Published on 18 January, the most recent Procurement Policy Note (PPN) 01/23 replaces PPN 09/21 and serves as ‘consolidated guidance’ for Section 109 of The Public Contract Regulations (2015). The PPN raises the threshold for publishing contract and framework notices on contracts finder to the following:
- £12,000 (previously £10,000) for contracts published by a central government authority, such as Crown Commercial Services or the Ministry of Defence
- £30,000 (previously £25,000) for contracts published by sub-central authorities, including local authorities and NHS Foundation Trusts.
According to the professional bid writers Executive Compass, the update is particularly relevant for microbusinesses (defined as between 1 and 9 employees) and small businesses (10–49 employees). Studies indicate that 84% of microbusiness bids and 64% of small business bids are for contracts with a value of less than £130,000, evidencing their reliance on comparatively low-value tender opportunities.
How SMEs will be affected
Various central government bodies’ five-year action plan for SMEs have included a target of 33% of total procurement spend to be awarded to small- and medium-sized businesses. However, research provided by the British Chambers of Commerce and Tussell found that SMEs were awarded just 21% of central and sub-central authority spend in 2021, despite comprising 99% of UK businesses, 52% of economic turnover and 61% of employment.
To remedy this underperformance, a 2022 policy paper stated an ambition for the Contracts Finder and Find a Tender service to ‘provide visibility of low-value opportunities’ and increase transparency for SMEs looking to tender for public projects.
Consequently, even a marginal decrease in the value threshold appears to run counter to these efforts. During 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 the total amount may seem negligible, a reduction in low-value opportunities could hinder initial SME entry into public procurement. With high access barriers for the tendering process, a decrease in listed small-value opportunities may prove to discourage subsequent participation in future bids.
Future directions
Although the most recent PPN signals neither a massive shift in central and sub-central authorities’ procurement strategies nor a large proportion of public procurement spend, it is understandable that SME bidders may be concerned about future procurement accessibility.
There are positive future signs regarding SME public procurement. The upcoming Procurement Bill, currently in the committee stage in the House of Commons, will look to streamline and update complex procurement regulations and other barriers to SME entry, such as lowering insurance thresholds and the ability to provide alternative financial evidence. It remains to be seen, however, if the proposed Bill will succeed in aligning the SME portion of public procurement with the government’s targets.
