UK Procurement in 2026: An era of transparency, rigour and reform
The Procurement Act 2023 (PA23) continues to reshape the landscape of UK public procurement and 2026 brings a fresh wave of new guidance, regulations and policy initiatives that seek to change how public contracts are awarded, managed and scrutinised. From enhanced guidance on testing suppliers' financial standing to greater payment transparency and expanded opportunities for SMEs, this article cuts through the complexity and sets out what you need to know as at the end of Q1 2026!
Supplier's financial health: New EFS guidance
In January 2026 the Cabinet Office's government commercial function released a new Economic and Financial Standing (EFS) guidance to supplement the sourcing playbook.
The core focus of the guidance is to establish a robust framework for considering whether a supplier has the financial capacity to deliver a contract and further safeguard the delivery of public services. The guidance applies to all central government departments, their executive agencies and non-departmental public bodies (in-scope organisations) though, other contracting authorities may adopt the guidance at their discretion (and are encouraged to).
A tiered approach
The guidance emphasises that effective evaluation and monitoring should take place both pre- and post-award, being an ongoing commitment throughout the contract lifecycle, rather than a one-time box-ticking exercise.
The guidance refers to the central government approach of tiering contracts (seen in the playbooks), categorising contracts as gold, silver or bronze to reflect factors such as the "potential impact of service failure, ease of switching suppliers and contract value". The tiering ensures that the depth of financial assessment is scaled appropriately.
The previous guidance recognised the need for contracting authorities pre-award to follow a structured method to assess bidder financial capacity. However, the latest guidance builds further on this and enhances the focus on post-award management of suppliers. It recommends monitoring a supplier's financial stability throughout the contract term. For gold and silver contracts, it is recommended that financial health is reviewed at least once per year, encompassing performance against "EFS metrics, Financial Distress Event triggers under the contract, KPI and contractual performance and commercial behaviours … and wider business performance". Where risks are identified, it is suggested authorities can require guarantees, deploy contract mechanisms (i.e., step-in rights, performance bonds and escrow arrangements) and/or implement continuous monitoring regimes.
Fairness built in
A new addition to the EFS guidance is the express recognition that the type of bidding entity may vary, and traditional metrics of assessment might not be appropriate for all. The EFS guidance notes that no SME, public service mutual or third sector organisation should be "inadvertently disadvantaged by the EFS assessment approach" and consequently the EFS guidance (whilst also noting the section 12 PA23 objectives around same treatment) introduces alternative metrics for voluntary community and social enterprises (for example rolling cash-flow forecasts and simplified solvency ratios). The EFS guidance notes that this is in line with the legislative need for proportionate conditions of participation (section 22 of PA23).
Why this matters
The strategic importance of the EFS guidance supplementing the playbooks has always been clear: preventing failures akin to the collapse of Carillion or allowing financially challenged suppliers to deliver sub-standard public services. However, only time will tell how far authorities can valuably make use of the new EFS guidance alongside PA23, and whether the introduction of new metrics for voluntary community and social enterprises will truly open opportunities for such organisations.
Greater transparency for significant public payments: Section 70 PA23
Contract payment information is a new requirement under Section 70 of the PA23 which will come into force in April 2026. This section obliges contracting authorities to publish "specified information" about payments made under public contracts on the central digital platform – part of a wider objective to increase transparency over high-value public expenditure and to support auditability and accountability. For more information, please see article 'Contract payment information' authored by Jasmin Mann and Jade Divers.
The MOD's SME commercial pathway guide
Published in January 2026, the Ministry of Defence's (MOD)'s SME commercial pathway (SME pathway) guide to "Levelling the playing field and improving opportunities for SMEs in defence procurement" (the MOD guide) is designed to "level the playing field" for SMEs in defence procurement by simplifying processes, reducing barriers to entry and promoting greater SME involvement across defence supply chains.
SMEs have the potential to offer innovation to contracting authorities in procurement. However, they often face barriers to entry in government procurement processes as a result of unfamiliarity with PA23 and/ or and limited visibility of opportunities. The latter is a direct result of many of the contracts MOD and other defence authorities procure falling within the scope of Schedule 2 exemptions in PA23 or the exceptions to transparency rules relating to defence and security requirements. The MOD guide and its SME pathway directly responds to these challenges by setting out how steps can be taken by MOD colleagues to reduce barriers to SME participation.
The MOD guide focuses on the following themes:
1. Better promoting opportunities and SME engagement;
2. Increasing the number of procurement opportunities that SMEs can bid for;
3. Not being risk averse with SMEs;
4. Driving supply chain collaboration and transparency; and
5. Strengthening SME resilience through improved cash flow.
The MOD guide recommends different steps that can be taken by colleagues such as smaller, shorter duration contracts and building frameworks with SMEs in mind. The overall aims of the MOD guide are therefore aligned with broader government priorities to increase SME involvement in public procurement by simplifying processes and driving innovation, and specifically the objective in section 12(4) of PA23 for contracting authorities to have regard to the barriers faced by SMEs and how those barriers can be mitigated or removed.
Enforcing the rules: The Procurement Compliance Service
The Procurement Compliance Service (PCS) is a core function within the procurement review unit, established under the PA23 to ensure contracting authorities comply with their obligations under PA23. The role of the PCS is to investigate potential non-compliance, issuing recommendations or publishing guidance to strengthen capability and practice where problems are observed.
The PCS has broad authority to investigate any procurement under the PA23, with a focus on significant breaches. It may receive referrals from the public procurement review service and can log cases for future reconsideration when new information emerges. In February 2026, the PCS scope of review was published setting out how the PCS would target its work.
To explore the PSC in greater depth, we recommend the following article authored by Charlotte Clayson: Policing Procurement: The Procurement Compliance Service.
Local government buying local: The England Order 2025
In December 2025, we wrote about the pending Local Government (Exclusion of non-commercial considerations) (England) Order 2025 (the Order) which would allow local authorities to reserve below-threshold competitions to local or UK businesses, SMEs or VCSEs. The intention was to support local economies and widen opportunities for these communities. This has been in force since 4 February 2026.
Where a contracting authority is also relying on article 3 of the Order to reserve a contract there is also a new obligation in below-threshold tender notices to say as much.
For more information see our previous article authored by Louis Sebastian and Jade Divers: Boosting Localised Procurement - Reform to Section 17 LGA 1988. However, as a reminder, the Order removes a long-standing restriction that previously prevented local authorities from considering supplier location when awarding public contracts (it amends section 17(5)(e) of the Local Government Act 1988 which made locality a non-commercial consideration not to be factored into procurement decisions). The reform is particular to local government authorities as the scope to reserve below-threshold competitions was always present for other organisations. See PPN 005 for more on this in respect of central government organisations.
Below-threshold Identifiers
From 1 April 2026 things will be further changing for below-threshold procurements, with a new obligation on contracting authorities to obtain from suppliers a unique identifier and publish this whenever required to publish a below-threshold contract details notice. Such notices are required for any below-threshold contract which is not exempt under Schedule 2 of PA23 and is at least £12,000 (inc VAT) for central government (including NHS bodies) or at least £30,000 (inc VAT) for sub-central government authorities.
In terms of actions to be taken by contracting authorities, the guidance indicates this will be:
1. Obtaining confirmation of registration on the central digital platform from suppliers and provision of specified information in regulation 36A of the Procurement Regulations 2024 (PR24);
2. Obtaining the suppliers unique identifier; and
3. Publishing it in the below-threshold contract details notice.
This shift is significant as until now registration has been merely recommended for suppliers involved in below-threshold procurements. However, according to the guidance the intention of implementing regulation 36A of PR24 is to bridge a gap in data available around contracting authority spend.
However, for contracting authorities currently undertaking below-threshold procurements, please note that the change comes into force from 1 April 2026 in respect of below-threshold contract details notices published after 1 April 2026. Therefore, unlike the transitional rules handling the move from Public Contracts Regulations 2915 to PA23, the trigger for the application of this rule is when the contract details notice is published and not when the procurement commenced.
UK-India CETA
The UK-India Comprehensive Economic and Trade Agreement (CETA) was signed in 2025 but it yet to come into force. Chapter 15 deals with government procurement. The primary significance of this will be that CETA will become one of the treaties listed in Schedule 9 to the PA23 and therefore, under section 90 of PA23 contracting authorities will be unable to discriminate against Indian suppliers in procurement exercises. Indian suppliers will also be able to directly enforce the market access rights created by CETA pursuant to remedies available under PA23.
Final thoughts: A year of accountability, inclusion and reform
2026 is shaping up to be an exciting year for UK public procurement. The cumulative effect of these changes and guidance shows that procurement is not staying still and authorities need to continue embracing PA23 and leveraging the potential created by the many tools and flexibilities in the regime.