New rules will see public sector open up to SMEs

Abolishing the two-tier code gives small companies a new competitive edge – this could lead to more SMEs bidding for public sector work.

Introduced in 2003, the two-tier code ensured that the pay and conditions of new staff hired by private companies who take over public-sector contracts would be comparable with those received by the former public sector staff they work alongside.

The two-tier code was a major disincentive for smaller businesses to bid for government contracts, however, as it restricted their ability to deliver services as cost-effectively as they potentially could.

Not only were SMEs being held back by increased staff costs, but also by lower productivity – for example, the ability to introduce incentives such as performance-related pay was difficult to do.

Jon Taylor, head of employment at commercial law firm EMW says: “Smaller companies and the voluntary sector in particular, should welcome this change.

“Without the restrictions of the two-tier code, they’ll be able to tender for business more confidently, knowing that they can offer a competitive bid and will have greater control over how they deliver the service in future.”

Taylor says that this new flexibility means that overall productivity can be increased and improved services can be delivered without an increase in price – possibly even cheaper.

“Traditionally, flexible working practices were seen as one of the efficiencies that smaller companies could bring to public sector work as they weren’t locked in deals with public sector unions,” adds John Taylor.

The two-tier code was forcing the private sector to be uncompetitive. Its abolishment is a win-win situation for both the taxpayer and the end-user of the services being provided.

Will you try winning more public sector business as a result of the change in procurement rules?

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