SMEs, VCSEs and Innovation in Public Procurement: Practical Actions Under the NPPS

Purpose: How buyers can reduce avoidable participation barriers while maintaining fair competition and creating space for innovative solutions.

How buyers can reduce avoidable participation barriers while maintaining fair competition and creating space for innovative solutions. This matters because public procurement decisions are rarely isolated events. A choice made during planning can affect competition, affordability, service quality, supplier behaviour and the ability to manage the contract later. The strongest approach is therefore to use the source guidance as part of an end-to-end commercial process, with clear ownership and evidence rather than as a document that is completed after the key decisions have already been taken.

Quick summary

• The NPPS identifies opportunities for SMEs and VCSEs as part of driving economic growth and strengthening supply chains.
• Section 12 of the Procurement Act requires a covered procurement to have regard to particular barriers SMEs may face and to consider whether they can be removed or reduced.
• The NPPS links procurement with high-quality jobs, fair working conditions and skills opportunities.
• It also encourages innovation and the development or adoption of new technologies.
• Early market engagement helps buyers understand solution maturity, risk and practical participation barriers.

What the guidance means in practice

The source material gives several anchors for that process. The NPPS identifies opportunities for SMEs and VCSEs as part of driving economic growth and strengthening supply chains. Section 12 of the Procurement Act requires a covered procurement to have regard to particular barriers SMEs may face and to consider whether they can be removed or reduced. The NPPS links procurement with high-quality jobs, fair working conditions and skills opportunities. These are not interchangeable statements: some describe statutory or policy requirements and others describe recommended commercial practice. Teams should identify which category each requirement falls into, apply it to the organisation and procurement in scope, and keep a record of the judgement. Where guidance from 2021 or 2023 predates the Procurement Act 2023, its commercial principles can remain useful, but current legislation, regulations and current statutory guidance take precedence on legal process.

The practical value becomes clearer when the remaining guidance is read alongside the project lifecycle. It also encourages innovation and the development or adoption of new technologies. Early market engagement helps buyers understand solution maturity, risk and practical participation barriers. A challenge-led approach can describe the problem to solve without unnecessarily prescribing the solution. In day-to-day terms, this means the buyer should be able to answer three questions at any approval point: what outcome are we trying to achieve, what evidence supports the proposed commercial approach, and what will need to be managed after the decision is made? If those answers are weak, more analysis is normally more useful than adding another layer of narrative to an approval paper.

A practical process to follow

A proportionate process can be built into existing governance. The steps below are deliberately practical. They are not a substitute for the detailed source guidance, legal advice or local standing orders, but they provide a useful structure for a procurement or commercial team.

1. Step 1. Map the supplier market early, including smaller and third-sector organisations. Record any assumption that could change the conclusion and when it will be reviewed.
2. Step 2. Ask suppliers which planned requirements create avoidable participation cost or complexity. Keep the analysis proportionate to the value, risk, novelty and criticality of the requirement.
3. Step 3. Review lotting, financial standing, insurance, evidence requirements and timetable for proportionality. Capture the source evidence and name the person accountable for the next decision.
4. Step 4. Describe the outcome or problem clearly enough to permit credible alternative solutions. Record any assumption that could change the conclusion and when it will be reviewed.
5. Step 5. Give suppliers realistic time and information to prepare responses. Keep the analysis proportionate to the value, risk, novelty and criticality of the requirement.
6. Step 6. Track who participates, who wins and what barriers remain for future procurement. Capture the source evidence and name the person accountable for the next decision.

What good looks like

Good practice is visible in the decision trail, not only in the final document. A reviewer should be able to follow the line from the service need, through market and cost evidence, to the route, evaluation, contract terms and management arrangements. Where several functions contribute, the file should show who owns each decision and where challenge occurred. The same principle applies to handover: useful assumptions, models, KPI definitions, risks, supplier information and approval conditions should move into mobilisation and contract management instead of being left in the sourcing archive. This continuity is particularly important for long-running public services, where staff can change but the organisation remains accountable for the outcome.

Recommendations for procurement teams

The following recommendations are suitable for teams that want to embed the topic into normal ways of working rather than create a parallel compliance process:

• Use preliminary market engagement before requirements are fixed.
• Keep bid documents and evidence requests proportionate to contract risk.
• Consider lots where they improve access and competition.
• Avoid over-specifying the technical solution where an outcome can be defined instead.
• Measure supply-chain commitments during delivery.
• Publish pipelines so suppliers have time to build capability and partnerships.

Common pitfalls to avoid

The most common problems are usually process failures rather than a lack of templates. Watch particularly for the following:

• Adding an SME objective without changing practical barriers.
• Using financial tests that are disproportionate to delivery risk.
• Calling a procurement innovative while prescribing the solution in detail.
• Measuring supplier diversity only at framework appointment rather than actual awards.

Easy-to-read takeaway

For smes, vcses and innovation in public procurement: practical actions under the npps, the core discipline is to start early, connect the analysis to a real decision and preserve enough evidence for the next stage of the lifecycle. The source material should help teams make better decisions, not merely produce more paperwork. Before acting on a live procurement, confirm the current version of the Procurement Act 2023, regulations, Procurement Policy Notes and any organisation-specific approvals or delegations. This is especially important for thresholds, notice duties, exemptions and policy requirements that can change over time.

Source basis

Primary source used: National Procurement Policy Statement, 13 February 2025. Related articles in this collection also draw on the other supplied Cabinet Office, HM Treasury and Procurement Act materials where the topics overlap.

This article is general procurement support content. It should be read alongside current legislation, statutory guidance and your organisation’s own governance and legal advice.