Box-ticking is out, job-ticking is in as small firms face a new procurement shake-up

This is an article by Liz Barclay – copyright https://business111.com/news

Small businesses were promised freedom from the endless ESG forms, diversity statements, net zero targets and social value questionnaires that have clogged up public sector contracts for years. Instead, many fear they have simply landed on another square in the great game of procurement snakes and ladders.

The Government is tearing up ESG, net zero and diversity requirements in public procurement and replacing them with a new jobs-first approach. From 2027, firms bidding for public contracts will be judged less on paperwork and more on whether they create jobs, train young people and raise wages.

Many small firms will welcome the change. For years they have struggled to compete with large companies that employ teams of specialists to manage complex compliance requirements. Ministers argue that procurement became overloaded with competing priorities and lost sight of economic growth.

Under the new rules, contracts worth more than £1 million will require evidence of job creation, while contracts above £5 million will allocate 20 per cent of their score to employment, training and workforce development. Companies paying above the minimum wage and offering opportunities for progression will be rewarded.

For microbusinesses, however, this may prove to be easier said than done.

Small firms are already wrestling with higher wages, increased National Insurance costs and shrinking margins. Many are struggling to fill existing vacancies, let alone create new positions simply to strengthen a contract bid. Large companies, by contrast, can recruit quickly, absorb higher costs and operate established apprenticeship programmes.

The fear is that one box-ticking exercise will simply be replaced by another.

The construction sector illustrates the dilemma. Large contractors are optimistic because they already recruit locally and run training programmes. Smaller firms fear that the new rules will create another barrier to entry, pushing even more government work towards large suppliers.

There is also another complication. While procurement rules are becoming less focused on ESG, broader ESG reporting requirements are becoming more important.

The two systems have different purposes. ESG reporting is intended to reassure regulators, lenders and investors by demonstrating resilience, transparency and an understanding of financial and environmental risks. Procurement rules are designed to encourage employment, skills development and economic growth.

In theory, the two approaches complement one another. In practice, many small firms will find themselves caught between the two.

Businesses dealing with investors, banks and insurers will still need to think about climate risks, supply chains and workforce resilience. Businesses seeking government contracts will need to demonstrate job creation, training programmes and wage growth.

Large organisations may be able to manage both sets of demands. Smaller firms may struggle to cope with either.

The Government says it is sweeping away red tape. Many business owners hope it is right. Yet there is a growing suspicion that the paperwork has not disappeared at all. It has merely changed its name.

For small businesses, the challenge remains exactly the same: finding enough time, money and people to satisfy a system designed with much larger organisations in mind.

This is an article by Liz Barclay – copyright https://business111.com/news

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