Press release

All public bodies to adopt SME-friendly business rules

A new government consultation will open up business across the public sector.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

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Plans to make it simpler and easier for smaller businesses to bid for and win work across the entire public sector were announced today (19 September 2013) by Cabinet Office Minister Chloë Smith.

Accounting for 99.9% of the UK’s 4.5 million businesses, small and medium enterprises (SMEs) are a crucial engine for growth. Building on central government reforms to make its business more accessible to small and medium sized businesses, and recognising good practice across the wider public sector, the government has today launched a consultation taking forward Lord Young’s recommendations to create an SME-friendly ‘single market’ for public procurement.

View the consultation and find out how to respond.

Suppliers who want to do business with the public sector will be able to expect all organisations to follow a single set of principles when buying goods and services. The proposals will simplify and standardise how public contracts are advertised, bid for and paid for across the public sector.

Chloë Smith said:

With £230 billion per year spent on goods and services right across the whole public sector, government wants to seize the opportunity to help hard-working SMEs get on by competing for and winning this business.

Ambitious small and medium sized UK businesses are increasingly showing how they can contribute to our economic recovery by delivering innovation and excellent value for money, but historically SMEs have been shut out of government business. In the past bidding for public sector contracts was time-consuming, expensive and overly bureaucratic.

Removing barriers and setting out a consistent, single set of SME-friendly principles for the whole public sector will provide the right support to encourage significant business and growth opportunities for SMEs, and help give the UK a better starting position in the global race.

Lord Young, the Prime Minister’s Enterprise Adviser, said:

I am pleased with the government’s response to my proposals, reflecting not only the huge growth opportunities that public procurement can offer small businesses but also the significant value these suppliers are delivering to all parts of the public sector. I want this to increase to reflect the growing number and importance of small businesses in the UK today.

For this to happen we need to improve small businesses’ access to the public procurement market by removing the bureaucratic processes and poor payment practices which stop and discourage SMEs from making winning bids for contracts.

The consultation proposals include:

  • introducing a requirement for all public sector contracts over £10,000 to be accessible on the same site
  • banning burdensome pre-qualification questionnaires for low value public sector contracts, and introducing a single standardised requirement for high value contracts
  • ensuring suppliers further down the supply chain benefit from the same standard payment terms that public bodies offer prime contractors to ensure prompt payment for public sector work

Since 2010 there has been considerable progress in central government and many other parts of the public sector to open up the procurement process to SMEs. Burdensome pre-qualification questionnaires (PQQs) have been removed for almost all central government contracts below £100,000, and the proportion of central government spend with SMEs on goods and services is increasing.

Since 2011, 12,900 of opportunities have been published on Contracts Finder to help SMEs spot opportunities more easily, whilst new procurement methods have stripped out unnecessary waste from the process and halved timescales.

The consultation will also consider whether performance bonds, which act as a financial guarantee for suppliers, can impact adversely on SMEs.

Notes to editors

The proposed reforms have been developed by the Cabinet Office, Department for Business, Innovation and Skills, Department for Communities and Local Government, Department for Education, Department of Health, and the Home Office.

Visit Making public sector procurement more accessible to SMEs to have your say on the proposals.

The new set of principles would apply to businesses as direct contractors with government and as sub-contractors or partners in a procurement supply chain.

In May 2013, the Prime Minister’s adviser on enterprise and small business, Lord Young, recommended developing a set of “single market” principles to be applied by all public bodies in their procurement in his report ‘Growing your business: a report on growing micro businesses’.

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Published 19 September 2013