Cabinet Office minister Chlo Smith has announced new procurement rules for the whole of the public sector that aim to make it easier for small and medium businesses to win business with government.

A consultation will run for four weeks until 17 October on the proposed changes, which will expand the work already being carried out in central government and extend it to a local level.

The Cabinet Office said that 99.9 percent of the UK's 4.5 million businesses are SMEs and it has been working on a number of reforms to ensure that more public sector contracts are handed to companies outside the traditional set of suppliers that dominate government procurement.

"With £230 billion per year spent on goods and services right across the whole public sector, government wants to seize the opportunity to help hard-working SMEs get on by competing for and winning this business," said Chlo Smith.

"Ambitious small and medium sized UK businesses are increasingly showing how they can contribute to our economic recovery by delivering innovation and excellent value for money, but historically SMEs have been shut out of government business. In the past bidding for public sector contracts was time-consuming, expensive and overly bureaucratic."

She added: "Removing barriers and setting out a consistent, single set of SME-friendly principles for the whole public sector will provide the right support to encourage significant business and growth opportunities for SMEs, and help give the UK a better starting position in the global race."

Consulting on new guidelines

In May 2013, the Prime Minister's advisor on enterprise and small business, Lord Young of Graffham, recommended developing a set of "single market" principles to be applied by all public bodies in their procurement.

These principles include:

Introducing a requirement for all public sector contracts over £10,000 to be accessible online, on the same website. It is hoped that this will improve transparency and it will be a requirement that all public sector organisations report on their performance on spend with SMEs and centrally negotiated deals.

Banning burdensome pre-qualification questionnaires for low value public sector contracts, and introducing a single standardised requirement for high value contracts.

Ensuring suppliers further down the supply chain benefit from the same standard payment terms that public bodies offer prime contractors to ensure prompt payment for public sector work.

"I am pleased with the government's response to my proposals, reflecting not only the huge growth opportunities that public procurement can offer small businesses but also the significant value these suppliers are delivering to all parts of the public sector. I want this to increase to reflect the growing number and importance of small businesses in the UK today," said Lord Young.

"For this to happen we need to improve small businesses' access to the public procurement market by removing the bureaucratic processes and poor payment practices which stop and discourage SMEs from making winning bids for contracts."

Central government progress

Since 2010 central government has been working hard to open up the procurement process to SMEs. For example, burdensome Pre-Qualification Questionnaires (PQQs) have been removed for almost all central government contracts below £100,000 and some 12,900 contracting opportunities have been published on Contracts Finder to help SMEs spot opportunities more easily.

The government has also introduced a number of SME-friendly frameworks, such as the G-Cloud, to put smaller businesses on a level playing field with larger suppliers.

Some 10.5 percent of central government spend goes to SMEs directly at the moment, but the Cabinet Office has set a target of 25 percent by 2015.