Policy paper

Department for Work and Pensions small and medium-sized enterprise (SME) action plan: 2025 to 2028

Published 24 March 2026

Applies to England, Scotland and Wales

How we are backing your business

Through Backing your business: our plan for small and medium-sized businesses, we are delivering the most comprehensive package of support for small and medium-sized enterprises (SMEs) in a generation.

Growth is this government’s number one mission and SMEs are the engine room. Our plan is to make the UK the best place to start and grow a business, with a culture that supports entrepreneurship in every community and high street.

We’re delivering:

• the most significant legislation to tackle late payments in over 25 years, giving the UK the strongest legal framework on late payments in the G7
• a new Business Growth Service to simplify finding advice and support, including a new streamlined digital offer – ending the chop and change of previous government business support programmes
• a package of support tailored to high streets to make it easier for SMEs to set up shop, ranging from a new licensing framework to targeted funding for places
• a massive £4 billion finance boost to increase access to finance for entrepreneurs – to inspire the next generation of small business owners, make the UK the best place to start and grow a business, and build a culture that celebrates and champions entrepreneurs

We also committed to making SMEs a national priority, ensuring they have a fair opportunity to win public contracts and setting ambitious SME targets for each department.

Each departmental SME action plan sets the steps Government departments are taking to maximise SME and start-up spend across their department and wider agencies. These plans also include departmental targets for direct spend with SMEs and the actions being taken to remove and reduce barriers to SMEs bidding for government contracts.

The Procurement Act 2023 creates a more simple and transparent procurement regime, making it easier for SMEs to do business with the government. This action plan sets out why SMEs should work with us, where to find opportunities, and the actions we are taking to reduce barriers for SMEs in bidding for work.

The plan is monitored through an annual publication (as a minimum) of our direct spend with SMEs as a percentage of our total procurement spend.

SMEs are suppliers that have fewer than 250 staff, and have a turnover of an amount less than or equal to £44 million or a balance sheet total of an amount less than or equal to £38 million. For more information, see Clause 123 of the Procurement Act 2023.

Forewords

Baroness Sherlock OBE, Parliamentary Under-Secretary of State for Work and Pensions (in the Lords)

I’ve spent most of my working life in the voluntary sector and I know that big changes often start by lots of people working in their different ways to make things better. That’s why it matters to me that when the Department for Work and Pensions (DWP) buys goods and services, we create opportunities for small businesses, who by working at the heart of their communities help improve the lives of those around them. 

Currently it’s often difficult for SMEs to bid for contracts with DWP. We plan to tackle that. As part of our becoming more open, more transparent, we are today committing to spend targets and to publishing how much we spend with SMEs.  

Change happens when we work together and bring down barriers. By making it easier for SMEs to bid for, and win, contracts with DWP we will bring in new ways of working and new ways of doing things. That means we will be better placed to help the people we’re here to serve, particularly the vulnerable.  

I look forward on reporting back on further progress on how we are improving SME opportunities and our spend target in the next iteration of this plan.

Max Cairnduff DWP Chief Commercial Officer

As the DWP Chief Commercial Officer, I am committed to ensuring SMEs can access and have a fair opportunity to win DWP contracts. Encouraging SMEs into our supply chain can positively impact our ability to deliver on policy commitments and provide important services to citizens through innovation, customer focus and agility. 

SMEs are a key part of helping us ensure the DWP can continue to support citizens safely and robustly. Our aim through the activities explained in our action plan and by setting a spend target is to ensure that we tackle any barriers and create new opportunities for SMEs to compete for DWP contracts. 

I will regularly review our progress against the key priorities set out in this plan to ensure we deliver on our commitments.

Department overview

As the Department for Work and Pensions we are responsible for welfare, pensions and child maintenance policy. We are the UK’s biggest public service department, administering the State Pension and a range of working age, disability and ill health benefits to around 20 million claimants and customers, paying £212 billion each year.

We provide our services in a number of ways, for example through Jobcentre Plus, The Pension Service, the Child Maintenance Service and partner organisations.  

There is more information about our work, Ministers and management team on GOV.UK.

Types of goods and services we buy

As a central department providing critical services to citizens, the goods and services we buy is very wide ranging from complex technical systems that process claims and support the platforms essential for our customers to interact with us, services which help support citizens into training or work, through to estate services which help keep our offices running.

How we buy goods and services

DWP contracts are awarded by competition between potential suppliers, unless there are compelling reasons why competition cannot be used. Routes to markets include use of Crown Commercial Service (CCS) agreements, in-house Frameworks, Open Competition and utilisation of other government services. DWP procurements are based on providing value for money, quality outcome and added value by inclusion of social value criteria to benefit citizens and communities.

Why SMEs should work with us

SMEs can win work with us by bidding directly on advertised contracts, by joining a framework, for example a centralised Crown Commercial Service framework or a framework let directly by DWP, or by becoming part of the supply chain as a subcontractor to a larger supplier and providing specific or specialised elements of a contract. 

Ways small businesses can benefit from working with us

• Fair and ethical treatment: We are committed to public sector best practice. In all commercial activity, DWP pursues the highest standards of professionalism, ethical conduct and impartiality.  

• Working with DWP subject experts offers invaluable experience of helping deliver key government services to citizens safely and robustly.  

• Our suppliers are paid promptly: We are committed to paying our supplier invoices promptly and we publish our payment performance information for transparency. DWP payment performance data shows the percentage of our invoices paid within 5 days and within 30 days of receipt.

• Prompt payment to indirect suppliers: For SMEs who are part of our indirect supply chain, we expect our suppliers to pay subcontractors promptly too. We undertake assurance checks to ensure this is happening during the life of the contract.

Links to departmental commercial opportunities

Direct opportunities

DWP publishes in-scope opportunities valued over £12,000 on the Find A Tender service (FTS) and Contracts Finder, which improves visibility and makes it easier for SMEs to find available opportunities.

Read about how to look at the notices, notifications and the use of data. 

Joining commercial agreements

Joining a commercial agreement, such as a framework or Dynamic Purchasing System (DPS), can put SMEs in front of buyers actively seeking their services. 

Frameworks

Framework agreements establish terms for future contracts, providing a pool of pre-selected suppliers from which public sector buyers can call off orders. 

Dynamic Purchasing System

DPSs are an ‘always open’ electronic list of pre-qualified suppliers that public sector buyers use to quickly and flexibly purchase goods, services, or works.

Guidance on how to register on the Flexible Support Fund, Dynamic Purchasing System 2 is available on GOV.UK.

Search the Crown Commercial Service commercial agreement pipeline for upcoming agreements.

Joining a supply chain

By joining our supply chain, SMEs can gain access to larger contracts that they might not secure on their own or if they can offer a specific element that makes up part of a larger contract. We believe this is a valuable opportunity to build strong relationships with larger companies and gain invaluable experience working with us. 

SMEs can use the the Find A Tender service to identify potential prime contractors bidding on our projects. By keeping an eye on these opportunities, small businesses can proactively reach out to these organisations and offer services as subcontractors or suppliers. We see this as an effective way to get involved in significant contracts and establish yourselves within our supply chain. 

Many industry bodies and trade associations also advertise opportunities in supply chains.

Find out more about how we work with external suppliers for goods and services.

Departmental supplier events

We engage with markets early as part of our procurement process, helping to clarify our requirements and assess market capacity. We do this in different ways such as procurement teams working with framework suppliers or through our Market Engagement Lead, in-person events, online engagement sessions, one-to-one or round table events. We have also offered knowledge sharing events, including an online sustainability presentation offered to suppliers looking at Carbon Reduction Plans.  

In October 2024, we held a three day ‘Reverse Pitch’ event hosting sessions in Leeds, London and Manchester in collaboration with colleagues from the Ministry of Justice (MoJ). We invited individuals, small businesses and digital agencies to pitch ideas to tackle some real government problems. Senior leaders from DWP, MoJ and government attended the sessions, showing how we valued attendees’ input and subject matter experts were on hand throughout the events to support businesses in pitching their ideas. The sessions proved a huge success with many great ideas and feedback. Those pitching brought a huge range of skills and experience to the problems giving DWP and MoJ colleagues real food for thought. 

We held a supplier event in autumn 2025, to launch the DWP 2030 Strategy and share our commercial vision, priorities and challenges and opportunities with suppliers. 

Out of 1,000 supplier registrations, 38% were SME or Voluntary, Community, and Social Enterprises (VCSEs). Supplier question and answer and post event feedback showed supplier support to help shape our future engagement events. We will run a further cascade event specifically aimed at SME and VCSE suppliers in early spring 2026. 

As part of our ‘tackling barriers’, we have implemented a dedicated SME VCSE mailbox and will be introducing an online notice page for publicising future engagement events. 

Crown Commercial Service also has an events page for frameworks.

Our actions and milestones

Our previous SME action plan set out key improvements actions to benefit SMEs. The table sets out how we have progressed, challenges that prevented all actions being completed, what we will continue to action and new actions to tackling barriers.

Action	Progress	Next steps
Improved data accuracy	Achieved. 95% of new contract records confirm if a supplier is an SME, enabling a clearer view of how many new contracts are with suppliers who are small businesses.	Maintain action and ensure transition in new eProcurement platform.
Supply chain prompt payment compliance	Achieved. Supplier compliance to pay subcontractors confirmed through assurance checks	Ongoing business as usual.
Internal engagement and accountability	Partially achieved. Our SME Champions Working Group has been relaunched with representatives from all commercial categories, developing plans for tackling barriers relating to their own specialist commodities and sharing best practice, ALB awareness sessions delivered, Sharepoint guidance developed. Ensuring wider DWP stakeholders consider the impact of proposals on SMEs. Challenges: Resource availability and competing demands implementing the Procurement Act.	Focus on: - finalising category level action plans incorporating spend target - develop case studies library - ALB support - senior sponsor
Analysis of SME engagement and outcomes in procurements	Partially achieved. Supplier feedback from successful procurement shared as best practice examples.	Action ongoing. Further analysis of procurement outcomes to help achieve target spend. Giving and Receiving SME bidder feedback will help reduce barriers.
Deep dive review into ‘hidden’ spend	Partially achieved. Data cleanse exercise identified £42 million previously unclassified spend as SME direct spend.	Action ongoing. ‘Hidden’ spend could help achieve our 27/28 spend target.
Social Responsibility Strategy	Achieved. Social Responsibility Strategy implemented, including a prioritisation of Social Value criteria in contracts that includes supporting and inclusion of small businesses in the supply chain where appropriate to the contract.	Action ongoing. Strategy now undergoing refresh to demonstrate full compliance with the 2025 National Procurement Policy Statement.
Tender timescales	Procurement teams will try to allow adequate tender timescales and stagger multiple linked procurements where possible. Actions will be part of category procurement level plans.	New
Publicise market engagement events online	Online events page should help small businesses to readily see events they can join.	New
Develop strategy and set spend target for VCSE spend by 31 March 2026	Current spend analysis commenced.	New

Success story – receiving and acting on supplier feedback

We were approached by a small business industry body lead to give feedback on one of their member’s experience in bidding and winning a DWP digital contract, worth over £1 million pounds. 

The procurement team had taken steps to make the process simpler and the bidder confirmed they had benefited from the approach. The barriers tackled to help simplify included: 

• taking a disaggregated contract approach 
• allowing an extended response time giving bidders extra time to complete a tender response, reducing pressure on small businesses 
• and staggering tenders where multiple related contracts were offered

This two way feedback opportunity gave us invaluable insight real life experience of how barriers can be successfully tackled. The small business feedback was presented to the SME Champions Group as a success story example and for capturing in category level action plans and our overarching plan for monitoring and proactively seeking feedback.

Our spend with SMEs

SME expenditure is categorised as either ‘Direct’ or ‘Indirect’. Direct expenditure is where DWP contracts directly with an SME and money is paid directly to them.  

Indirect expenditure is where DWP contracts with a supplier, often a large company  who then sub-contract with an SME to deliver aspects of the service and are paid by the supplier, not DWP. 

Tables 1 to 3 below show our previous three years spend, which shows a slight decrease in direct spend with SMEs, but we have achieved an average of 6.8% direct spend supplemented by a higher indirect spend. 

As a government department we have an obligation to government and taxpayers to secure value for money through our contracts and also ensure the contracts we let keep the DWP business safe and operational. The challenge in part is sometimes this may mean using large single vendor contracts which delivers value and capability but may decrease direct spend with SMEs. However, we will aim to increase our SME direct spend incrementally year-on-year and have committed ourselves to a target of spending 8% of our direct spend with SMEs by 2027 to 2028.  

For transparency we also commit to continuing to publish our Indirect Spend, to show how SMEs still benefit from being part of our contracts even if not as direct suppliers.

Table 1: Direct Spend

Financial year	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
Spend	£184 million	£167 million	£171 million	£99 million
Percentage of DWP Spend	8.40%	6.30%	5.77%	3.3%

Table 2: Indirect Spend

Financial year	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
Spend	£194 million	£195 million	£261 million	*tbc
Percentage of DWP Spend	8.90%	10.30%	8.81%	*tbc

Table 3: Combined percentage spend with SMEs

Financial year	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
Combined total percentage	17.3%	16.6%	14.58%	*tbc

* Due to the collection process for Indirect Spend data, 2024 to 2025 will be confirmed in next iteration.

View historical central government spend with SMEs.

Our payment performance

Government is leading by example and paying our suppliers promptly. We understand that late payment is an issue for businesses, especially smaller businesses, as it can adversely affect their cash flow and jeopardise their ability to trade. The government recognises that the public sector should set a strong example by paying promptly. The public sector is required to pay their suppliers in 30 days and report on their performance on an annual basis. 30 day terms also apply in public sector supply chains. Our department’s latest payment performance is set out below.  

Latest report covering Quarter 3 2025 to 2026 (1 October to December 2025): 

• 94.88% percent of invoices were paid within 5 days 

• 99.14% percent of invoices were paid within 30 days

View further information on government’s payment policy and legislation.

SME hub

The Small and Medium Business Hub is a dedicated space for SMEs looking to work with the government. Here you will find links to other departmental action plans and centralised guidance on bidding for government work.

Contact us

Email cd.smeandvcsesuppliers@DWP.GOV.UK

You can find more information about the Department for Work and Pensions on GOV.UK.