Small suppliers are winning open tenders, yet the central government is spending a smaller share with them than it did in 2020. A contract extension at DWP suggests where some of that work is going.
In April 2025, the Department for Work and Pensions published a notice on Find a Tender extending the contract behind Find a Job, which is the national jobs board, by fifteen months.
The supplier, Adzuna, is a London company that the notice records as an SME, and it had run the service since 2018 after winning a competitive procurement against Monster and Hireserve.
The extension carried the contract to 30 June 2026 and lifted its value from £10.7 million to £15.2 million excluding VAT. The reason the department gave is the part we keep returning to, because it describes a customer that has decided to stop being one.
“…no longer be outsourced to the market on a like-for-like basis…” —Department for Work and Pensions, Find a Tender modification notice, April 2025
The in-house replacement launched in late June, and the original service was switched off on 30 June.
DWP has described the build as part of a wider plan for a new jobs and careers service. A Government Digital Service assessment of the employer-facing beta, carried out in May and published this week, gave it an amber rating, and the assessors noted that data collection to measure the replacement’s performance was not yet live.
Now, we do not know what the new service cost to build or what the department weighed against buying one, and we think that gap is where this story sits.
SME Procurement Is Growing, but Not Everywhere
It matters because, taken as a whole, the UK government procurement looks like good news for small suppliers.
Direct public sector spending with SMEs reached £45.2 billion in 2025. That was a six-year high of 21%, and underneath that figure the picture splits.
Local authorities in England spent 34% of their budgets directly with SMEs, or £29.1 billion, while central government spent 10%, or £6.4 billion, down from 13% in 2020. Departments averaged 8.4 percentage points below the SME spend targets they had set themselves.
The share is rising where the buyer is a council and falling where the buyer is a department.
Open Tenders Are Not Where SMEs Lose Out
The Procurement Act 2023 went live on 24 February 2025 and, for the first time, left a data trail.
Notices that used to sit across portals such as Contracts Finder now run through Find a Tender, which doubles as the UK government’s Central Digital Platform, where suppliers register once and reuse their details across bids.
A year of that data, analysed by the Open Contracting Partnership, suggests the open tender is not where small suppliers lose.
SMEs and voluntary organisations made up 67% of bids by February 2026, and 61% of contracts awarded through open tenders went to at least one SME. Direct awards look different thpugh, with only 36% going to an SME, and only 46% of below-threshold contracts awarded without competition.
“SMEs lose out on direct awards though.” — Open Contracting Partnership, 3 March 2026
Direct procedures were still about 41% of all procedures by number, mostly below-threshold contracts, though the monthly share fell from 53% to 34% between March 2025 and February 2026, and open tenders accounted for 52% of awarded value, excluding frameworks.
The same analysis found that 58% of below-threshold contracts carried no supplier identifier, which limits what the UK government’s Central Digital Platform can show about who is winning small contracts.
SME is a size category rather than an age one, and we could not find a published dataset that identifies startups as a group, so how many of that 61% are startups is unknown.
Read next: As Palantir UK Government Contracts Faces Review, Who Is Left to Bid?
When Startups and Government Become Competitors
The Startup Coalition’s report, Buying British Innovation, published in August, singles out a pattern in UK government procurement in which opportunities for startups are taken by in-house development teams with no visible appraisal of value for money or impact.
“…makes the government and our startups competitors rather than collaborators.” — Startup Coalition, Buying British Innovation, August 2026
The Coalition is a lobbying group, and most of its cases come from the founders it interviewed, which leaves the DWP notice as the clearest example open to public checking.
The Risks of Building Before Buying
The case for building has a record behind it in UK government procurement.
The UK National Audit Office estimated in January 2025 that at least £14 billion a year goes on digital programmes and technology across the UK public sector, and found that five programmes it had examined carried £3 billion of cost increases, at least 26% of their original forecasts, with delays totalling at least 29 years.
Commercial approaches to suppliers were a factor in each; the same report asked for decision-makers to be trained on the risks of “build before buy”, the kind of advice that was not written about DWP but frames a question the published record on Find a Job does not yet answer.
Justice Transcribe Shows the Case for Building In-House
The Ministry of Justice offers a case that cuts the other way. Front-line probation teams who were exploring commercial transcription tools proposed using AI for meeting notes, and the ministry and HM Prison and Probation Service adapted an existing government product from the Government Digital Service’s i.AI team into Justice Transcribe.
Before national rollout, they piloted two alternative tools and compared quality, time savings, estimated return on investment and the risk of commercial lock-in.
In October 2026, the UK National Audit Office published a case study recording that ownership protects the ministry against lock-in and rising licence costs, and that this flexibility was a key consideration in building in-house instead of buying off the shelf.
The project is expected to cost £7.9 million to 2028-29, and its forecast saving of around 450,000 hours a year is a modelled estimate, since the department does not hold measured data on time saved.
The ministry is now testing the same tool on Crown Court transcripts, a job contracted providers do today, and its AI unit lists reducing reliance on costly external suppliers among the potential benefits for courts.
Better Market Engagement, but Frameworks Still Shape the Race
The UK National Audit Office also found that digital specialists in departments felt constrained from talking to suppliers before work was scoped, and judged that the early market engagement tools in the Procurement Act 2023 were unlikely to make a practical difference without detailed guidance and a change in culture.
The first year of data gives a mixed answer.
Pre-market engagement notices have risen to more than 700 a month, of which 29% are associated with a tender, and open tenders that followed one drew a slightly higher SME share (63% against 61%) and more bids (4.7 against 3.8).
Frameworks sit upstream of all of it.
UK government procurement of technology leans on them, with about £9 billion of digital procurement running through Crown Commercial Service frameworks in 2022-23, and who gets onto one is settled before any department names a need. Tests of economic and financial standing tend, in our view, to favour companies with a past over companies with a product, and we could not find a published count of how many pilots or proofs of concept become contracts.
One route built for innovation is growing: the competitive flexible procedure, which lets buyers pick suppliers through testing and demonstration, now makes up almost 15% of tender notices by number and over 35% by value.
New Procurement Rules Do Not Settle the Build-or-Buy Question
The new government is attacking the problem from the buyer’s side.
Procurement Policy Note 026, published on 5 August, narrows the social value model for central government to good jobs and skills and sets a minimum weighting of 10% for contracts from £1 million and 20% from £5 million.
It applies to procurements under the Procurement Act 2023 that start on or after 1 January 2027. The government says the £1 million threshold means the rules will not typically apply to work that smaller firms bid for.
PPN 026 is the latest change to UK government procurement rules, and it does not address whether a department builds or buys.
What we’d still like to ask
Several questions about UK government procurement still remain open.
What did DWP spend building Find a Job versus retaining Adzuna? Were the Ministry of Justice’s trial tools UK startups? How many SME contract wins went to startups? How many pilots became contracts? When should government build rather than buy?
So what really happens when the government’s biggest competitor is the government itself?
Editorial Note
This piece is based on secondary research.
We would certainly welcome any relevant information from DWP, the Ministry of Justice, Adzuna and the Startup Coalition, and from any founder who has lost a government opportunity to an in-house build.
Sources: Find a Tender notice 2025/S 000-014114 (DWP, Find a Job Service extension); PublicTechnology (11 April 2025); Career Development Institute (26 June 2026); GOV.UK Find a Job notice; GOV.UK Service Standard report, DWP Jobs & Careers Service beta (14 October 2026); BCC and Tussell SME Procurement Tracker 2026; Open Contracting Partnership, The UK Procurement Act one year on (3 March 2026); Startup Coalition, Buying British Innovation (August 2026); National Audit Office, Government’s approach to technology suppliers (16 January 2025); National Audit Office, Productivity improvement: The Justice Transcribe AI-enabled transcription tool (14 October 2026); GOV.UK, AI court transcripts to boost access to justice for victims (14 April 2026); Ministry of Justice AI Unit, Speech AI; GOV.UK Central Digital Platform guidance via public-body supplier pages; Cabinet Office PPN 026 (5 August 2026), via Osborne Clarke, Capsticks and Muckle.
