Regulated procurement | UK Regulatory Outlook July 2025

Growing British industry, jobs and skills: consultation on further reforms to public procurement 

The government is consulting on further reforms to the public procurement process. The proposals for consultation fall into three categories:

1. supporting small businesses and social enterprises;
2. supporting national capability; and
3. supporting local jobs and skills. 

Supporting small businesses and social enterprises 

This would require large contracting authorities with spend over £100m per year to publish their own three-year target for direct spend with small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) and report against it annually, as well as extending spend reporting requirements. 

It would require contracting authorities to exclude suppliers from bidding on major contracts (+£5m) if they cannot demonstrate prompt payment of invoices to their supply chains. 

There would be clarification in primary legislation where it may be appropriate to award contracts for certain services delivered to vulnerable citizens without full competitive procedure, so that decisions can be driven by the needs of the individuals and vulnerable groups. 

Supporting national capability 

The government is only consulting with relevant national security stakeholders on the proposal to designate certain services, works or goods as "critical" to economic security, which would enable certain contracts to be directly awarded (as exempt on the basis of national security from the Procurement Act 2023) to "trusted suppliers".  

The proposal would require contracting authorities to make a standard assessment before procuring a major contract (+£5m) in order to test whether service delivery should be in-house or outsourced. 

Supporting local jobs and skills 

This would require contracting authorities to set at least one award criteria in major procurements (+£5m) which relates to the quality of the supplier’s contribution to jobs, opportunities or skills. Contracting authorities would need to apply a minimum weighting of 10% of the scores available, to social value award criteria. 

Contracting authorities would be required to set at least one social value key performance indicator relating to jobs, opportunities or skills in major contracts (+£5m) and report on delivery performance against this KPI in the contract performance notice. 

Contracting authorities would be required to use standard social value criteria and metrics selected from a streamlined list (to be co-designed with the public sector and suppliers) in their procurement of public contracts. 

The proposal would allow contracting authorities to specify the area in which the social value is to be delivered by choosing between the location of a contracting authority’s area of responsibility, the location where the contract will be performed, or the location where the supplier is based. 

The consultation is due to run from 26 June to 5 September 2025. For more information, including how to respond to it, see the government's paper. 

Debarment investigation into Grenfell suppliers paused due to criminal proceedings 

The government has announced that the debarment investigations into seven organisations criticised by the Grenfell Tower Inquiry, relating to their eligibility for public contracts, have been paused to prevent any impact on criminal investigations.  

The investigations were launched under the new powers available under the Procurement Act 2023, once it came into force in February 2025, but have now been paused after the Metropolitan Police and Crown Prosecution Service informed the Cabinet Office that the investigations could unintentionally prejudice the ongoing criminal investigation and any future criminal proceedings. 

If any of the organisations are convicted of a criminal offence that is a mandatory exclusion ground under the Procurement Act, it would potentially leave the government in a stronger position to act once the debarment investigations resume. 

Report of government-backed 'Defence & Economic Growth Taskforce' published 

A new Defence & Economic Growth Taskforce Report has been published. It contains recommendations around procurement, contracting, IP, regulation and private capital deployment. The aim of the report's recommendations are to ensure that the UK is globally competitive and ensures innovation, jobs and prosperity across the UK by reforming procurement and contracting processes. The ultimate goal is to have government, academia, the defence industry, investors, and financial institutions pulling together as a team – "Team UK". 

From a procurement perspective, there are several key policy proposals: 

• Ministry of Defence (MOD) and HM Treasury to explore the inclusion of explicit measures within the procurement award process to assess and capture the value generated for the UK economy (for example, via UK talent development and retention, investment, job creation, and IP development).
• MOD to review supplier profit restrictions, with the intent to encourage greater risk sharing from private sector and incentivise private sector investment in UK productivity (for example, potential parameter tweaks, selective cap removal, or adoption of new approaches), building on the Strategic Defence Review (SDR) recommendation to amend single source contract regulations.
• SDR recommendations: By April 2026, the MOD should develop a package of support for its industrial partners that removes barriers to collaboration and drives better, more cost-effective results: reducing by at least 50% the burden of Defence Standards and Conditions; working across government to amend the Single Source Contract Regulations; reforming regulations, intellectual property handling and security clearance requirements; and providing access to intelligence, data and test and evaluation sites.
• MOD to implement SDR recommendations for new segmented approach to procurement in a way that streamlines contracting practices for SMEs and mid-markets, including new entrants, and delivers benefit to wider supply chain, including: major modular platforms (contracting within two years); pace-setting spiral and modular upgrades (contracting within a year); and rapid commercial exploitation (contracting within three months), with at least 10% of the MOD’s equipment procurement budget spent on novel technologies each year. 

For more details and recommendations from the report, see pages 8–11.  

Procurement Act 2023 introduces new mandatory exclusion grounds from UK public bids for tax penalties 

The Procurement Act came into force on 24 February 2025. As with the previous regime, suppliers risk being excluded from participating in public procurements and winning public contracts in specified circumstances. The Act retains the concepts of mandatory and discretionary exclusion grounds and embeds the "self-cleaning" process into the overall definition of whether a supplier is "excluded" or "excludable". There are, however, some significant changes – including a new mandatory exclusion ground for deliberate tax penalties. 

Deliberate behaviour 

While the previous public procurement legislation included exclusions in relation to tax, these are significantly expanded under the Act. In particular, it includes a new mandatory exclusion ground for certain "deliberate" tax penalties that have become payable at any time since 25 February 2022 (and, from 25 February 2027, any time in the previous five years before the public procurement takes place). 

Tax-geared penalties (that is, charged as a percentage of the tax due) can be imposed in circumstances, including where taxpayers have: 

• made errors in tax returns (or other documents submitted to HMRC) which leads to an underpayment of tax; or
• failed to notify liability to tax as required, such as failing to properly register for VAT. 

The level of the penalty charged is in part determined by the type of taxpayer behaviour involved. For more discussion on what counts as "deliberate", as well as a review of the Act's application to third parties, time limits, non-UK equivalent penalties, potential exclusions, and more, please see our Insight. 

Key takeaways 

Under the new regime, the exclusion risk now extends down supply chains. Suppliers will need to ensure that there are appropriate procedures in place to provide transparency with subcontractors and other relevant third parties. Where a potential mandatory exclusion ground for tax is discovered, it is important to seek specialist advice to understand the circumstances of the alleged tax misconduct in question.  

More proactively, suppliers will want to ensure that current tax issues do not unnecessarily affect a future public procurement process. Deliberate tax penalties under active appeal are ignored for the purposes of the Act – businesses that are concerned about a potential penalty's impact on a future procurement process should seek specialist tax disputes advice. 

More broadly, the exclusion regime encompasses a wide range of mandatory and discretionary exclusion grounds, each with their own applicable time periods and nuances. Suppliers are actively encouraged to check whether any exclusion grounds apply, but doing so can be challenging given the complexity of the legislation. In order to support suppliers in undertaking their own risk assessments, Osborne Clarke has produced an Exclusion and Debarment Health Checker that helps suppliers understand what conduct is (and is not) caught by the exclusion grounds.