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Understanding the impact of the Procurement Act

As we head into mid-2025, have we seen any impact from the new Procurement Act in the construction industry?

Brought in late 2024, the Act was going to aid in simplifying bidding for public contracts, ensuring prompt payment, improved social value outcomes, greater transparency and, most importantly, support for SMEs and local businesses. 

The benefits to SMEs should be noticeable long-term, as we know bureaucracy can strangle small businesses.

It introduces a new 'competitive, flexible' procedure, and simplifies the registration process through the central digital platform Find a Tender. 

SMEs can now store and re-use their core business details across multiple bids, saving time and reducing these administrative burdens.

Another key area for small business is cashflow, and the Act aims to improve this, mandating that public sector buyers pay SMEs within 30 days of invoice submission. 

This provision extends to sub-contractors, ensuring timely payments throughout the supply chain.

However, more enforcement would really help SMEs.

SMEs dedicate significant time and money to the process of procurement, and often struggle to understand how to improve their submissions. 

The new Act requires contracting authorities to provide specific, informative and timely feedback to all suppliers.

This transparency will help them understand how their bids compare and where improvements can be made for future tenders.

Additionally, the Act wants to improve focus on social value, which SMEs often find difficult to achieve.

It shifts the evaluation criteria from cost to a 'most advantageous tender' approach, incorporating factors like environmental sustainability, community impact and ethical practices. 

This change allows SMEs to compete by highlighting their contributions to social value, even if they cannot match larger competitors on price alone. 

However, there is a downside, with larger organisations having entire departments dedicated to social value.

Furthermore, the Act allows SMEs access to framework agreements and introduces 'open' frameworks, allowing firms to participate more readily and reducing long-term exclusivity of contracts. 

The insurance and financial requirements SMEs have to provide may no longer be required to provide audited accounts or insurance before bidding, lowering the entry barriers.

Will this benefit small businesses? Nobody knows. 

The intentions behind the Act are well-meaning but could be cumbersome for those implementing it, causing delays in projects and tendering, meaning work may be a bit thin on the ground until new systems are implemented and are up and running.

Hopefully, utilised in the right manner, the Act will allow SMEs access to projects that would not have been available to them. 

We need to monitor the situation and see if things change in year one.

Tim Barrett is chair of Construction Alliance North East 

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