The biggest reform to UK public procurement in a generation is now live and embedded. Here is what small and medium-sized enterprises need to know, and how to make the most of it.
The Procurement Act 2023 came into force on 24 February 2025, replacing the patchwork of EU-derived regulations that had governed public sector buying in England, Wales and Northern Ireland for over a decade. The old regime, built on the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and several other statutory instruments, has been consolidated into a single, modern framework.
For SMEs, this is not a technicality. It is a genuine shift in how the public sector buys, and it creates real opportunities for businesses that are prepared to act on them. The Act was designed with smaller suppliers in mind, and the reforms it introduces touch every stage of the procurement lifecycle, from early engagement through to payment and contract management.
Why This Matters for SMEs
SMEs account for 99.9% of the UK business population, yet public procurement has historically been dominated by large incumbents with the resources to navigate complex, bureaucratic tendering processes. The Procurement Act explicitly sets out to change that balance.
The Act places a new statutory duty on contracting authorities to have regard to SME participation and to consider whether barriers to entry can be removed or reduced. That is not advisory guidance or best practice. It is a legal obligation written into the framework. Alongside this, central government departments are now required to set three-year SME spend targets and to publish departmental SME action plans setting out the specific steps they are taking to increase direct spend with smaller businesses.
In practical terms, this means that every government department is being held to account for how much of its procurement spend reaches SMEs. The direction of travel is clear, and it is backed by published targets and public reporting.
The Key Changes SMEs Should Understand
The Procurement Act introduces a number of reforms that directly affect how SMEs engage with public sector opportunities. The most significant are worth understanding in detail.
First, the Act replaces the old menu of rigid procedures with a single competitive flexible procedure that allows buyers to tailor the procurement process to fit the market. Buyers can now incorporate negotiations, presentations or phased approaches into a single process, rather than being forced into prescriptive formats that often favoured larger, more experienced bidders. For SMEs, this flexibility can mean procurement processes that are more proportionate to the size and nature of the contract.
Second, the Act introduces a duty on contracting authorities to consider dividing contracts into smaller lots. Lot-splitting has long been recognised as one of the most effective ways to open up public contracts to smaller suppliers, and this duty means buyers must actively think about whether a contract could be broken down before deciding to let it as a single large award.
Third, there is now a requirement for greater transparency around the procurement pipeline. Contracting authorities must publish pipeline notices giving advance sight of upcoming opportunities, and preliminary market engagement notices must be published when buyers consult the market ahead of a formal tender. This is significant for SMEs, which often lacked the visibility and market intelligence that larger firms took for granted. Earlier notice provides more time to prepare, to form partnerships, and to make informed decisions about where to invest bidding resources.
Fourth, the Act bans several common barriers that disproportionately affected smaller suppliers. Contracting authorities can no longer require an SME to have insurance in place before the award of a contract, for example, a requirement that previously forced businesses to incur costs before knowing whether they had won the work.
Payment Protection Across the Supply Chain
Cash flow is the single greatest vulnerability for most SMEs working in public sector supply chains, and the Procurement Act addresses this head-on.
Section 68 of the Act implies 30-day payment terms into every public contract, and Section 73 extends the same requirement to subcontracts throughout the supply chain. These terms are mandatory and are implied into contracts even where they are not explicitly written in. Invoices must be paid within 30 days of receipt, not from the point of validation, which closes a loophole that was previously used to delay payments.
The Government has also introduced a regime of spot checks on contracts worth more than five million pounds per year, requiring contracting authorities to verify that subcontractors are being paid on time. The results of these checks must be published on Find a Tender, and non-compliance can lead to formal action, including breach of contract and potential exclusion from future procurements.
For SMEs operating as subcontractors, this is a material change. It means that the obligation to pay on time is no longer just between the buyer and the prime contractor. It flows through the entire supply chain, with enforcement mechanisms to back it up.
A New Transparency Regime
The Procurement Act has been implemented in stages, and the latest provisions, which came into force on 1 April 2026, complete the transparency architecture.
Contracting authorities must now publish quarterly data on every payment over thirty thousand pounds made under public contracts, using the Central Digital Platform. Suppliers awarded below-threshold contracts must register on the platform and obtain a unique supplier identifier. This is the first time that smaller suppliers’ contribution to public procurement will be systematically visible, and it underpins the Government’s ability to track and report on SME spend targets.
Contract performance is also now subject to published reporting. For contracts worth five million pounds or more, authorities must publish contract performance notices including assessments against agreed key performance indicators. Social value commitments made at the bidding stage become formal contract KPIs, meaning they must be delivered, measured and publicly reported, not just promised in a tender submission.
Where a below-threshold contract goes out to open competition, 73% are awarded to at least one SME, against 61% for open tenders overall. The route matters more than the size: only 46% of below-threshold contracts awarded without competition, and 36% of direct awards, reach an SME at all (Open Contracting Partnership, March 2026).
Local Supplier Reservation
A further development is the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026, made on 3 February 2026 and in force since 4 February 2026. This allows local authorities, on a discretionary basis, to reserve certain below-threshold procurements to suppliers based in the UK or within a defined local area.
This does not amount to automatic preference for local suppliers. Authorities must still ensure value for money and run proportionate processes. But for SMEs with strong regional roots and local delivery capability, it creates a meaningful opportunity to compete on home ground.
What SMEs Should Do Now
The Procurement Act creates opportunity, but it does not hand it to businesses on a plate. SMEs that want to benefit from these reforms need to take practical steps to position themselves.
Registration on the Central Digital Platform is essential. This is now the single point of registration for public procurement, and without it, businesses cannot bid for contracts or be recorded against awards. SMEs should also be monitoring pipeline notices and preliminary market engagement notices on Find a Tender, which provide early visibility of upcoming opportunities and the chance to shape how procurements are designed.
Equally important is the quality of bid submissions. The Act’s transparency provisions mean that contracting authorities must now provide formal feedback on unsuccessful bids, including scoring breakdowns. This is valuable intelligence, but only if SMEs use it to refine their approach. Winning in public procurement requires evidence-led submissions that demonstrate relevant experience, measurable outcomes and a clear understanding of the buyer’s requirements.
SMEs should also ensure that their own payment practices are in order. The 30-day payment obligation flows through the supply chain, and businesses that cannot demonstrate prompt payment to their own suppliers will find themselves at a disadvantage, both contractually and reputationally.
How JGP Consultancy Can Help
At JGP Consultancy, we work with SMEs across construction, professional services, infrastructure, technology and the wider public sector supply chain to help them win and deliver public contracts.
Whether you need support identifying the right opportunities under the new regime, strengthening your bid submissions with data-driven evidence, or building the contract management capability that the Procurement Act now demands, we can help. Our approach is grounded in the practical realities of public procurement, and we work with businesses at every stage, from market positioning through to post-award delivery.
If the Procurement Act has changed the rules, the question for SMEs is straightforward: are you ready to compete under them?
Get in touch with JGP Consultancy to discuss how these changes affect your business.
www.jgpconsultancy.co.uk