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Public procurement: increased financial thresholds and good news for SME’s

29 January 2014

The regular update to the financial thresholds that trigger a public procurement procedure has just come into force. The government has also published its plans to open up procurement to smaller businesses.

The European Commission has issued marginally increased thresholds for the application of the EU public procurement directives, which take force in the UK through the Public Contracts Regulations 2006. The thresholds are updated every two years. As from 1 January 2014, the new figures are:

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Good news for smaller contractors

Meanwhile at UK level, in an effort to open up public procurement to smaller contractors who may have been put off by the burdens imposed by the procurement process, the government has published [1] its proposed procurement reforms to encourage SME's to bid for public sector contracts, which are worth £230bn annually. The legal reforms include:

  • Abolish pre-qualification questionnaires (PQQs) for low value contracts (the proposal was to eliminate PQQs for almost all goods, services and works procurements under £173,934);
  • Mandate the use of a standard core PQQ for high value contracts and ensure small business needs are taken into account in the design of procurement processes;
  • Make contract opportunities easier to find by uploading them onto a single online portal; and
  • Ensure small firms get treated fairly by mandating prompt payment terms all the way down a procurement supply chain.

Additionally the government intends to:

  • Require all public bodies to report their procurement spend and prompt payment performance with small businesses;
  • Prototype a new rating service for small firms to judge public bodies on their procurement credentials. Also, public bodies will rate their suppliers so that small businesses can start to build up their reputations;
  • Launch a new service this month, 'Solutions Exchange', to help public sector organisations go to the market to ask for ideas and solutions to problems before a formal procurement, and provide an opportunity for SME's to pitch innovative proposals to the government;
  • Extend the reach of the Mystery Shopper so that it not only investigates reports of unfair treatment but also spot checks public bodies to make sure their procurement is small business-friendly - the results of these investigations will be made visible so that poor practice by public bodies and their contractors can be challenged.

Further details will be published in due course, and it will be interesting to see whether these proposals do in fact encourage smaller contractors to get involved with public procurement.

[1] "Small Business: GREAT Ambition" (Department for Business, Innovation and Skills, 7 December 2013)

For more information please contact Simon Ewing, Partner

T: +44 (0)20 7203 5330