The Procurement Act 2023 came into force on 24 February 2025 and now governs most public procurement in the UK. For a small software supplier, the most useful change is not a new opportunity but a set of limits: on asking for audited accounts, on requiring insurance before award, on pre-qualifying suppliers for smaller contracts, and on how long you can be kept waiting for payment. It also adds one obligation most SMEs have not yet met: registering on the Central Digital Platform.
This guide is for founders and bid leads at small software companies, and for the procurement officers who evaluate them. Every point below cites the section of the Act or the official guidance it comes from, so you can check it yourself.
The duty to think about SMEs
Section 12(4) requires a contracting authority, when carrying out a covered procurement, to have regard to the fact that small and medium-sized enterprises may face particular barriers to participation, and to consider whether those barriers can be removed or reduced. Section 86 applies a similar duty to regulated below-threshold contracts.
On its own, "have regard to" is a weak duty. It does not reserve contracts for SMEs or require a buyer to pick one. Its practical value is that it gives you a legal hook when a procurement contains an obvious barrier, such as a turnover requirement out of proportion to the contract. The specific rules below are where the teeth are.
What a buyer can and cannot ask of you
Under the Act, the tests a supplier must pass to be awarded a contract are called conditions of participation. Section 22 sets out what they can cover and where they stop.
- Only two things can be tested. Conditions of participation may only be used to make sure a supplier has the legal and financial capacity, or the technical ability, to perform the contract (section 22(1)).
- No audited accounts from companies that do not need them. A contracting authority cannot require audited annual accounts except from suppliers who are, or were, required to have their accounts audited under Part 16 of the Companies Act 2006 (section 22(3)). Most small companies are exempt from audit, so this removes a common filter.
- No insurance before award. A contracting authority cannot require insurance relating to the performance of the contract to be in place before the contract is awarded (section 22(3)). You can be asked to commit to holding it. You cannot be shut out for not paying for it speculatively.
- No "must have worked for us before". Technical conditions cannot require that a supplier has previously been awarded a contract by a particular contracting authority (section 22(4)), and cannot require a qualification without allowing for equivalents.
- Proportionality is a legal test. Conditions must be proportionate, and in judging that the authority must have regard to the nature, complexity and cost of the contract (section 22(5)).
In practice. If a tender for a modest software contract asks for three years of audited accounts from a company that is audit-exempt, or for professional indemnity cover to be in force at the bid stage, quote section 22(3) in a clarification question. Clarification questions are usually answered to all bidders, so you are often fixing the procurement for every small supplier, not just yourself.
Below-threshold contracts: no pre-qualification
Much of the work that suits a small software studio sits below the main procurement thresholds. From 1 January 2026, those thresholds for goods and services contracts are £135,018 for central government authorities and £207,720 for other contracting authorities, under Procurement Policy Note 023.
Below those figures, the Act's rules on "regulated below-threshold contracts" apply, and they are more favourable to small suppliers than many realise:
- No suitability gate. A contracting authority may not restrict who can submit a tender by reference to an assessment of suppliers' suitability, meaning their legal and financial capacity or technical ability (section 85). Exceptions include higher-value works contracts and frameworks. Suitability can still feature when tenders are evaluated, but not as a hurdle you must clear before you are allowed to bid.
- Advertised at £12,000 or £30,000. If a below-threshold contract is advertised, or once it is awarded, a notice must be published where the contract is worth at least £12,000 for most central government authorities or £30,000 for other authorities (section 87).
- Reservations must be stated. Since the Procurement (Amendment) Regulations 2026, if an authority reserves a below-threshold competition for SMEs or voluntary, community and social enterprises, it must say so in the notice.
The Central Digital Platform
The Act replaced the old patchwork of notice websites with a Central Digital Platform, accessed through the Find a Tender service. Suppliers register their organisation there once, including whether they are an SME, and receive a unique identifier. The platform is free to use. Government guidance tells suppliers to share that identifier with the contracting authority before being awarded a contract, and the Procurement (Amendment) Regulations 2026 extend the requirement to suppliers awarded notifiable below-threshold contracts.
Two consequences matter for small suppliers. First, if you have not registered, you can win a competition and then stall at award. Second, the platform holds your core details so you do not have to retype them for every bid, which reduces one of the hidden costs of bidding that falls hardest on small teams.
The old Contracts Finder service is being wound down. Under the same 2026 amending regulations, from 1 October 2026 the remaining duties to publish notices there for procurements run under the old rules were either moved to the Central Digital Platform or removed. If your opportunity search still relies on Contracts Finder alerts, move it to Find a Tender.
Getting paid in 30 days, including as a subcontractor
Section 68 implies a term into most public contracts that sums due must be paid within 30 days of the authority receiving the invoice, or of the date payment falls due under the invoice if that is later. Section 73 implies the same 30-day term into subcontracts, so it flows down the supply chain. Section 88 applies equivalent terms to regulated below-threshold contracts.
This matters more to small software firms than it looks. Many SMEs reach public sector work as a subcontractor to a larger supplier, where payment terms used to be whatever the prime contractor chose. The 30-day term now travels with the work.
How you will be evaluated and watched
- Most advantageous tender. Contracts are awarded to the most advantageous tender, assessed against the award criteria and weightings the authority sets (section 19). The authority decides the balance between price and quality. A well-run evaluation of a software contract should weight quality and post-launch support heavily. If it does not, say so in pre-market engagement.
- Flexible procedures. Above threshold, authorities can use the open procedure or a competitive flexible procedure they design themselves (section 20). Read the procedure description carefully, because each competitive flexible procedure is different.
- Dynamic markets. Dynamic markets (sections 34 to 39) let suppliers join a pool at any time and compete for contracts awarded through it. If your sector has one, joining is often a lower-cost route into repeat work than bidding contract by contract.
- Published performance. For contracts worth more than £5 million, the authority must set at least three key performance indicators and publish them (section 52), and performance against them is assessed during the contract (section 71). This is mostly relevant to larger suppliers, but it changes how prime contractors manage their subcontractors.
- Debarment. The Act creates a public debarment list of suppliers that a Minister has decided should be excluded or treated as excludable (section 62). Buyers will check it, so it is worth knowing it exists.
Central government spend targets
Procurement Policy Note 001, published in February 2025, requires central government departments, their executive agencies and non-departmental public bodies to set three-year targets for direct spend with SMEs from 1 April 2025, to be achieved in the financial year ending March 2028, and to publish results every year by 30 September. Equivalent targets for voluntary, community and social enterprises apply from 1 April 2026. NHS trusts and devolved authorities are outside its scope.
Targets do not award contracts. They do mean that a department's commercial team now has a published number to explain, which makes pre-market engagement with small suppliers more welcome than it used to be.
What to do this month
| Action | Why |
|---|---|
| Register on the Central Digital Platform and keep your unique identifier to hand | You will be asked for it before award, including on notifiable below-threshold contracts |
| Move opportunity alerts from Contracts Finder to Find a Tender | Contracts Finder is being decommissioned |
| Keep a short clarification template quoting sections 22(3), 22(4) and 85 | Disproportionate conditions are often drafted by habit, and a polite citation usually fixes them |
| Check your subcontract terms against section 73 | 30-day payment is implied into subcontracts of public contracts |
| Respond to preliminary market engagement notices, not just tender notices | That is the stage where requirements, procedures and conditions are still being shaped |
Where the Act does not help
The Act lowers barriers. It does not lower the bar. A small supplier still has to show it can deliver, keep data safe, and be there after go-live. Cyber Essentials remains mandatory for many central government contracts under PPN 014, buyers still ask for a data processing agreement, and a proposal that cannot name the people doing the work will still lose. The rules above make sure you are allowed to compete. Winning is still about the quality of the answer.
We are an SME supplier ourselves, and these are the rules we bid under. We wrote this because the most common mistake we see from small suppliers is not a weak bid. It is not challenging a condition the law no longer allows.