Small businesses to benefit from one of largest shake-ups to procurement regulations in UK history

• The landmark Procurement Bill has today been granted Royal Assent, becoming an Act of Parliament.

• The Act provides for simpler procurement processes to support small businesses and innovation, and protect against national security risks in public contracts. 

• The new regime is expected to come into force October 2024 delivering lasting change for generations to come. 

New procurement rules have today become law, following the Royal Assent of the Procurement Act - and is part of the Government’s work to make long-term decisions that will change this country for the better.

The new rules are one of the largest shake ups to procurement rules in this country's history.

The Act establishes a new public procurement regime following the UK’s exit from the EU, and helps deliver the Prime Minister's promise to grow the economy by creating a simpler and more transparent system that delivers better value for money, reducing costs for business and the public sector.

The new regime will deliver simpler, more effective public sector procurement, and help small and medium-sized enterprises (SMEs) secure a greater share of approximately £300bn of expenditure per year. 

The new rules will protect against national security risks in public contracts.

Significant new  powers will enable high-risk suppliers to be put on a public debarment list and be prevented from bidding for some categories of goods or services, such as areas related to defence and national security, while allowing them to continue to bid for contracts in non-sensitive areas. 

Minister for the Cabinet Office Jeremy Quin said:

“We have taken the long-term decisions that will increase our powers to protect our security in our supply chains and procurement.

“This has included radical steps such as creating a National Security Unit for Procurement and giving Ministers the power to prevent suppliers from bidding for certain products where there is a risk to national security it will deliver lasting change which protects the UK for generations to come.

The Act places a requirement on contracting authorities to assess the particular barriers facing SMEs throughout the entire procurement lifecycle, and to consider what can be done to overcome them.  

For example, in the area of insurance, procurement processes can unfairly penalise businesses that lack the resources of larger suppliers. The Act makes it clear that contracting authorities must accept evidence that required insurance cover will be in place when a contract is awarded, rather than at the point of bidding. This will save all businesses, including SMEs, from having to incur unnecessary upfront costs.

Parliamentary Secretary for the Cabinet Office Alex Burghart said: 

“This Act is all about supporting British business using the opportunity of Brexit, as we change the way government works so it delivers better for people across the country. . 

“In particular, we draw on the new freedoms available to us by leaving the European Union to embrace and best support our small and medium sized businesses”. 

The Act will streamline the way that companies bid for public contracts, while also giving procurers more room for negotiating prices and innovative solutions with these companies. 

These reforms will deliver better value for money, slash red tape, drive innovation and make it easier for suppliers of all sizes to do business with the public sector

It will also be possible to exclude suppliers from bidding for contracts, not only if they’ve performed badly on other contracts in the past, but also based on modern slavery or professional misconduct grounds.

The Act introduces a new duty for Ministers to proactively consider suppliers for potential debarment investigations.

To achieve this, the Government will introduce a new National Security Unit for Procurement. This unit will better protect people across the country by investigating suppliers who may pose a risk to national security, and assess whether companies should be barred from public procurements.  

In addition, the Government is committing to publish a timeline for the removal of surveillance equipment produced by companies subject to China’s National Intelligence Law from central government sensitive sites. Government will also produce an annual written report to Parliament detailing progress on this commitment.

Cabinet Office Minister Baroness Neville-Rolfe said: 

“These new rules will help grow the economy and deliver better and simpler public sector procurement.

“I am particularly pleased to help small and medium sized businesses secure a greater share of nearly £300 billion worth of government contracts."

The Act draws on newfound Brexit freedoms to create a more transparent procurement system - with clearer and faster competition processes in emergency situations, such as during health pandemics, ensuring that contracting authorities can act quickly and transparently to buy vital goods.

Contracting authorities will also need to take account of the national strategic priorities set out in the National Procurement Policy Statement. This could include matters such as job creation, enhancing supplier resilience and fostering innovation.

The changes are expected to come into force once secondary legislation is laid and after a six-month implementation period. 

The Cabinet Office will be providing all public sector contracting authorities with access to a comprehensive, centrally-funded learning and development package and guidance materials to help them prepare.

Notes to editors

The main benefits of the Act are:

• Delivering better value for money – Supported by greater transparency and a bespoke approach to procurement, the Act will provide greater flexibility for buyers to design their procurement processes and create more opportunities to negotiate with suppliers.

• Slashing red tape and driving innovation – More than 350 complicated and bureaucratic rules govern public spending in the EU. Removing these and creating more sensible rules will not only reduce costs for businesses and the public sector, but also drive innovation by allowing buyers to tailor procurement to their exact needs, building in stages such as demonstrations and testing prototypes.

• Making it easier to do business with the public sector – The Act will accelerate spending with small businesses. A new duty will require contracting authorities to consider SMEs and we will ensure 30 day payment terms on a broader range of contracts. The Act will also create a central digital platform for suppliers to register and store their details so that they can be used for multiple bids, and see all opportunities in one place.

• Levelling up the UK – While value for money will remain the highest priority in procurement, the Act will require buyers to take account of national strategic priorities such as job creation, improving supplier resilience, and driving innovation. Buyers will be able to reserve competitions for contracts below certain thresholds for suppliers located in the UK, SMEs and social enterprises.

• Taking tougher action on underperforming suppliers – The Act will put in place a new exclusions framework that will make it easier to exclude suppliers who have underperformed on other contracts. It will also create a new ‘debarment register’, accessible to all public sector organisations, which will list suppliers who must or may be excluded from contracts.

• Creating an open and transparent system – Everyone will have access to public procurement data. Citizens will be able to scrutinise spending decisions. Suppliers will be able to identify new opportunities to bid and collaborate. Buyers will be able to analyse the market and benchmark their performance against others, for example on their spend with SMEs.

• Effective emergency procurement – The Act will allow faster competition processes for emergency buying, reducing the reliance on direct awards while retaining (and improving) the ability to act at pace in situations similar to the COVID pandemic

• Protecting national security – The Act includes specific rules for defence and security procurements and provides flexibility for contracts to be upgraded to refresh technology to address gaps in capability. The Act also has provisions to enable suppliers to be excluded from procurements if they present a threat to national security. In addition, the debarment list can identify suppliers that must be excluded from certain contracts, as well as identify suppliers that contracting authorities may consider excluding from a procurement.

• Strengthening exclusion grounds - The Act toughens the rules to combat modern slavery by allowing suppliers to be excluded where there is evidence of modern slavery, accepting that in some jurisdictions it is unlikely that a supplier would ever face conviction.

• We will also create a central digital platform for suppliers to register and store their details so that they can be used for multiple bids - and enable them to see all opportunities in one place - making it easier, especially for SMEs, to bid for any public contract.  Simplified bidding processes will make it easier and more efficient to bid - and increasing their opportunities to bid should mean SMEs win more work.

• Reforms