Consultation on further reforms to UK public procurement regime

The UK Government is consulting on further reforms to the public procurement regime, building on the Procurement Act 2023 (the Act), to support implementation of the new National Procurement Policy Statement (NPPS).

What you need to know:

• The proposed changes aim to enhance national security, strengthen support for small businesses and promote the creation of local jobs and skills.
• Key measures include mandatory targets and reporting for small and medium sized enterprises (SMEs) and voluntary community and social enterprises (VCSEs) spend, stricter prompt payment obligations, increased flexibility for people-focused services and new obligations for contracting authorities to consider social value and local economic impact in major contracts.
• The consultation is open until 5 September 2025, following which new legislation is expected to amend the Procurement Act.

Consultation

The Cabinet Office recently launched a consultation on further reforms to the UK's public procurement regime following the entry into force of the Act and the new NPPS (see our Procurement Act 2023 hub for additional resources).

The consultation proposes reforms to support three key areas:

• small businesses and social enterprises;
• national capability; and
• local jobs and skills.

Supporting small businesses and social enterprises

• Mandatory spend targets and reporting: Large contracting authorities with annual spending of over £100 million will be required to publish their own three-year targets for direct spend with SMEs and VCSEs and to report on their progress annually. This is intended to increase spend with SMEs and VCSEs year on year. 
• Enhanced transparency: Contracting authorities will be required to publish spend data in one place. Additionally, the reporting threshold for payments under public contracts will be lowered to ensure there is greater visibility as to SME and VCSE spend.
• Prompt payment: Contracting authorities will be required to exclude suppliers from bidding on major contracts with a value above £5 million if they are unable to demonstrate prompt payment of invoices to their supply chains (within an average of 60 days). Authorities will also be required to exclude suppliers from procurements who have failed to comply with their prompt payment obligations. If contracting authorities do not exclude suppliers, they will be required to provide an explanation.
• People-focused services: The Government proposes to clarify in primary legislation when contracts for certain services for vulnerable citizens (e.g. adult and children's social care) can be awarded without a full competitive procedure. This would ensure the procurement process captures the requirements and needs of vulnerable groups and individuals and will remove the unnecessary bureaucracy on contracting authorities where a complex procurement process is not efficient.

Supporting national capability and security

• Building commercial capability: Contracting authorities will be required to undertake a standard public interest test ahead of procuring major contracts with a value above £5 million to test whether service delivery should be inhouse or outsourced. This test will evaluate value for money, impact on service quality and economic and social value goals. The results of the test will be required to be published in order to provide transparency.
• Ministerial powers and economic security: In a bid to protect the UK's national interests, Ministers may be given powers to designate services, goods or works as critical to economic security. The primary legislation would allow a Minister of the Crown to establish clear rules through secondary legislation on how these services, goods and works are identified. When a product or service is designated as critical, contracting authorities will be required to account for this and review purchasing plans to assess any potential risks involved in depending on international suppliers. Contracting authorities will also have to consider the potential use of the national security exemption to protect supply chain resilience and national interests.

Supporting good quality local jobs and skills

• Social value award criteria: Contracting authorities will be required to set at least one award criterion in major procurements with a value above £5 million in relation to the quality of the suppliers' contribution to jobs, opportunities and skills, with a minimum weighting of 10% of the total evaluation score.
• Key performance indicators and reporting: Authorities must ensure there is at least one key performance indicator (KPI) relating to skills or job creation and this must be reported on within contract performance notices. 
• Standardised social value metrics: Contracting authorities will be required to set standard social value criteria and metrics selected from a streamlined list when procuring public contracts. This aims to ensure social value requirements remain consistent and easy for suppliers, in particular SMEs, to navigate.
• Flexible social value delivery: Contracting authorities will be able to specify the social value outcomes they are looking for, whether this is the area of responsibility, where the contract is performed, or where the supplier is based.

Practical implications and next steps 

The proposed reforms represent a deliberate policy shift in public procurement as regards supporting SMEs and embedding economic, social and national security goals into the delivery of public contracts. 

In anticipation of the adoption of the proposed reforms, contracting authorities should take steps to ensure that their internal processes are sufficient to ensure compliance with the proposed changes to reporting, transparency and social value requirements. Suppliers should also review their internal payment and supply chain management practices and policies to ensure they are compliant with the proposed new requirements to mitigate the risk of being disqualified from future procurements. 

The consultation closes on 5 September 2025 following which the Government intends to introduce legislation to amend the Act. 

Other Authors: Aanya Verma, Solicitor Apprentice