The Parliamentary Secretary, Cabinet Office (Georgia Gould)
Today the Government are publishing a national procurement policy statement that sets out our priorities for public procurement and maximises the impact of every pound spent. This will come into effect alongside the commencement of the Procurement Act 2023 on Monday 24 February. The Government are determined to ensure that the £400 billion of public money spent on public procurement annually delivers economic growth, supports small businesses, champions innovation, and creates good jobs and opportunities across the country.
For too long, small and medium-sized enterprises and voluntary, community and social enterprises have been held back by Government procurement processes that are too slow, bureaucratic, and difficult to navigate. Therefore, today, the Government are also announcing new measures to support the transformation of public procurement and deliver on the Government’s plan for small businesses.
New rules will require all Government Departments and their arm’s length bodies to set three-year targets for direct spend with SMEs (from 1 April 2025) and VCSEs (from 1 April 2026) and publish progress annually. On top of this, regular spot checks will ensure smaller companies in the supply chain are paid within 30 days. This builds on previous interventions in the Budget that require Government Departments to exclude suppliers from bidding for major contracts if they cannot demonstrate prompt payment of invoices. We will be reforming the way social value is taken into account in central Government procurement, streamlining the current model to focus on delivery of our missions, and taking forward new standards on fair work in support of our growth mission.
The new national procurement policy statement sets out an expectation for the public sector to maximise procurement spend with SMEs and VCSEs. It sets out how early market engagement and collaboration combined with a clear pipeline of projects can help deliver this. To support local businesses the Government have listened to concerns from local authorities and are working to implement changes to allow them to reserve competitions for low-value contracts for local small businesses and social enterprises.
A new commercial innovation hub will foster procurement innovation by trialling new approaches to service design and procurement. Delivering on the commitment in the blueprint for modern digital government, we will explore establishing a digital commercial centre of excellence bringing together digital and commercial expertise to make it possible to buy once and well, and to open up opportunities for small and medium businesses to work on digital transformation.
This Government are clear that we want the value of contracts to go into delivering for citizens, and are making changes to deliver value for money in procurement through stronger expectations around commercial capability and contract management. A new online register of commercial agreements will increase visibility of frameworks and fees, curbing excessive profits. We will deploy new artificial intelligence commercial tools to cut bureaucracy, boost productivity, and free up commercial staff for higher-value tasks.
To build on this progress, the Government will consult on further reforms to our public procurement processes to drive economic growth, support small businesses, and better support innovation. This consultation is intended to inform the development of primary legislation when parliamentary time allows.
The Government will update their sourcing playbook and consult on introducing a new public interest test for contracting authorities to assess, at the outset of a procurement process, whether work should be outsourced or if it could be done more effectively, and drive better value for money, in house. This will strengthen market stewardship in procurement and ensure there is a rigorous evaluation of the broader public interest of in-house, outsourced or hybrid delivery models, ensuring that decisions properly reflect long-term value for taxpayers and are aligned with Government priorities.
This transformative package of reform ensures public procurement delivers real benefits for taxpayers, businesses and communities alike. By setting ambitious targets for small business spend and aligning social value with our missions, we are driving economic growth, strengthening supply chains, and fostering innovation. By maximising the power of public procurement, we will fuel job creation around the country, drive local and national outcomes and ensure that every pound spent delivers the maximum value for the people of this country.
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