More Lots, Less Volume: How PPN 002 and the Procurement Act Help SMEs Create Social Value

Estimated reading time: 5 minutes

The Procurement Act 2023 and the PPN 002 Social Value Model include two critical provisions that will help Small and Medium Sized Businesses (SMEs) and Voluntary, Community, and Social Enterprises (VCSEs) to win a greater share of public contracts by leveraging social value.  

Those are:

• A duty to consider splitting large contracts into smaller “lots” so as to encourage more diverse types of bidder (Procurement Act 2023, Section 18)
• The stipulation that “volume” is not to be treated as an evaluation factor when social value offers in bids are considered (PPN 002: Guide to Using the Social Value Model, Section 3.2)

We’ve talked a lot about the barriers SMEs and VCSEs face to participation and how the government is trying to address them elsewhere. 

But in this blog, we’re going to dig into how these two provisions around lots and volume are likely to play out under the new system. 

NB This article predates the publication of PPN 026 in August 2026 which will supercede PPN 002 from January 2027.

Lots

The Procurement Act 2023 puts the following duty upon contracting authorities:

Before publishing a tender notice in respect of a public contract, a contracting authority must consider—

1. whether the goods, services or works to be supplied under the contract could reasonably be supplied under more than one contract, and
2. whether such contracts could appropriately be awarded by reference to lots.

It also requires them to provide reasons for not doing so, if that is the decision reached. 

The Cabinet Office defines “lots” as:

A way to split a larger single procurement into smaller ‘chunks’ which are then procured under separate contracts with different suppliers.

This is advantageous for SMEs and VCSEs, which often lack the scale to deliver on major, national contracts. This problem has been particularly noted around procurement frameworks. 

For some years now, some contracting authorities have been trying to increase the diversity of their supply chains and reduce barriers to participation by splitting contracts into geographically defined lots – eg the Crown Commercial Service’s 2021 SME Action Plan made this point long before the Act became law. 

However, this requirement to consider dividing contracts into lots is new and applies to all organisations within the scope of the Procurement Act 2023. 

It should therefore go a long way towards making it easier for SMEs and VCSEs to take part, especially when combined with other measures taken including:

• The abolition of Pre Qualification Questionnaires for sub-£100,000 procurements
• Requirements for Preliminary Market Engagement
• The introduction of Dynamic Purchasing Systems, which allow self certification
• Permission to show proof of required insurance only upon contract award rather than during bidding
• Reinforced rules and guidance around publishing tenders and other notices – centralised on the Find A Tender and Contract Finder websites

For a more comprehensive list, see the October 2025 CCS SME Action Plan. 

Social Value and Volume

SME and VCSE involvement in public procurement is one of the key objectives of the new Social Value Model. 

Policy Outcome 3 under Mission 1 looks to promote:

Resilient, innovative and flexible supply chains: Support economic growth through enabling resilient businesses, opportunities for small businesses and voluntary, community and social enterprises.

The accompanying Model Award Criteria (MAC 3.1) is even more explicit: 

Create a diverse supply chain to deliver the contract including new businesses and entrepreneurs, start-ups, SMEs, VCSEs and mutuals, including creating opportunities for entrepreneurship and helping new organisations to grow, supporting economic growth and business creation.

This encourages the inclusion of SMEs and VCSEs, not just as bidders, but as supply chain partners for other providers – because it makes it clear that spending with these types of organisation is regarded as a social value benefit in its own right, quite apart from any other relevant outcomes (eg job creation, training provision, etc) that spending may lead to. 

That’s because diversifying the supply chain, circulating money in local economies, driving innovation through startups and alternative provision models, and creating local opportunities are key social value goals. 

But how can SMEs and VCSEs compete with the economies of scale, purchasing power, and other advantages that bigger players have at their disposal to craft compelling social value offers?

The Social Value Model Guide spells this out for all concerned:

Although users will ask the supplier to state the quantity of what they commit to deliver (and include the resultant offer as a commitment in the contract), the assessment is qualitative, scoring how the method statement and implementation plan meet the award criteria and sub-criteria (only) – volumes are not evaluated.

Only the quality of what is being presented is to be assessed. The quantity is not. 

That addresses the longstanding complaint – that SMEs and VCSEs are disadvantaged by the inclusion of social value requirements in tenders – directly. With their local connections, smaller carbon footprints, and ability to reducing supply chain risk, the stipulation that social value offerings are to be assessed purely on qualitative grounds provides a distinct advantage to SMEs and VCSEs. 

It’s still early days, but we’ll be watching this space closely to keep you informed! 

At Thrive we specialise in helping companies track, measure and amplify their social value in line with the Social Value Model. If you want to discover how you can measure your social value more effectively and report to stakeholders quickly, don’t hesitate to contact us. We’d love to help you uncover more opportunities to showcase your impact.