Overview
This PPN applies to all central government departments, their executive agencies and non-departmental public bodies (NDPBs) (collectively referred to as ‘in-scope organisations’) awarding public contracts for goods and / or services and / or works, other than special regime contracts.
Other contracting authorities may choose to apply the approach set out in this PPN. However, for the avoidance of doubt, this PPN does not apply to NHS trusts and foundation trusts or to contracting authorities whose functions are devolved or mainly devolved functions of Scotland, Wales or Northern Ireland.
The National Procurement Policy Statement (NPPS) sets the government’s strategic priorities for public procurement in support of the government’s missions. This includes driving economic growth and strengthening supply chains by giving small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) a fair chance at public contracts.
To enable implementation of the NPPS and take forward commitments in the Plan for Small Business, in-scope organisations must set a three year target for direct spend with SMEs (from 1 April 2025) and a two year target for direct spend with VCSEs (from 1 April 2026) and report the results annually.
Objective at this commercial stage
When setting procurement requirements, in-scope organisations should be aware that they will have set a target for direct spend with SMEs and a target for direct spend with VCSEs in line with PPN 001. There is also a requirement to publish direct spend with SME and VCSE results annually.
Key considerations at this commercial stage
In-scope organisations should:
- be aware of and have regard to their target for direct spend with SMEs (for FY 2027/28) and their target for direct spend with VCSEs (for FY 2027/28)
- understand the requirement to report direct spend with SME and VCSE results annually
The Procurement Act 2023 (Act) introduced a number of reforms intended to remove unnecessary burdens and costs in order to make it easier for SMEs to access public procurement opportunities, including:
- Placing a new duty on contracting authorities to have regard to SME participation and consider removing or reducing barriers to entry
- Ensuring greater visibility of upcoming public sector opportunities and preliminary market engagement to involve suppliers at an early stage and provide more time to prepare to bid
- Banning some common barriers to SME participation (for example by preventing contracting authorities from requiring an SME to have insurance in place before the award of a contract)
- Requiring 30 day payment terms throughout the public sector supply chain
- Requiring contracting authorities to publish their payment performance data in one place and bringing reporting in line with the private sector
- Ensuring the above are being taken into account gives you the best opportunity to achieve your targets for direct spend with SMEs and VCSE organisations
Additional support and guidance
