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Cutting red tape for SMEs

In August 2015, the Crown Commercial Service ("CCS") issued guidance on the provisions within the Public Contract Regulations 2015 ("PCR 2015") with the intention to improve access to public contracts for small and medium sized enterprises ("SMEs").  The guidance note builds on previous attempts by the government to improve SME access to public procurement and follows the welcome Cabinet Office announcement in February this year scrapping pre-qualification questionnaires across the public sector for contracts under £143,000.

Amendments within the PCR 2015 are believed to have the advantage of removing unnecessary barriers to participation in public contracts, reducing procurement-process costs, bureaucracy and time spent submitting tenders. However, CCS has been quick to point out that these amendments have not been drafted to give SMEs preferential treatment as this would contravene the key Treaty principles of non-discrimination and equal treatment.

Key changes for SMEs include:

1. Dividing contracts into lots is at the authority's discretion, as in the previous procurement regulations; however, under regulation 46 PCR 2015 authorities will now have to explain in writing any decision not to do so. This is expected to encourage greater use of lots, resulting in small businesses, with adequate capacity to perform a given lot, acquiring improved access to the competition.

2. The exclusion and selection requirements have been streamlined as outlined within regulations 57 and 58 PCR 2015, and now only the winning bidder will have to submit supporting documents except in specific circumstances. The online repository established by the Commission, named "e-Certis", contains information on exclusion and selection evidence available to suppliers in different Member States and evidence that is commonly sought by procuring authorities across the EU. This will be a useful database for small businesses that wish to bid across borders.

3. There are new rules under regulation 58(9) PCR 2015 for authorities requiring suppliers to have a minimum turnover, which should avoid smaller suppliers being unjustifiably excluded. The minimum yearly turnover that economic operators are required to have shall not exceed twice the estimated contract value, except in duly justified cases, such as by reference to special risks attached to the nature of the works, services or supplies, in which case the contracting authority shall indicate their main reasons in the procurement documents or in the report referred to in regulation 84(1) PCR 2015. CCS have also stressed that the imposition of minimum turnover requirements are not an obligation under the procurement regulations and should only be imposed where genuinely necessary.

4. There has been a reduction in the length of minimum process timescales in which suppliers must respond to adverts and submit tenders; however, specific timescales will vary depending on the procedure used (see regulations 27 - 31 PCR 2015 for further detail). This will be particularly relevant to smaller and simpler procurements typically using the open and restricted procedures, which would be most attractive to SMEs.

5. The rules on Dynamic Purchasing Systems ("DPS") have been simplified, as outlined within regulation 34 PCR 2015. SME business opportunities can now be maximised by searching DPS via categories, i.e. size of contracts to be awarded, subject matter and geographical area of delivery. Furthermore, suppliers admitted to the DPS will not be required to undertake the exclusion and selection stage for each contract awarded under the DPS. This will further reduce procurement-process costs.

6. The new Innovation Partnership procedure under regulation 31 PCR 2015 is intended to benefit small businesses by allowing an authority to set up partnership(s) with one or more separate suppliers aimed at the phased development of an innovative product, services or works. The procedure is expected to be useful for SMEs that lack the resources to speculatively develop innovative solutions in the absence of interim payments or a specific customer in place.

7. The requirements in regulation 22(1) PCR 2015 for all communication to be carried out by electronic means are anticipated to reduce process costs for all bidders and effective implementation of electronic communication, and is expected to improve access to opportunities by small businesses.

8. Regulation 113 PCR 2015 also includes a requirement for contracting authorities to include provision for 30-day payment terms that flow through the supply chain, which is expected to improve prompt payment.

It is hoped that the changes to the PCR 2015 will have the effect of increasing competition, conserving the limited bidding resources of SMEs, and encouraging innovation and flexibility whilst improving value for money for public bodies.

However, it remains to be seen whether the changes will have the desired effect of bolstering employment amongst SMEs, especially in the wake of the Spending Review, which is due in September 2015.