Small business.
Bigger role.

For too long, SME participation has sat at the edge of major procurement.

Something to mention in a bid. A percentage to report. A commitment made once the delivery model had already been designed.

That is beginning to change.

Public procurement reform has given SMEs greater visibility and placed a clearer responsibility on contracting authorities to consider the barriers preventing them from participating. Social value is increasing the focus on diverse, resilient supply chains. Large organisations are looking more closely at how their procurement decisions support innovation, sustainability, economic growth and supplier diversity.

The opportunity is not simply for more SMEs to win work. It is for specialist SMEs to play a more meaningful role in how complex programmes are shaped, won and delivered.

The rules have changed.

The Procurement Act 2023 came into force on 24 February 2025, introducing a new public procurement regime across England, Wales and Northern Ireland.

Among its objectives is a specific requirement for contracting authorities to consider the barriers SMEs may face and whether those barriers can be removed or reduced.

The changes include more flexible procurement procedures, greater transparency, more open frameworks, improved feedback and strengthened 30-day payment provisions across public-sector supply chains. The intention is clear: businesses should not be excluded simply because they are smaller or have less capacity to navigate unnecessarily complex procurement processes.

From 1 April 2025, central government departments, including their executive agencies and non-departmental public bodies, have also been required to set three-year targets for direct spend with SMEs and report their results annually.

That does not mean every department has the same target. Nor does it create an automatic entitlement to public-sector work.

It does mean SME participation is now a visible, measurable priority rather than a broad ambition sitting somewhere in a procurement strategy.

Ambition alone was not enough.

The distinction matters because previous policy ambitions did not create the progress intended.

In its small business plan, the government acknowledged that the previous ambition for £1 in every £3 of procurement spend to go to SMEs had not been met. It also reported that the overall proportion of procurement spend going to SMEs had declined over the preceding five years, despite direct SME spend reaching £3.52 billion in 2023/24.

The lesson is important.

Targets do not transform supply chains on their own. Buyers must design accessible procurements. Prime contractors must create meaningful routes into their delivery models. SMEs must demonstrate the capability, assurance and commercial maturity major programmes demand.

Social value is changing the role of the prime.

The updated Social Value Model became mandatory for in-scope central government organisations from 1 October 2025.

The model includes an outcome focused specifically on creating resilient, innovative and flexible supply chains. Where that outcome is relevant and selected for a procurement, bidders can be asked to demonstrate how they will:

• 01Create opportunities for SMEs, start-ups and other diverse suppliers
• 02Open subcontracting opportunities under the prime contract
• 03Engage smaller businesses before and during delivery
• 04Build fair and accessible supplier-selection processes
• 05Work collaboratively across the supply chain
• 06Measure and report the value of work awarded to SMEs

The model is not applied identically to every contract. Contracting authorities select outcomes that are relevant, proportionate and non-discriminatory.

But where SME participation forms part of the evaluation, prime contractors need more than a general promise to engage smaller suppliers. They need a credible plan, clear commitments and a way to measure their delivery.

This changes the conversation for systems integrators and prime contractors. A strong SME ecosystem can extend specialist capability, provide access to hard-to-find expertise, increase flexibility and strengthen the social-value proposition within a bid. It can also create additional capacity when programmes mobilise quickly or new requirements emerge during delivery.

SMEs are not simply beneficiaries of the policy. The right SMEs can make the prime more competitive and the programme more deliverable.

ESG has moved into the supply chain.

The same shift is happening beyond public procurement.

Whether organisations describe it as ESG, responsible procurement, social value or supplier diversity, more attention is being paid to who sits within the supply chain, how suppliers operate and what wider value procurement decisions create.

There is no blanket UK rule requiring every large business to award a fixed percentage of its spend to SMEs. Individual organisations set their own responsible-procurement priorities, supplier-diversity commitments and environmental standards.

But expectations are changing.

Large organisations increasingly need supply chains that can demonstrate resilience, responsible business practices, environmental awareness, fair treatment, transparency and a positive contribution to the economies and communities in which they operate.

SME participation can support those objectives. It can widen economic opportunity, bring different perspectives into programmes and enable buyers to access specialist innovation that may not exist within larger providers.

But SME status alone is not evidence of ESG impact. Meaningful impact comes from the work awarded, the way suppliers are treated, the opportunities created and the results measured. A female-led, diverse or specialist SME should not be included simply to complete a supplier-diversity statement. It should be given the opportunity to contribute something valuable.

The danger is reducing SME participation to a percentage.

Counting spend is important. It creates visibility and accountability.

But numbers alone do not tell us whether an SME has been meaningfully involved. A small subcontract awarded after the solution has been designed is very different from bringing specialist capability into the bid, mobilisation or programme at the point where it can genuinely influence delivery.

The strongest relationships begin earlier. Prime contractors identify where specialist SMEs can strengthen their offer before the bid is complete. Buyers use market engagement to understand what smaller providers can bring. SMEs are given clearly defined work, appropriate commercial terms and a place within the programme’s governance and delivery model.

That is how SME participation moves from procurement commitment to delivery advantage.

What does good SME engagement look like?

Public-sector buyers

Removing unnecessary barriers, using proportionate participation requirements, dividing work into sensible lots where appropriate and giving smaller suppliers enough visibility and time to compete.

Systems integrators and primes

Building relationships before a tender lands, identifying genuine capability gaps and giving SME partners meaningful responsibility within bids and live programmes.

Large enterprises

Connecting supplier-diversity and ESG ambitions to real commercial opportunities rather than isolated initiatives.

SMEs

Being ready. Specialist expertise supported by strong governance, information security, appropriate insurance, transparent commercial practices and the ability to work inside complex delivery environments.