**London**: The Cabinet Office has directed public bodies to boost procurement spending on SMEs and VCSEs, aiming to streamline processes and maximise social value, while setting significant spending targets ahead of the new Procurement Act taking effect later this month.
Ministers have issued a directive for public bodies to enhance their procurement spending on small and medium-sized enterprises (SMEs), as part of an initiative to reform public sector contracting. This policy, detailed in a national procurement policy statement released by the Cabinet Office last week, mandates that contracting authorities maximise their budgets allocated to SMEs and voluntary, community and social enterprises (VCSEs).
Georgia Gould, the public sector reform minister, addressed Members of Parliament, highlighting that SMEs and VCSEs face challenges due to government procurement processes that are often “too slow, bureaucratic and difficult to navigate.” To combat these issues, the new guidance sets a target timeframe from 1 April 2025 to 30 March 2028 for central government bodies and other public sector organisations to aim for significant spending levels with SMEs. Additionally, during the latter two years of this period, there will be a further goal related to VCSE expenditure.
The guidance, which is part of a series of documents designed to implement the upcoming Procurement Act coming into full force next week, imposes various obligations on contracting authorities. This includes the removal of barriers for SMEs wanting to enter the public procurement market, requirements for early market engagement, and a stipulation that pre-award performance insurance cannot be mandated. Moreover, the Procurement Act will enforce 30-day payment terms across the public sector supply chain.
In conjunction with these changes, the Cabinet Office has issued new instructions on integrating social value into bid assessments. The forthcoming legislation introduces the phrase ‘most advantageous tender’ to supersede the existing ‘most economically advantageous tender’. As stated in the latest guidance, in-scope clients are required to apply a minimum 10% weighting towards social value when evaluating tenders, ensuring that commitments related to social value by suppliers are integrated into contracts through specific terms or performance indicators.
Gould referred to the reforms as a “transformative package of reform” aimed at fostering economic growth, enhancing supply chains, and catalysing innovation. Shamayne Harris, the head of procurement at Pagabo, expressed that the new SME policy note supports a principal objective of the Procurement Act, which is to open up public contracts to new entrants. Harris emphasised the established framework includes provisions for accountability through annual results.
Joanna Rees, a partner at the law firm Blake Morgan, discussed the implications of the Cabinet Office’s notes on social value, stating that it represents a significant step forward in using public sector funds effectively. She noted that social value is predominantly generated through SMEs rather than larger contractors, highlighting potential challenges in the implementation and oversight of social value commitments.
In related developments, the Thermal Insulation Contractors Association (TICA) is advocating for public authorities to prioritise apprenticeships within the framework of new public procurement regulations, which will take effect on 24 February. The organisation is pushing for the inclusion of apprenticeship investment as a key performance indicator (KPI) for contracts exceeding £5 million. TICA’s technical director, Chris Ridge, noted the importance of translating the significant support observed during National Apprenticeship Week into actionable policies that address the construction skills crisis.
Ridge highlighted the urgent skills gap in the construction sector, exacerbated by an ageing workforce and the significant number of young people not engaged in education, employment, or training (NEET). He pointed out that recent major projects have awarded thermal insulation contracts to foreign firms, resulting in the loss of apprenticeship opportunities for UK-based trainees.
Emphasising the long-term benefits of apprenticeship programmes, Ridge remarked, “Companies that invest in training the next generation are often losing out to firms that prioritise short-term cost savings over long-term sustainability. That has to change.” He asserted the necessity for public procurement policies to reward companies committed to skills development, in order to secure a skilled workforce for the future of the construction industry.
Source: Noah Wire Services
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