UK government consults on further reforms to public procurement

On 26 June 2025, the government launched a consultation on further reforms to public procurement. It sets out the government's ambitions to build on the changes introduced by the Procurement Act 2023 and will support the implementation of its new National Procurement Policy Statement. 

The government's stated intention is to "strengthen the UK's economic resilience and support British businesses". It believes that by "strategically leveraging [the UK's] annual public procurement spend, we can protect our supply chains, open up new opportunities for local small businesses and social enterprises, create good local jobs, and deliver greater value for taxpayers".

The consultation sets out the government's ambitions, which are to support small businesses and social enterprises; national capability; and good quality, local jobs and skills.

The consultation is open to everyone, including contracting authorities, businesses, civil societies and individual citizens. It closes on 5 September 2025 at 5pm.

Supporting small businesses and social enterprises

One of the government's main objectives is to support small and medium sized enterprises (SMEs) and voluntary, community, and social enterprises (VCSEs). The government proposes to achieve this by:

• requiring large contracting authorities with annual procurement spend of over £100 million per annum to publish their own three-year targets for direct spend with SMEs and VCSEs and report progress annually;
• amending the Procurement Act 2023 to clarify 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; and
• requiring all contracting authorities to exclude suppliers from bidding on major contracts (+£5m), or explain why they have not excluded a supplier, if the supplier cannot demonstrate prompt payment of invoices to their supply chains.

The government expects public authorities with annual procurement spend of over £100m to set stretching targets in respect of spend with SMEs and VCSEs. To facilitate transparency and comparison across the public sector, public authorities would be required to publish data in a central location (for example, the Central Digital Platform). The Cabinet Office would provide guidance on setting targets and reporting progress to ensure consistency across authorities. Importantly, the government does not propose to introduce penalties for failing to meet targets.

The government believes that greater flexibility is needed in the procurement regime to ensure that services delivered to vulnerable citizens can be procured in the best way. It proposes to achieve this by reducing the focus on commercial procurement for essential services, and foster an environment where quality care and support take precedence.

It recognises that a significant challenge of operating an SME or VCSE is dealing with late payment of invoices and lengthy payment terms. This can have a damaging knock-on effect on an enterprise's ability to manage its cash flow and plan for future growth. The government proposes to address this by requiring all contracting authorities to exclude suppliers from bidding for contracts worth more than £5m per year if they are unable to provide evidence that they pay their invoices within an average of 60 days. If an authority does not exclude such a supplier, it will be required to explain why it has not excluded that supply, on a "comply or explain" basis.

Supporting the UK's national capability and economic security

The government proposes to bolster the UK's domestic resilience and protect national security by enhancing its ability to award certain contains outside the scope of the Procurement Act 2023 under the national security exemption. It proposes to achieve this by:

• giving ministers powers to designate specific services, works or goods as critical to the UK's national security and economic security, and then direct contracting authorities to take this into account when considering whether the national security exemption applies to a particular contract; and
• requiring contracting authorities to make a standard assessment before procuring a major contract (+£5m) in order to test whether service delivery should be inhouse or outsourced.

The government's proposal is that a minister of the Crown would establish clear rules via secondary legislation for how critical services, works, or goods are identified. Where a product or service is designated as critical, contracting authorities would be required to review their purchasing plans to assess any potential risks of depending on international suppliers.

If there are significant concerns for national security, then the authority could use the national security exemption available under the Procurement Act 2023. This would allow the authority to dispense with the usual competitive bidding process and contract directly with "trusted suppliers" outside the scope of the Procurement Act 2023. The government is not inviting public consultation on this particular proposal but is expected to engage with relevant national security stakeholders.

The government has raised concerns about the quality, accountability and resilience of outsourced services, and believes that there needs to be greater scrutiny and accountability in outsourcing decisions. In contrast, its view is that insourcing (where public authorities regain control of service delivery) has become a viable alternative. It proposes to require authorities to carry out a public interest test, which will be a series of questions that the authority must answer to help inform its decision on the appropriate delivery model.

Supporting good quality, local jobs and skills

A significant component of the consultation is the government's focus on social value. It believes that contracting authorities should deliver social and economic value that supports good quality jobs, opportunities and skills to boost productivity, and economic growth. It proposes to achieve this by:

• requiring public 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% to social value award criteria;
• requiring contracting authorities 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;
• requiring contracting authorities 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; and
• allowing 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.

In its consultation document, the government has stated that social value should not be about tactical "tick-boxing". Instead, it should be aligned to actual need which will require collaborative working to identify those who are furthest from the labour market, such as those with long term health problems, care leavers, prison leavers, and young people with additional needs, and opening jobs and skills so that they can participate in the labour market.

As a practical measure, the government proposes to amend section 23 of the Procurement Act 2023 to remove the current requirement that all award criteria must relate to the contract's subject matter. Its view is that this rule deprives the authorities of the flexibility to target social value delivery to where it is most needed.

Osborne Clarke comment

Business that operate in the public sector should closely review the proposals and consider responding. In particular, they could find it a real challenge to deliver social value in areas where they are not based and with which they do not have any connections, so this is an area in which businesses may want to share views on the practical impact of such a proposal.

In relation to prompt payment, all businesses bidding for contracts over £5m should prepare for the possibility of this being introduced by looking to adopt payment practices that comply with the code now.

If you would like to discuss any of the matters raised in this Insight, or require assistance with responding to the government's consultation, please contact one of our regulated procurement experts below.

For further detail on the Procurement Act 2023, please visit Navigating the changes under the Procurement Act.