How will the new Procurement Act 2023 benefit small businesses?

If you’re in the business of supplying goods, works, or services to public and utility sectors in the UK, you need to know about the new Procurement Act 2023.

The new Act is all about flexibility, and levelling the playing field for smaller businesses by giving them a fair shot at more contracts without drowning in bureaucracy. Plus, the act ensures small businesses in public sector supply chains get paid quicker. 

In this article, Lawhive’s small business solicitors take a closer look at the Procurement Act 2023, and explain exactly how small businesses are set to benefit in 2024.  

What Is The Procurement Act?

The Procurement Act, which is slated to come into force in October 2024 following a notice period of at least 6 months, aims to make the procurement system easier, more straightforward, and transparent, promising better value for the government’s money. 

Key benefits of the act include: 

  • A simpler and more flexible system that suits the UK’s needs and follows international rules; 
  • Giving small businesses and social enterprises a fairer chance at winning contracts: 
  • Getting tough on suppliers who aren’t up to par and kicking out those who pose risks; 
  • Making sure the spending process is clear for taxpayers. 

Key benefits of The Procurement Act for SMEs

The Procurement Act makes big promises to SMEs in the UK. But how exactly will they benefit from the new legislation? Let’s break it down…

Visibility of upcoming opportunities 

The Procurement Bill mandates that significant government entities must publicly disclose upcoming contracts exceeding £2 million for an 18-month period. This transparency enhances visibility, allowing businesses, particularly SMEs, to strategically plan and align their capabilities with upcoming opportunities. 

The central platform, where this information will be accessible, will provide businesses with a comprehensive view of planned procurements, categorised by region or type. 

Opening the playing field for innovation 

Many organisations talk to potential suppliers before they officially ask for bids, but they often stick to familiar lists or networks. This can make it tough for new players to get it on the action and learn about opportunities. 

The Procurement Bill introduces clear guidelines on how authorities can talk to the market before they officially start the bidding process. They can even shout it out to the world by publishing notices about these talks and how suppliers can get involved. This means authorities can feel confident in organising events that welcome new players and opening the forum up to new ideas. This is very useful, especially in fields like energy solutions or defence, where innovation is a big deal. 

Transparency for new entrants 

Under the Procurement Bill, when a government department or big buyer is all set to ask for bids (tenders) for something over a certain value, they’ll post a notice about it on a central platform. This notice will have all the important details that a business needs to know to bid for the job. 

Importantly, businesses will be able to set up email alerts. So, as soon as a new opportunity matching their interests comes up, they get a heads up right away. 

Streamlining the bidding process 

For small businesses and new players, one of the biggest challenges is having to sign up on multiple platforms if they want to bid for contracts in different sectors. This involves lots of separate sign ups, each asking for similar information over and over. 

The Procurement Bill introduces a new system where suppliers can share their details just once, and all their information goes into a secure evidence locker which easily connects with different procurement systems. This makes it super clear for smaller suppliers where they need to sign up and what information they need to keep updated. 

Reducing unnecessary upfront costs 

The Bill stops contracting authorities from making it a requirement for bidders to provide only audited accounts to prove their financial standing (except where they are already required to under the Companies Act 2006). This means that start ups and SMEs who might not legally need audited accounts won’t get left out of bidding for contracts. Instead, they can show they’re financially fit in other reliable ways. 

The Bill also says authorities can’t demand insurance before giving out a contract. So, suppliers won’t have to spend money on insurance unless they actually win the contract. 

A flexible approach to awarding contracts 

The Competitive Flexible procedure allows a contracting authority to create a custom procurement process, which is especially handy for complex, high-tech, or innovative solutions.  For example, a cyber security startup who wants to five into the public sector, under the new procedure, can do site visits, make presentations and offer innovative bids – all things that are tough under the current rules. 

However, this flexible approach isn’t one-size-fits-all. For less complex deals, authorities can use an open procedure, perfect for smaller businesses that can compete well on price and quality. They can also opt for frameworks to plan future contracts awards, but the Dynamic Market lets suppliers join anytime and allows quick competitions, giving small contractors a fair shot at housing association or local authority projects. 

The Bill also offers an 8-year framework option with an opening point for suppliers to try again, reducing the risk of being locked out for the entire duration. To make things even better, there’s a new register showing available frameworks and Dynamic Markets which gives suppliers a heads-up on opportunities and helps plan for future bids. 

Better feedback 

For new players, not every bid leads to success. A common gripe is that feedback from debrief letters can be all over the plane and not very helpful. With the new Procurement Bill, if a supplier doesn’t snag the winning spot, they won’t just get a generic debrief. Instead, they’ll get an assessment summary which shows exactly how their bid stacked up against the winner, offering a clear roadmap of where suppliers missed the mark and highlighting areas for improvement next time. 

The purpose of these assessment summaries is to act as a tool for business growth that encourages new entrants to learn from each bid and keep pushing to win contracts. 

Quicker payments 

The perks of the new legislation don’t stop at bidding on and winning contracts – it instead aims to support businesses throughout the entire process. This includes the introduction of 30-day payment terms that will apply across the public sector supply chains. And this applies even if the contract itself doesn’t explicitly state it. 

If a new entrant wins a contract and there are larger contractors in the mix, they have to stick to the 30-day payment rule. This means smaller businesses won’t have to wait forever to get paid, improving cash flow and making it easier for them to deliver on their commitments. 

How can you prepare for the upcoming changes?

The new rules are set to kick in around October 2024, and the Cabinet Office is gearing up to educate and train teams’ involvement in procurement, including contracts managers, financial teams, and legal advisors. 

To get ahead, procurement teams should: 

  1. Plan ahead for upcoming work and figure out which procurements in the next year or so could benefit from the new rules; 
  2. Review their commercial strategies from planning and governance to resources;
  3. Identify who needs training for successful implementation; 
  4. Spread the work about the reform to senior stakeholders and influences; 
  5. Help communicate changes to suppliers and encourage them to get on board. 

The Cabinet Office is also rolling out online training and information sessions, kicking off with a series called “Knowledge Drops” starting in December 2023. These are quick overview of the Procurement Act, tailored for: 

  • Contracting authorities; 
  • Suppliers; 
  • SMEs and voluntary, community, and social enterprises. 

Overall, the Procurement Bill is bringing in some big changes that make it much simpler for new businesses to jump into the game of bidding for public contracts. 

But it’s not just about the rules. Cultural shifts are important to get the most out of the marketplace, and the Procurement Bill offers a chance to hit the reset button on how people think about and approach risks in contracts, making it easier for fresh ideas and new businesses to contribute to the public sector.

Interesting Related Article: “The importance of sustainability in procurement practices