Source · Select Committees · Business and Trade Committee
Recommendation 12
12
Accepted in Part
Provide multi-year framework contracts for SMEs; set direct public procurement spend target.
Recommendation
To support SMEs to innovate and to continue to grow, we recommend that multi-year framework contracts are available for SMEs in the sectors in which the state is the biggest customer, such as defence and life sciences. We also recommend that the Government set a target for how much of public procurement spend is direct spend to SMEs. (Recommendation, Paragraph 71)
Government Response Summary
The government states that the Procurement Act (2023) requires central government departments to set 3-year targets for direct spend with SMEs from April 2025, and MOD has committed to increasing defence spending with SMEs by £2.5 billion by May 2028. However, the response does not specifically address the recommendation for multi-year framework contracts for SMEs.
Government Response
Accepted in Part
HM Government
Accepted in Part
7.1. For SMEs, the Procurement Act (2023), which came into force in February 2025, and National Procurement Policy Statement include a suite of measures including requiring all central government departments and their arms length bodies to set 3-year targets for direct spend with SMEs from 1 April 2025 (with targets for voluntary, community, and social enterprises (VCSEs) to follow in 2026). 7.2. The Government is also currently consulting on options to go further to: require large contracting authorities with spend over £100m p.a. to publish their own 3-year target for direct spend with SMEs and VCSEs with annual reporting; require contracting authorities to exclude suppliers from bidding on major contracts if they cannot demonstrate prompt payment of invoices to their supply chains, and; clarifying in primary legislation where it may be appropriate to award contracts for certain services to vulnerable citizens without full competitive procedure. 7.3. The MOD has committed in the Industrial Strategy to increasing annual defence spending with SMEs by £2.5 billion by May 2028, which equates to a 50% increase in the value of work delivered by SMEs compared to FY 23 /24 and will take total MOD spending with SMEs to £7.5 billion covering both direct and indirect spend.