A recent report from the National Audit Office (NAO) has found that 27% of government spending on goods, works or services in 2014/15 was fulfilled by contracts with small-and medium-sized enterprises (SMEs). £4.9 billion was spent directly with SMEs and a further £7.3 billion indirectly through supply chains. This exceeds the government target of 25% and demonstrates the government’s commitment to opening up procurement to SMEs.

EU Requirements

The EU imposes obligations on governments to ensure that supplier contracts are awarded fairly and transparently. In the last five years it has become a government priority to remove the barriers to public contracts and increase spending with SMEs. The Cabinet Offices’ Crown Commercial Service (CCS) has the task of identifying ways to increase competition for procurements across all government departments.

The recently enacted Public Contracts Regulations 2015 have introduced key reforms, including the abolition of pre-qualification stage of low-value procurements and the requirement for government bodies to advertise many public sector contracts on the online ‘Contracts Finder’. These reforms remove some of the red tape surrounding public procurement to make the process far more efficient and accessible to SMEs, who may not have the resource to take part in lengthy and complex procurement processes.

UK commitment

The Act goes above and beyond the requirements laid down by the EU - again, another positive sign for SMEs. This will continue in force whether or not the UK decides to leave the EU following the upcoming referendum.

Who benefits?

It is not just SMEs that benefit from widened procurement opportunities – contracting authorities gain advantages too. SMEs can offer a new perspective in delivering services and goods, greater flexibility and often better value for money. In addition, procuring to SMEs helps contracting authorities to meet their obligation under the Social Values Act 2012 to consider wider social, economic and environmental benefits in procurement processes.

The government aims to increase the proportion of procurements with SMEs to 33% by 2020 – representing around a further £2.7 billion of spending. The NAO report gives a list of recommendations to the CCS to help achieve this target – including finding ways in which the government can influence flow-downs in subcontracts to SMEs further down the supply chain, as well as improving use of the Contracts Finder among government departments.

The report demonstrates that procurement to SMEs remains securely on the government agenda. If the recommendations can be implemented, hopefully we will see opportunities for SMEs continue to increase in the future.

How can we help?

If you are a SME looking for advice in relation to the procurement process or if you are a contracting authority looking for ways to structure your procurements to be inclusive of SMEs, please get in touch with a member of our team who would be happy to assist.

About the author

Christine Jackson Partner

Christine advises on a wide range of supply chain, commercial and intellectual property related matters in the technology, retail, sport, transport/logistics and waste management sectors.