New rules will 'help small businesses get a bigger slice of the public procurement pie'

Cabinet Office minister Baroness Neville-Rolfe has outlined how the new Procurement Bill will tackle the complexity that is holding back more small businesses from accessing the £300m government spends on goods and services each year.

Speaking at a Deloitte and Enterprise Nation event in London, the minister said she recognised “the opportunities we can unlock by making the right changes in government – particularly to the complex procurement rules that are the bane of small businesses”.

The government has pledged to deliver a third of public sector contracts to small businesses and although there was record central government spending with SMEs in 2021/22, the target has yet to be reached.

Baroness Neville-Rolfe said that is one of the issues being tackled by the government’s Procurement Bill which is currently working its way through Parliament.

During a consultation with business groups, business owners and others, the minister said the key challenges highlighted for small businesses included:

• The inflexibility of the procedures, and the inability to negotiate and evolve bids – something that would be standard practice in the private sector.

• A cultural reluctance to work with potential suppliers, to test the market and help develop in partnership, before embarking on the procurement.

• Less obvious barriers to SME participation: seen in some procurers’ practice of insisting that bidders provide three years’ audited accounts when their size means they aren’t required to file any; or that they have insurance to cover the contract even before putting in a bid, in case they win the contract.

• The perennial problem of late payment, a particular curse for indirect suppliers.

The Procurement Bill demands that procurement teams make sure there are no unnecessary barriers that might hinder smaller companies in a contract; as well as ensuring bidding timelines are realistic and giving more consistent and helpful feedback to unsuccessful bidders.

Other key elements of the Bill are forcing public sector organisations to pay suppliers within 30 days, and the creation of one single website for small businesses to register on, rather than the multiple sites founders currently have to use before bidding for work.

Baroness Neville-Rolfe said:

“The platform, which will be free for all to access, will make life easier for suppliers in a range of ways. For example, it will let suppliers see forward pipelines. This will allow them to find out more, plan which contracts to go for, where to invest, and when to prepare to bid or work with partners to develop consortia and joint bids.

“It will establish a single place for suppliers to register and self-authenticate their key bidding information – a “tell us once” approach that will cut out needless repetitive bureaucracy.”

There will also be other cuts in bureaucracy aimed at helping small businesses:

“Commercial teams will have more flexibility to design and run a procedure that suits the market in which they are operating, tailoring a procurement to their exact needs.

“Contracting authorities will find it easier to contract with partners to research, develop and eventually buy a new product and service in a single process; and they will be able to build in stages to the procurement process such as product demonstrations.

“For example, a contracting authority would be able to invite bidders to come in, meet the buyer and showcase the new app they’re developing, so that they can get a really thorough appreciation of solutions being offered by suppliers and understand what those solutions do in practice, not just on paper.”

Concluding her speech, Baroness Neville-Rolfe said:

“Businesses have a key role in unlocking value from public contracts - we look forward to continuing our work with business groups and trade associations, and our regional Growth Hubs, to ensure that the supplier community is also well prepared.

“This is because I want to see SMEs right across the UK helping the recovery by being more successful and winning much more of that procurement pie.”

How HMRC is increasing small business suppliers

Also speaking at the event was Phil Disbury from HM Revenue & Customs (HMRC).

He is working on the Digital and Legacy Application Services (DALAS) procurement framework which is designed to improve and simplify procurement processes and help more small businesses to win public sector contracts with the tax department.

He outlined how the framework will reduce barriers to entry for SMEs:

“We’ve got a much reduced minimum annual revenue requirement to qualify in the first place. And whereas before there might have been all sorts of other requirements, the new framework has two very simple requirements; ISO 9001 and Cyber Essentials.

“We are building the framework in such a way that the pre-qualification of suppliers will have done a lot of the work for us up front. This means small businesses don’t have to keep redoing legal work.

“The contracts are going to be much shorter to enable us as a department to respond quickly so we can get boots on the ground in some of these contracts in four to six weeks, which compares to about 14 to 16 weeks currently.

“We are also introducing more predictable revenue baselines which will mean businesses know exactly how much they will make as a minimum, enabling them to make growth and investment plans.”

Disbury concluded:

“We care about sustainability in our communities. SMEs, more than any other organisations, are engines of growth within local communities, and that is why they are so important to us."

The Meet the Buyer event took place at Deloitte in London. As well as the government approach to SME procurement, it looked at how small businesses can be part of the Deloitte Digital supply chain to deliver public sector contracts.