The Procurement Act: A Small Step for Efficiency, or a Giant Leap for SME’s?

Expected to come into effect in October 2024, the United Kingdom’s government is finalising a significant set of changes towards how public sector procurement works, with a view to encouraging greater Small and Medium-sized Enterprise (SME) spend, increased transparency and enhanced flexibility. 

With several decades of experience working in, and selling to, the public sector, gravity9’s Senior Bid Manager, Allan Hudson, casts a critical eye over the details of the new act from the perspective of an SME.  

Will it signify the start of a new era, or merely recycle old ideas with a detrimental impact? The short answer of course is “it depends” on how the act is implemented, with both positives and pitfalls evident at a glance.  

Here, Allan breaks down some of the key details and provides a little more depth to his insights. Text in italics below is taken directly from UK government issued guidance documentation.  

“Tell us Once.”

Centralised Digital Platforms (and AI) 

“The Act will require the creation of 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. This will accelerate spending with SMEs.” 

A Standard Questionnaire (SQ) is an example initiative created to speed up framework applications to the procurement process, connecting systems to share data and enable prefilling of fields for a number of mandatory forms. Other frameworks help to avoid duplication and increase the number of new suppliers, while ousting incumbents in the short term.  

That could be considered the first caveat – new frameworks and formats for bidding disrupt the process and allow for “new blood” as SMEs (by their very nature) are agile and able to adapt quickly. Meanwhile, over time, larger companies will research, adapt, and create their own “best practice” to catch up. They’ll also be able to use deep pockets to incentivise the best bid-writing talent to join them.  

Another exciting opportunity for those bid-writers is AI. A well-built system can already create a good first draft and in time AI will be able to create more advanced drafts still – reducing the need to finesse the bid. Any bid-writers out there who are worried about their jobs – don’t be! AI will free up time to research and craft quality content. The key question is: “Will the constant improvement in quality of AI-created bids reduce or even remove the natural advantage SMEs enjoy (being flexible and agile)?” 

Integrity at its Heart (and the Admin Burden) 

“Contracting authorities must have regard to delivering value for money, maximising public benefit, transparency and acting with integrity. Integrity must sit at the heart of the process. It means there must be good management, prevention of misconduct, and control in order to prevent fraud and corruption.  

The Act also includes a duty on contracting authorities to have regard to the particular barriers facing SMEs, and to consider what can be done to overcome them.” 

An excellent statement around the balancing act that the public sector faces. Proof of good governance is essential – fraud, bankruptcy, or sudden operational failures would wake a civil servant up in the dead of night in a cold sweat!  

This, however, can present complications for the inclusion of SMEs, where larger, more established options have systems of governance in place to allay those fears. But SMEs can bring innovation, adaptability, and industry specific expertise that larger corporate options may struggle to pivot to meet. So how can the public sector find the perfect balance of robust governance and security as well as the innovative approach of a smaller organisation? How can an SME prove they can be “safe” too?  

Another barrier to confidence in increasing SME supplier spending is the administrative burden. If you’re committed to spending £1million on an IT system, engaging (for example) twenty SMEs requires a far greater administrative resource spend than would be needed to engage one corporate. One alternative solution is to select a prime, or contract to a single corporate with the expectation they will sub-contract to SMEs. Surely this creates the best of both worlds…? 

But this is not the case in my experience; primes will often cherry-pick the most lucrative or high-profile parts of a contract (the “choice cuts” if you like). The remaining “scraps” are then offered to SMEs at a low rate. Innovation is stifled by the arrangement and the benefit of using an SME is eroded. To retain the benefit of using an SME, contracting with them directly is the answer – but the corresponding infrastructure must be developed to ensure they’re used meaningfully and more often.  

The Competitive Tendering Process (and Weighing Risk) 

“The Act introduces a new procedure for running a competitive tendering process – the competitive flexible procedure – ensuring for the very first time that contracting authorities can design a competition to best suit the particular needs of their contract and market.” 

Again, there’s the challenge that uniformity and flexibility are balanced, but there’s no guarantee that familiarity/contempt will be avoided. The Act is positive, in that buyers can tailor the tendering process to meet requirements, offering the public sector a process they can feel comfortable with.  

The first draft of a procurement specification will be aspirational, encompassing all the elements that a buyer wants to see. But as soon as a procurement office begins to question what is important, logic and fear may set in.  

Nobody would want to risk procuring from a supplier who later goes into bankruptcy or administration, so financial stability gets a high “weighting.” Similar anxieties drive similar high weightings around proven capacity to deliver and robust governance, meaning technical ability, company culture and creativity have less importance here (and less than that first draft with its aspirational nature).  

The Act also heralds a new approach to assessing and managing the national security risk posed by suppliers which will, as part of the exclusions and debarment regime, ensure public contracts are awarded in a manner consistent with mandatory national security. It is going to be interesting to see how the balance is kept here: In recent years, increasing security levels have forced Government departments to move to meet them. Security clearances take time to process, creating a supply issue and subsequent backlog. If we increase security needs (through the Act), will this reduce quality and lead to gradation in clearances, with tick-box accreditation to clearances with “real” scrutiny?  

More Opportunities, with Dynamic Market  

“The Procurement Bill will include an enhanced commercial tool called a Dynamic Market that will allow suppliers to join at any time and which the buyer can use to run quick competitions.” 

This will enable buyers to buy specific services that they identify as meeting their needs, rather than choose the best fit from the options that are available. It will also create consistency across frameworks. Too often, as Bid Managers, you look at opportunities coming out on frameworks which are very obviously on the incorrect framework. 

This must be done to allow a buyer to procure the service that they need from a supplier who is not on the ”correct” framework. If you are a Bid Manager, it is incredibly frustrating having to read the runes to decide whether a bid is genuinely winnable. 

Feedback You Can Use 

“A new entrant isn’t always going to be successful in bids and a key complaint at the moment is that feedback via debrief letters is inconsistent and not always useful. Under the new Procurement Bill, tenderers who are unsuccessful will receive an assessment summary which will show them directly how their bid compared to the winner.” 

I’ve heard presentations in which public sector speakers claimed that this means that winning bids will also be published. This isn’t reflected in the official literature, which means that feedback is likely to focus on how the unsuccessful bid differs from the winner: this is incredibly good practice which will improve the quality of bids.   

Feedback is always useful in bid writing and making it a legal requirement (as it’s now part of legislation, rather than a CCS framework requirement) will ensure that bidders and bid-writers increase their proposal-writing ability, and this will mean more and better quality of choices for the public sector.  

There is a threat here: too much transparency generally benefits larger companies who have the luxury of large bid teams with more time for continual improvement activities. If an SME finds a way to win bids through innovative prose or business agility, the advantage won’t last long. Paradoxically this also plays into the hands of AI: Detailed, concise feedback on the winning habits of good bidders can be used to train AI on bid-writing and the market then faces an arms race – who can construct the best AI?  

Innovation and Risk, Who Wins?  

The Act promises to draw on the lessons of innovative funding, using organisations like Innovate UK as a template – again – this is a laudable objective. Having worked with several such innovation programmes, I am always impressed with their knowledge of how private sector innovation works. The systems they use to allow risk into the calculation benefits innovative products, solutions, and methods.  

Can the public sector channel the spirit of innovation created by such bodies, or will the essence be diluted by the cognitive filters of risk management, lack of expertise and scarce resources?  

This is a question to apply to all these aspirations.  

The reward for getting this right would be a substantial one – restructuring our Public Sector procurement and turbocharging the efficiencies of all public sector institutions.