Background:
On 22nd September 2025, the Competition and Markets Authority (the “CMA”) released a response to the Cabinet Office’s June 2025 consultation, ‘Growing British industry, jobs and skills - consultation on further reforms to public procurement’, in which it provided recommendations on how the procurement of public contracts can be effectively utilised to provide positive development in UK markets.
The consultation focused on three proposals relating to future legal reform following the introduction of the Procurement Act 2023.The consultation requests feedback on proposals for developing existing procurement legislation, for the purpose of promoting national interest, strengthening the UK’s economic resilience, and supporting British businesses.
The first proposal of the consultation relates to “supporting small businesses and social enterprises,” which would see requirements imposed on contracting authorities in order to help break down barriers for SMEs and VCSEs in the procurement process, as well as establishing rules for awarding contracts without full competitive procedure for services delivered to vulnerable individuals. The consultation considers excluding suppliers who cannot prove the ability to promptly pay their supply chains, and there would also be a requirement for large contracting authorities with a spend of over £100 million per annum to publish 3-year targets for direct spend with SMEs and VCSEs.
The second proposal involves “supporting national capability” by requiring contracting authorities to introduce standard assessments for service delivery options prior to the procurement of major contracts. The aim of this proposal would be to promote contracting authorities to take a long-term approach to their procurement process and engage in the market to develop effective strategies. Contracting authorities would also have the ability to designate goods, services, or works as critical to national security, allowing direct awards to trusted suppliers.
Lastly, the third proposal details “supporting local jobs and skills” through instructing contracting authorities to incorporate social value in their award criteria by stipulating a minimum weighting of 10% and setting a minimum of one social value KPI which relates to jobs, opportunities or skills in procurements of over £5million. The proposal also details the use of standard social value criteria and metrics, which would be specific to the area where it is expected to be delivered.
What are the CMA’s recommendations?
The CMA’s recommendations build on the Cabinet Office’s proposals on using public procurement to strengthen UK markets. The CMA acknowledged that such a task is not without its challenges, including shortages of experience and skills in procurement teams and limitations on budgets and deadlines, which can cause long-term objectives to be neglected.
However, the CMA believes that public procurement poses a powerful tool to achieve wider economic goals, specifically to proactively shape markets. The CMA agreed with the Government’s identification of the advantages of using public procurement to fulfil economic policy goals and increase jobs and opportunities across UK markets. As a significant client in a diversity of markets across the country, governmental public bodies can strategically shape markets through buying practices of public goods, works or services. This is because governmental public bodies control a prominent share of demand in markets, allowing them to influence industry and extent of competition.
The CMA states that governmental public bodies can create opportunities to improve economic resilience, drive market dynamism, deliver long-term value for money and increase innovation, and recommended five practical approaches with this in mind:
- Effective preparation and market signalling: contracting authorities should effectively engage with and be aware of markets, allowing them to set achievable objectives and procurement rules and communicate these to potential bidders. The CMA suggests this can be achieved through the use of procurement pilots, engaging with SMEs and VCSEs and broadening communications of contract information out with current suppliers to allow for new partnerships.
- Addressing barriers to entry or expansion: the use of preliminary market engagement and effective procurement processes can aid in reducing limitations to participation and market entry for suppliers, including SMEs. The CMA suggest a number of actions that contracting authorities can take, such as reducing the costs of bids; applying less restrictive criteria which reduces competition and blocks suppliers from bidding; and producing high quality feedback for suppliers to enable improvement.
- Addressing switch barriers: obstacles which make it harder for contracting authorities to switch providers should be identified early. By limiting themselves to one supplier in future procurements, contracting authorities not only hinder competition and market dynamism, but also lock themselves out of potential opportunities for higher value for money. Appropriate contract clauses should be considered, including exit plans to prevent authorities from being exposed to increased risks.
- Harnessing the scale of (fragmented) public procurement: opportunities for market shaping and achieving Government objectives can often be missed due to public contract procurements being divided among different governmental bodies and affiliates. The CMA suggests harnessing coordination across all government bodies, including using shared data and introducing guidance on market shaping responsibilities; adopting incentives for officials to ensure policy objectives are seriously considered during procurement processes; and ensuring contracting authorities acquire capacity and competence to carry out effective procurements of vital government contracts, including knowledge on markets and meeting wider objectives.
- Creating incentives that go beyond price competition: the CMA highlights the importance of utilising public procurement to encourage positive dynamics in UK markets including innovation, quality, and social value, as well as the importance of weighting long-term costs as opposed to focusing on short-term gains. This should be applied in conjuncture with breaking down barriers for SMEs and VCSEs, to avoid restricting their participation.
What potential impact does this have on the market and on public procurement?
The impact of these proposals and recommendations put forward by the Cabinet Office and the CMA respectively offer the potential of future reform in public procurement. The CMA has confirmed that it is prepared to collaborate with contracting authorities to aid in the integration of market shaping into public procurement, as well as assist with other practical implementations. This will most likely include further consultations and research prior to the adoption of any new amendments.
Should both the Cabinet Office and the CMA’s proposals and recommendations be taken forward, we can expect added emphasis on developing skills and knowledge on market shaping within governmental public bodies, increasing competition and innovation among UK suppliers, and providing routes for the participation of SMEs. These principles highlight the need for an appropriate balance of objectives, between encouraging additional economic and social objectives to be considered in the procurement process and avoiding creating barriers for businesses.
Find out more about our related services on our Procurement Centre of Excellence web page.
Thank you to Eryka Kobelczuk, a trainee in our Commercial Team, for their assistance in creating this article.
