Tim Borton argues it is getting easier for SMEs to compete for public sector contracts.

The government’s on-going austerity is driving public sector bodies to achieve better value for money, creating outsourcing opportunities for private firms.

Framework agreements

However, many public sector procurements are geared to framework agreements, which rely on a panel of preferred providers. We see that this is now changing, as it was recognised as bad for the public purse, small businesses and the taxpayer.

Framework agreements were revamped last year to make it easier for SMEs to bid for tenders. There is also a requirement for authorities to advertise new work on Contract Finder, unless below certain limits, thus allowing private firms of all sizes to compete. Public contracts must now also ensure that undisputed invoices are paid within 30 days, assisting SME cash flows.

Overall, the public sector procurement process is becoming more transparent.

IR35 in the public sector

What is not so welcome is that from April 2017 individuals working for the public sector through their own companies will no longer be able to decide whether IR35 applies. This responsibility will pass to the public sector engager, who is likely to assume the contractor is within IR35 and tax him/her accordingly.

This will lead to freelancers being discriminated against, as they will suffer “false employment” taxes and will come across as more expensive; engagers will look elsewhere for their staffing needs. Talented experts may decide to avoid the public sector altogether and keep control over their finances, which means the public sector loses their expertise

Red tape

On the positive side, a new Enterprise Act enables regulators to contribute to the government’s deregulation target of £10bn of regulatory savings during the current Parliament. It is hoped that the government will go still further and reduce the wider regulatory burdens on business.


The government’s continuing austerity programme has had an adverse effect on the income of charities. This, together with the National Living Wage pushing up charity staff costs and uncertainty over continued relief from business rates after they have been devolved, is adding to the financial pressures of the third sector.

Budget cuts up to 2020 will inflict further austerity on the provision of adult social care, as the main grant from Whitehall is phased out alongside business rates devolution. To soften the impact, a new 2% social care precept is being levied by councils, though there is concern that this will not be enough, as some have estimated the charge should be nearer to 10%.

In the meantime, councils are being slow to ensure that care providers pay their staff for travel time between clients. Local authorities need to ensure such workers are being paid at least the national minimum wage.

[This article first appeared in the Western Morning News.]


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