NPPS 2024: SMEs and social value among public procurement priorities

Simon Colvin and Totis Kotsonis of Pinsent Masons were commenting after the government said contracting authorities should have regard to SMEs and social value among other “national priorities” when exercising their functions relating to procurement.

The other national priorities relate to value for money; commercial and procurement delivery; and skills and capability for procurement. The revised NPPS will begin to apply on 28 October 2024.

The UK government uses the NPPS to offer strategic direction to contracting authorities. It applies in England and to certain public procurements concerning matters that are reserved from devolution in Wales.

On SMEs, the government described them as “the backbone” of the UK economy and said it is “vital” that contracting authorities “open up public procurement opportunities to more SMEs, voluntary, community and social enterprises (VCSEs)” so as to create a “thriving, competitive marketplace”.

“SMEs not only play a key role in communities by providing a local service and employment but can also offer innovative solutions to public service delivery,” it said. “Contracting authorities should ensure that they level the playing field for SMEs, VCSEs and start-ups to compete in public procurement by reducing and removing barriers in the procurement process.”

Kotsonis said: “Under the new Procurement Act 2023, which will come into force on 28 October, public bodies will have an obligation to have regard to the national policy statement when designing and conducting procurements. The new Act also includes an explicit provision which requires contracting authorities to have regard to the fact that SMEs may face particular barriers to participation in a procurement process and should consider whether these may be removed or reduced.”

“At the same time, it remains to be seen to what extent the national policy statement and indeed, the new Act’s specific requirement for contracting authorities to have regard to the barriers which SMEs might face, would in fact make a substantive difference to the way in which contracting authorities conduct their procurements. In this regard, it is notable that the requirement to have regard to barriers that SMEs face and to procurement policy statements more generally, will not be enforceable in civil proceedings under the Act,” he said.

The revised NPPS also reflects the growing focus on ensuring the process of awarding public contracts delivers improved social value.

The government said contracting authorities, in their procurement activities, should strive to create resilient businesses and opportunities for quality employment and skills development; improve innovation, supply chain resilience and security of supply; and tackle climate change and reducing waste, where it is “relevant to the subject matter of the contract and proportionate to do so”.

“There are a number of ways that contracting authorities can implement these outcomes, for example, changes to the way the procurement is structured or the process carried out, the specification of the goods, services or works to be purchased, or the award criteria which will determine the most advantageous tender,” the government said.

However, it stressed that delivering those social value outcomes should not come at the cost of “overburdening suppliers”.

“Contracting authorities should ensure that they do not place onerous requirements on suppliers, or use disproportionate clauses in tenders and contracts,” the government said. “For example, contracting authorities should not ‘gold-plate’ the Equality Act 2010 by setting unnecessary diversity reporting or ‘equality, diversity and inclusion’ requirements for the private and voluntary sectors.”

Colvin said: “We welcome this guidance to ensure that social value requirements are proportionate and so appropriate outcomes are delivered. Gold plating the social value requirements is likely to skew the procurement and ultimately fail to deliver the overall project objectives.”