Are you an SME trying to navigate the current economic climate in the UK? This is no easy task, especially in the light of the tremendous increase in labour costs brought about by the October budget. For many businesses, when looking at what 2025 hold, they see another tough year ahead. Common sense tells us that there are two main ways to adapt to negative pressure on profits:
- Slash overheads – including your salary and wage bill; or
- Seek new and profitable markets.
Realistically, the best way forward is a combination of the two but reducing costs has its limits. You cannot reduce overheads to the point where your business is unable to service existing customers or attract new clients. According to the most recent government statistics, there are over 5.5 million SME’s operating in the UK. That is a lot of competition.
There can be no doubt that increasing revenue in a way that boosts profit must be an essential component of your business’s 2025 financial plan. To achieve this, it may be time for you to consider a new market – doing business in the public sector.
The Procurement Act 2023 is due to come in force on 24 February 2025. This act replaces the current somewhat fragmented procurement regulations and aims to provide a more streamlined procurement process. In addition, a key objective of the act is to provide small and medium-sized businesses with an opportunity to benefit from the government’s enormous procurement budget and requirements.
The act contains many new terms and concepts and is jargon-heavy which is counter-intuitive given its goal of simplification. Broadly speaking, the act (with some exceptions) places obligations on a contracting authority when embarking on a covered procurement process. Covered procurement refers to the award, entry into and management of a public contract.
In particular, the contracting authority must have regard to the importance of:
- delivering value for money;
- maximising public benefit;
- sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions; and
- acting, and being seen to act, with integrity.
The contracting authority is also expected to have regard to the fact that small and medium-sized enterprises may face particular barriers to participation in the procurement process and consider whether these barriers can be removed or reduced.
By building on, expanding or replacing concepts and definitions found in the current procurement regulations, the act provides for categories of procurement contracts, the creation of what is known as a dynamic market and the expansion of the concept of a framework to include an open framework.
Without unpacking these terms in detail, the outcome of these amendments, generally speaking, provides significant benefits to SMEs through the streamlining of the procurement process, the easing up on the current onerous and costly up front requirements before certain procurement contracts are awarded and the regulation of payment terms in certain circumstances in an effort to relieve some of the cash flow difficulties which many SME’s experience.
There is also a greater emphasis on transparency and, subject to specific exclusions, a public authority is obliged to make information available throughout the duration of the tender. Whilst this is all good an well, the new regime does not absolve supplier from taking responsibility for their part in the process. The need for the proper allocation and use of public funds means that the procurement process still needs to be taken seriously by suppliers. This means that before business dive into the procurement process headfirst, they need to understand the terms of the tender, whether they qualify to participate and how to prepare and submit their applications.
So, what does this mean for your business? It is now easier for SMEs to compete with bigger businesses in the procurement space which is a game changer. However, like all business opportunities, there is always an element of risk. That said, with some careful planning and the help of trusted advisors, the opportunities under the Procurement Act can open up a whole new stream of revenue for your business.
At Wright Hassall we are committed to seeing our clients’ businesses succeed. We don’t just provide advice; we walk with our clients as they work to achieve their business goals. Our procurement expertise allows us to guide our clients through the whole process from making sure their businesses have solid legal frameworks to assessing whether a procurement opportunity is a good fit to drafting clear and compliant procurement documentation.
Whether you have worked with public entities in the past and want to understand how the Procurement Act impacts your business or whether you are looking to explore this opportunity for the first time, reach out to us and we’ll gladly assist.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
