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Public procurement law reforms to be delivered to help SMEs, says Government

The Government will change the law in an effort to make it easier for small and medium-sized businesses (SMEs) to win public sector contracts, it has announced.

The measures to be introduced will be intended to address an existing problem of SMEs being put off bidding for public sector contracts due to the "excessive burdens imposed through the procurement process", it said.

In a new report (40-page / 3.10MB PDF), the Department for Business, Innovation and Skills (BIS) said that it would use legislation to abolish the use of 'pre-qualification questionnaires' (PQQs) for low-value contracts. PQQs are documents that prospective suppliers are often required to fill out as part of the process of bidding for contracts. Details supplied in PQQs help bodies looking to award a contract to assess which businesses to invite to formally bid for those contracts.

For high-value contracts, public bodies will be obliged to use a standardised PQQ and will also be required to "ensure small business needs are taken into account in the design of procurement processes".

In addition, all contracts being awarded by public bodies are to be publicised via a "single online portal" in an effort to make them easier to find. Businesses that win public sector contracts will also be obliged, under new laws, to pay sub-contractors they use in line with rules on prompt payments, BIS said.

Public bodies will also be obliged to report what they spend with small businesses and in the voluntary, community and social enterprise sector and detail their "prompt payment performance" with those organisations under the plans.

The new legislation will be introduced by spring 2014, BIS said.

"For years, small firms have found it difficult to do business with the public sector because they have been pushed out by larger companies or deterred by the excessive burdens imposed through the procurement process," BIS said. "We have made improvements in Central Government but we want these improvements to be rolled out across the whole public sector, particularly in areas such as procurement by hospitals and local government services where small businesses have a lot to offer."

Public sector contract negotiations expert David Isaac of Pinsent Masons, the law firm behind Out-Law.com, said: "Anything that makes it easier for SMEs to compete for Government opportunities is obviously to be welcomed and will undoubtedly help ensure that SMEs bid for more lower-value contracts. This is a step in the right direction."

"It’s also important to remember that as a result of their technical expertise and innovative ideas SMEs can also play an important role in higher-value contracts. The fact that the Government is going to require public bodies to consider ‘small business needs’ when designing their procurement processes will hopefully ensure that SMEs are considered in large as well as small procurements," he added.

The Office of Fair Trading (OFT) announced in October that it had launched a market study into the supply of public sector ICT goods and services. The study, which the OFT is due to report its findings on in March 2014, is being conducted in relation to the regulator's concerns about competition in the market.

The market for the supply of public sector IT goods and services is estimated at being worth £13.8 billion annually. The OFT previously said that the top 20 software and IT service providers currently earn about £10.4 billion in annual revenues from UK public sector bodies.

The Cabinet Office has previously set out a target of ensuring that SMEs win 25% of the business being outsourced by the Government, either directly or through the supply chain. According to data published by the Cabinet Office in the summer, 10.5% of all Government procurement expenditure in 2012-13, £4.5 billion, made its way directly to SMEs. The figure was up from £3bn spent by central Government departments on services offered by SMEs in 2009, it said.

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