What It Means for SME Tendering

On January 18, the latest Procurement Policy Note (PPN) 01/23 was released, replacing PPN 09/21 and serving as consolidated guidance for Section 109 of The Public Contract Regulations (2015). 

The PPN increases the threshold for publishing contract and framework notices on Contracts Finder to £12,000 (previously £10,000) for contracts published by central government authorities, such as Crown Commercial Services or the Ministry of Defence, and to £30,000 (previously £25,000) for contracts published by sub-central authorities, including local authorities and NHS Foundation Trusts.

Executive Compass, professional bid writers, suggest that this update has a significant impact on microbusinesses and small businesses, with the majority of their bids (84% for microbusinesses and 64% for small businesses) being for contracts worth less than £130,000. This emphasizes their reliance on low-value tender opportunities.

However, research conducted by the British Chambers of Commerce and Tussell found that SMEs were only awarded 21% of central and sub-central authority spend in 2021, despite representing 99% of UK businesses, 52% of economic turnover, and 61% of employment. To address this underperformance, a policy paper published in 2022 stated the ambition for the Contracts Finder and Find a Tender service to “provide visibility of low-value opportunities” and increase transparency for SMEs seeking to tender for public projects.

The recent PPN update seems to run counter to these efforts, even if the decrease in the value threshold is marginal. In 2022, a total of 405 contract notices between the old and new thresholds were published, totalling £9.77 million in public procurement spending from buyers such as the Ministry of Defence, Natural England, and Telford & Wrekin Council. Although this amount may seem insignificant, a reduction in low-value opportunities could hinder SMEs’ initial entry into public procurement.

Future directions look promising, with the Procurement Bill currently in the committee stage in the House of Commons. The bill aims to streamline and update complex procurement regulations and lower barriers to SME entry by decreasing insurance thresholds and allowing alternative financial evidence. However, it remains to be seen whether the proposed bill will align the SME portion of public procurement with the government’s targets.

Christopher Stern

Christopher Stern is a Washington-based reporter. Chris spent many years covering tech policy as a business reporter for renowned publications. He has extensive experience covering Congress, the Federal Communications Commission, and the Federal Trade Commissions. He is a graduate of Middlebury College. Email:[email protected]

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