cost alone, allowing them to compete with larger businesses who may have previously benefitted from economies of scale.
How can SMEs prepare for the new act?
Stay up to date
With the new Act there will be new developments and regulations, as well as opportunities, and government procurement is no exception. Make sure that you, or someone in your business, is responsible for staying informed of these changes. This can be achieved through participating in workshops with industry trade associations, reviewing government guidance and networking with other SMEs.
Build relationships
If you haven’t already, start building relationships with key stakeholders. These include contractors, contracting authorities (such as government agencies or councils) and other SMEs, all of which can help with business opportunities. Although the Act aims to make it easier for SMEs to access these contracts, fostering collaborations could prove invaluable.
Develop your company’s public image
If you are an SME owner, now is the time to focus on developing your business’ public image to position your company as strongly as possible in the eyes of public sector buyers. Ensuring your business’ financial credit score is in good health and all accounts are up to date with Companies House is a good starting point.
It’s important to also consider what the goals are of the contracts you will tender for, and to start investing in areas that could be viewed as favourable to these buyers before the Act comes into full force. This could include certifications or frameworks such as:
- ISO 14001 (Environmental Management): Shows a commitment to environmental responsibility.
- Cyber Essentials or Cyber Essentials Plus: A UK government-backed certification that ensures basic cybersecurity measures are in place.
- SSIP (Safety Schemes in Procurement): A certification demonstrating compliance with health and safety standards required in many public sector projects.
- Carbon Trust Standard: Certification for demonstrating actions in measuring, managing, and reducing carbon emissions.
You can find more information about being a supplier to the public sector here.
Have the right insurance in place
Having the right insurance in place for your business can help with a number of aspects of submitting a bid in a competitive tender:
- Bid eligibility: Insurance can help ensure that SMEs meet the necessary criteria to qualify for government contracts by fulfilling legal and contractual obligations.
- Risk management: Insurance can provide protection against financial losses from accidents, errors, or disruptions that may occur during the contract term, helping to safeguard business operations.
- Operational confidence: With appropriate insurance in place, SMEs can operate with peace of mind, knowing they are financially protected if something unexpected were to happen.
What types of insurance can support your business in the procurement process?
Public Liability Insurance
Many government contracts require SMEs to have adequate public liability insurance. This type of insurance can protect businesses in the event they are held liable for injury caused to a third party, or property damage, during the performance of a contract.
Professional Indemnity Insurance
Government contracts often involve significant sums of money, and mistakes can have serious financial consequences. Professional indemnity insurance can mitigate this risk by protecting businesses from allegations of professional negligence. If the contracts you tender for will involve providing designs, advice or professional services, it’s likely that the contracting authority will have a requirement for your business to hold a minimum level of professional indemnity insurance cover.
Product Liability Insurance
For SMEs supplying goods as part of a government contract, product liability insurance can be crucial. It can protect businesses from claims related to defects in the products supplied and more. This type of insurance is generally considered essential cover when bidding for contracts involving manufacturing or distribution.
Cyber Insurance
Public sector contracts often involve handling sensitive data, which increases the risk of breaches, cyberattacks, and data loss. Cyber insurance can offer financial protection against cyber-related incidents and demonstrates that SMEs have strong risk management in place, providing reassurance to contracting authorities. If you’re a policyholder with Markel Direct, you’ll have access to a cyber response helpline and we’ll cover agreed associated costs of the public relations response service following a crisis.
For more information and guidance, visit the Markel Direct website.
