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Oxygen Finance

Procurement Act 2023 Spotlight: Small Businesses Take Centre Stage

If you’re a supplier to the public sector, or wish that you were, you will likely have heard about the Procurement Act 2023. This legislation, due to come into force in October 2024, is set to transform the way that the public sector buys from private companies, giving the whole process a facelift and making it more straightforward and transparent.

With public procurement accounting for approximately £300 billion annually, the Procurement Act 2023 replaces previous regulations tied to EU directives.

To help suppliers prepare, we invited the Cabinet Office’s Martin Traynor OBE, the Small Business Crown Representative and one of the chief architects of the bill, to a Q&A with Team Oxygen (you can watch the session here) where we put suppliers’ questions directly to him, the answers to which we’ve summarised for you below.

 

The background to the Procurement Bill 2023

Martin explained the journey that government has been on from 2019 to now.

Over the last five years, a number of initiatives have been launched to level the playing field. The government decided that suppliers to the public sector should get their money within 30 days. They also set up the Public Procurement Review Service, a hotline of sorts for suppliers to voice their concerns. Contracts Finder was launched to help suppliers find government tenders, and the decision was taken to make the paperwork (Pre-Qualification Questionnaires or PQQs) a lot less complicated by switching to plain English.

However, the government realised there was still more to be done. The Cabinet Office then spent three years consulting stakeholders, including suppliers, and this has led to what we now call the Procurement Act 2023. This act aims to make buying things for the government fairer and more straightforward. As Martin said, “the important thing about this bill, it’s removing things, not necessarily adding things… This is a huge cultural change.

The Procurement Act merges four sets of regulations into one, offering better visibility, more pre-market engagement, and solid provisions for suppliers. It will apply to procurement by Contracting Authorities, which covers public utilities, defence sectors, and entities in England, Wales, and Northern Ireland (with reserved functions doing procurement in Scotland). There are some exemptions, though, such as devolved Welsh and transferred Northern Ireland procurements. It mandates the creation of national and Wales procurement policy statements, setting out strategic priorities for public procurement.

 

Supporting small businesses

The first major shift from the bill is the move towards more pre-market engagement, aimed at breaking away from the traditional model that unintentionally excluded SMEs. The new legislation emphasises the need for procurement officers to consider SMEs from the early stages, promoting flexibility in supply chain engagement.

The government is throwing its weight behind this with a commitment to give small businesses a fairer shot, with Martin explaining that “it’s the government’s aspiration that… for every three pounds we spend, we want one pound spent with SMEs.”

Every government department will have both an SME Champion and a group called an SME Panel to talk to small businesses. Departments will also have an SME Action Plan designed to keep small businesses in mind when they’re planning purchases. “More SMEs in the supply chain, that will be the ultimate goal,” explained Martin.

The webinar touched upon the need for a cultural shift in procurement, focusing on fostering innovation, and the legislation’s intent is to provide constructive feedback to unsuccessful bidders, promoting a learning opportunity for improvement.

 

Making things clear and fair

During the Q&A session, Martin emphasised the pivotal role of transparency in the forthcoming changes. The introduction of an 18-month pipeline offers businesses a glimpse into the government’s future procurement plans, fostering better preparation and strategic alignment. This helps everyone get ready for what’s coming up. Preliminary Market Engagement Notices will also help suppliers get involved in research or events, allowing them to better understand their capabilities and identify chances for innovation. In addition, for the first time, procurement teams can talk to prospective suppliers while they’re deciding, about anything – even the price. Plus, suppliers will only need to show they have the right insurance in place after they’ve won the tender.

What’s more, winning proposals, with a few secrets kept safe, will be shown to everyone, and the contract will require the publication of key performance indicators (KPIs), plus contract change notices as necessary.

The Act keeps the door open for direct awards, especially in emergencies, pre-authorised by a minister of the crown, ensuring swift responses to critical situations. Contracting Authorities can make direct awards, but they have to keep the market informed of these awards through transparency notices.

The Procurement Act 2023 takes a robust stance on Conflicts of Interest, emphasising the need for Contracting Authorities to identify and mitigate conflicts throughout the process. If a conflict provides any supplier with an undue advantage, and it can’t be mitigated, the supplier will be excluded from bidding.

There will also be a new debarment list, a transparent record of suppliers who may face exclusion designed to ensure that public funds only go to fit and proper suppliers. Firms are granted the right to appeal though, and the list will be regularly reviewed.

 

Live frameworks with frequent updates

One change that is sometimes overlooked, but potentially seismic for newer entrants, is the opening up of Frameworks. Unlike conventional frameworks that are closed to new suppliers after being awarded, the act introduces open frameworks, allowing flexibility for new suppliers to join throughout the framework’s term, and made visible to all through the Central Digital Platform – more on that later!

Open frameworks will let Contracting Authorities bring in new suppliers over a maximum 8-year term, keeping the competition flowing. In contrast, Dynamic markets, akin to Dynamic Purchasing Systems (DPS), will let suppliers apply at any time, helping newcomers and those with fresh ideas otherwise, as Martin eloquently put it, “we’d still be buying Betamax videos, wouldn’t we?”.

This will allow for better adaptability to evolving technologies, avoid restricting access to potentially exciting new suppliers, and ensure that frameworks are not static, allowing for adjustments to innovations in the market.

 

What else is changing?

The bill also recognises the shift from buying authorities just looking for the cheapest option, aka MEAT (Most Economically Advantageous Tender), to MAT (Most Advantageous Tender). That means buyers will be considering other things, like new ideas, being creative, helping society, job creation, and looking after the environment, as part of their decision-making process, which can help smaller firms who might be unable to match the economies of scale available to larger firms, but may, for example, have a new approach to an existing problem. It’s a shift towards recognising and rewarding the extra mile suppliers can go to boost local economies.

The new Central Digital Platform is a further game-changer, giving suppliers a single place to manage their bids. This platform lists all frameworks and dynamic markets available for contracting authorities, aiming in part to ensure that authorities do not recreate frameworks unnecessarily. This streamlined approach also eliminates the need for suppliers to repeatedly provide the same information, making it more efficient for firms to engage in tendering opportunities. It’s a win for suppliers, making it easier to find and pursue tendering opportunities.

One of the other impactful changes discussed was the commitment to shorter payment terms. As Martin put it; the Procurement Bill contains “a commitment that the public sector will pay undisputed invoices within 30 days.” While there’s recognition that adjusting to a 30-day payment window may pose challenges, the phased approach aims to ease this transition. Martin explained that the phased approach provides for “people to be paid within 55 days as of next April, the following April that drops down to 45, and then the following year it will be the 30 days” with the expectation that this change will permeate through the supply chain. Note: Oxygen know just how transformative faster payment can be for businesses, so we wholeheartedly endorse these changes.

The Act introduces a more flexible approach to procurement procedures, reducing the number of competitive procedures to just two: the Open and the Competitive Flexible Procedure. This change allows Contracting Authorities to tailor procurement processes to better suit market dynamics and contract requirements. The Competitive Flexible Procedure enables multi-stage tendering, fostering negotiation, dialogue, and consideration of supplier innovation.

 

Getting ready for the change

Addressing concerns about the transition period, Martin clarified that the shift to new rules in October 2024 would be more of a gradual transition. The existing procurement rules will still apply until the go-live date, encouraging a smooth evolution rather than an abrupt change. Until then things are pretty much the same.

The intention is not to create rigid policing mechanisms but to offer guidance, spot checks, and a flexible approach to managing the shift in rules.  There are also videos from the Government Commercial Function on YouTube designed to give Suppliers even more insights into the changes here, and of course you can catch the recording of our Q&A with Martin here.

So, to sum it up, this new Procurement Act 2023 is about making selling to government fairer and simpler. If you have shied away from bidding before for fear of failure, this is your chance to jump in and make the most of these changes that should bring increased fairness and transparency, and create more opportunities for Britain’s army of small businesses.

We’ll leave the last word to Martin; “My advice to small businesses is have a look, have a go, because there are lots of opportunities out there.”

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