Procurement in the UK: Building efficiency, compliance and value

Procurement serves dual purposes in the UK, as both a business essential and a necessity for complying with regulatory standards. Modern procurement practices serve as strategic levers for demonstrating compliance, gaining a competitive edge, and improving supply chain resilience in challenging times.

The introduction of the Procurement Act 2023 marks a significant change affecting both the public and private sectors. It encourages greater transparency and innovation, and by understanding how it works, your organisation can drive more value from procurement.

This guide covers practical solutions and strategies for meeting your regulatory requirements, reducing procurement costs, and improving operational efficiency.

What is procurement?

Procurement is the complete process of acquiring goods and services from external vendors. Its role is to maximise the cost-effectiveness, transparency, and quality of business purchases, ensuring they align with your organisation’s strategic goals and operational needs.

There are five stages in a typical UK procurement process:

1. Sourcing: Identifying, evaluating, and comparing potential suppliers
2. Contracting: Negotiating vendor terms and establishing service level agreements
3. Delivery: Managing the receipt of goods and services
4. Payment: Processing invoices, reconciling transactions, and paying suppliers
5. Evaluation: Monitoring vendor performance, contract effectiveness, and spending insights

Procurement differs from purchasing, which solely refers to the activity of buying goods or services. Procurement is a broader, strategic function encompassing purchasing workflows, supplier relationship management, risk management, and payment processing.

The Procurement Act 2023: What UK businesses need to know

The Procurement Act 2023 represents the most significant reform to public procurement in recent years. The Act came into force on 24 February, 2025, replacing the previous EU-centric regulations and providing a unified procurement framework for UK organisations.

There are some new details of particular importance. 

Contracting authorities (public bodies and certain utilities) must now conduct covered procurements—contracts above specific financial thresholds—in accordance with new transparency, flexibility, and competition requirements. They must also publish procurement notices, contract details, and supplier performance information on a centralised digital platform.

The Most Economically Advantageous Tender (MEAT) standard has been replaced by Most Advantageous Tender (MAT), giving contracting authorities greater flexibility to award contracts based on factors beyond price.

While the Act primarily applies to the public sector, it also indirectly affects private sector procurement—private companies bidding for public contracts must comply with the new requirements, and some private utilities may be bound to the Act if they operate in regulated sectors.

Public vs. private sector procurement in the UK

Procurement operates differently in the UK’s public and private sectors. CPOs and procurement teams in both sectors must adapt to unique compliance rules and market demands.

Here’s a quick overview of the differences between public and private UK procurement:

Regulations

• Public sector: Highly regulated under the Procurement Act 2023, with strict legal requirements for covered procurements
• Private sector: Self-regulated—procurement policies are based on business strategy and risk appetite

Transparency

• Public sector: Procurement notices, contract awards, and supplier performance must be published on central digital platforms
• Private sector: Transparency is at the discretion of the organisation

Award criteria

• Public sector: MAT assessment is required to consider value for money, quality, sustainability, and social value
• Private sector: Flexible criteria based on strategic priorities, such as cost reduction, supplier relationships or innovation

Competition rules

• Public sector: Required to ensure fair and open competition, with restrictions on direct awards and framework usage
• Private sector: Free to select suppliers based on business needs, and can negotiate directly or use preferred supplier arrangements

Decision timelines

• Public sector: Extended procurement cycles due to mandates for standstill periods, challenge mechanisms and compliance checks
• Private sector: Typically faster procurement cycles with organisations having the ability to prioritise decisions based on urgency

Accountability

• Public sector: Subject to Freedom of Information requests, public scrutiny, audits by external bodies, and judicial reviews
• Private sector: Accountable to the company’s shareholders and board - commercial decisions are confidential

Despite these differences, CPOs in both sectors face external pressure to procure more goods from small and medium-sized enterprises (SMEs), minority-owned businesses, and local suppliers. 

Environmental, social, and governance (ESG) factors are also central to procurement decisions for all organisations. To meet ESG requirements, CPOs can benefit from implementing digital procurement platforms that provide spend analytics tools, enabling procurement teams to gain greater insights into their spending patterns.

In the public sector, organisations must also meet transparency requirements, ensure all covered procurements comply with their relevant threshold values, and adhere to competition rules. For example, the CPO of an NHS trust procuring £500,000 of medical equipment must evaluate bids using the MAT approach.

In the private sector, shareholders and boards expect the CPO to abide by corporate governance, sector-specific regulations, and internal controls. An FTSE 100 retailer procuring third-party logistics services can freely negotiate with preferred providers. However, they must still demonstrate responsible sourcing.

Why procurement matters for UK organisations

Procurement practices directly impact financial performance and operational efficiency. By prioritising strategic procurement, you can gain competitive advantages by reducing costs, enhancing compliance, and strengthening supplier relationships.

The primary benefits of procurement for UK organisations include: 

• Cost savings: Strategic procurement helps you reduce costs while maintaining quality by optimising spend, negotiating better contract terms, and eliminating waste
• Compliance: Robust procurement processes ensure adherence to legal requirements, protecting you from legal challenges, reputational damage, and fees or penalties
• Risk management: Effective procurement involves assessing supplier risks, diversifying your supply base, and conducting due diligence to improve supply chain resilience
• Supplier diversity and access to SMEs: By engaging diverse suppliers, procurement helps increase competition and drive innovation - the Procurement Act 2023 includes provisions to encourage purchasing from SMEs
• Sustainability and ethics: Your procurement decisions directly affect your organisation's environmental footprint and social impact, and help you meet stakeholder expectations and emission targets
• Efficiency and innovation: Modern procurement technologies, such as our Amazon Spend Visibility tool, can help you make data-driven decisions and improve efficiency through data analytics and collaboration
• Social value: Compliant procurement offers social benefits such as creating apprenticeships, supporting minority-owned businesses, and improving community facilities.

UK procurement spending rose by around 13% in 2025, according to data from the HM Treasury Expenditure Statistical Analysis 2025. This demonstrates why effective procurement is more important than ever for UK businesses: as spending increases, so does the potential for significant cost savings and innovation.

How procurement works

Regardless of your sector or organisation size, procurement follows a structured cycle that focuses on strategic sourcing of goods, regulatory compliance, and cost-effectiveness. 

How the procurement cycle works in the UK:

1. Planning: Identify what you need and when you need it, establish budget limits and stakeholder requirements, and determine whether regulatory thresholds apply
2. Market engagement: Qualify potential suppliers, research market capabilities, and assess your available options
3. Sourcing and tendering: Issue a request for proposals (RFPs), request for quotations (RFQs), or invitation to tender (ITTs) to qualified suppliers
4. Evaluation and contracting: Assess supplier bids, do your due diligence, negotiate payment terms, and formalise the supplier agreement
5. Delivering, invoicing, and payment: Manage the receipt of procured goods or services, validate them against contract terms, and process supplier invoices
6. Supplier performance review: Monitor ongoing supplier performance against metrics, including quality, timeliness, cost, and service levels

A new era of procurement skills is required to handle these processes efficiently. UK organisations in the public sector must comply with additional mandatory requirements under the Procurement Act 2023, including formal advertising, evaluation process transparency, and publication of award notices for covered procurements. Let’s take a closer look at UK-specific procurement requirements.

The UK procurement process

Public sector procurement in the UK is governed by the Procurement Act 2023. This Act introduced new competitive tendering procedures, including the open procedure, the competitive flexible procedure, and direct award.

Key UK procurement process steps for the public sector:

1. Identification of needs: Contracting authorities must first determine whether procurement is covered procurement by comparing the estimated value (including VAT) with the threshold amounts set out in Schedule 1 of the Procurement Act 2023
2. Procurement route: For covered procurements, contracting authorities must select the appropriate procedure (open, competitive flexible, or direct award) based on the criteria outlined in the Procurement Act 2023
3. Tendering and RFPs: Contracting authorities must publish tender notices on the central digital platform and ensure the competitive tendering procedure is proportionate to the nature, complexity, and cost of the contract, while avoiding complex procedures that could restrict SME participation
4. Evaluation (MAT): Contracting authorities must assess procurement against MAT criteria—before awarding contracts, they must also provide unsuccessful bidders with summaries that explain how tenders were scored against MAT criteria
5. Award and standstill period: Before entering into a public contract, contracting authorities must publish a contract award notice that triggers a mandatory standstill period of at least eight working days - this allows suppliers to raise concerns or formally challenge the award decision before the contract is entered into
6. Contract management and reporting: Contracting authorities must publish a Contract Details Notice, fulfill ongoing transparency obligations throughout the contract’s lifecycle, and conduct regular supplier performance reviews.

UK public procurement requirements vary depending on your spend size and sector. 

Below-threshold contracts (under the amounts listed above) are subject to fewer legal obligations and typically only require a Contract Details Notice. Above-threshold procurements must follow full competitive procedures, standstill periods, and transparency requirements.

Effective 1 January, 2024, to 31 December, 2025, key thresholds include:

• Central government goods/services: £139,688
• Sub-central government goods/services: £214,904
• Works contracts: £5,372,609
• Light-touch contracts: £663,540
   

How to boost efficiency and compliance

Efficiency and compliance go hand in hand. Modern procurement technologies can help organisations meet regulatory requirements—including adherence to the Procurement Act 2023—while reducing costs and ensuring the quality of goods and services.

Set procurement KPIs

Monitoring the operational efficiency and impact of your procurement helps you make informed decisions that drive more value in the long term. To do this, establish clear metrics that align with your procurement objectives and business needs. 

Common UK procurement KPIs include:

• Cycle time: The average time from identifying a need to awarding a contract or issuing a purchase order—shorter cycle times indicate more efficient processes
• Spend under management: The percentage of total organisational spend that adheres to formal procurement policies rather than maverick or uncontrolled purchasing—higher percentages indicate greater spend controls and management
• Cost savings and avoidance: Savings achieved through contract negotiation, supplier consolidation, or process improvements - monitor both hard savings (cost reductions) and cost avoidance (prevention of price increases)
• Compliance rate: The percentage of procurements that follow legal processes, policies, and regulatory requirements - for public sector organisations, this includes adherence to the Procurement Act 2023 obligations for covered procurements
• Supplier performance score: Average ratings across key suppliers based on quality, delivery, responsiveness, and contractual compliance
• Procurement ROI: The value generated by the procurement function relative to its operating costs - this includes savings delivered, risk mitigation value, and process improvements
• Social value delivered: Quantified social benefits such as apprenticeships created, local jobs supported, carbon emissions reduced or community investments made.

Ensure regulatory and legal compliance

The easier you make it for your teams to follow internal and regulatory policies, the better your compliance rate can be. Digital tools can help automate compliance checks and flag breaches of threshold limits.

Implement internal controls that establish a clear hierarchy of authority, prevent unauthorised spending, and create clear audit trails for all procurement decisions. Provide regular training for procurement staff on legal requirements and document your procurement procedures, ensuring all employees have access to them.

If your organisation is in the public sector, assess whether the estimated contract value exceeds the applicable thresholds for covered procurements.

Centralise and digitise data 

Digital tools enable better visibility, support legal requirements, and improve decision-making in procurement. Our 2025 State of Procurement Data report found that 64 percent of respondents identified improving data and insights as a top priority, while one-fifth said they lack systems to monitor and manage risk.

Implement an integrated e-procurement solution to streamline the procurement process and reduce manual errors. Use AI tools to automate key tasks such as payment processing, invoice reconciliation, and purchase order management.

Strengthen supplier relationships

Strategic supplier management enables you to optimise your purchasing process and build stronger supplier relationships, leading to better contract terms and collaborative innovation through shared goals and improved communication. 

Simplify your qualification requirements where possible and prioritise clear communication with suppliers. To mitigate supplier risk, implement robust risk management that assesses the financial health, operational capacity, and exposure to the geopolitical risks of your partnerships. 

Develop contingency plans for key suppliers and diversify your sourcing strategy; expanding your supplier network increases competition and enables you to engage with SMEs and diverse businesses.

Embed sustainability and social value

Procurement plays an important role in achieving ESG and net zero commitments.

Integrate ESG criteria into your sourcing process by assessing the carbon footprint, ethical labour standards, and diversity policies of potential suppliers. To support net zero goals, specify low-carbon materials and prioritise suppliers that use science-based reduction targets.

Find the right procurement mix

Diverse spend categories often require different approaches. By creating tailored management strategies for these categories, you can improve the efficiency, quality, and value of your procurement efforts.

Here’s a quick breakdown of the different types of procurement:

• Managed vs. tail spend: Managed spend refers to purchases that go through formal channels with approved suppliers and negotiated contracts - tail spend is your low-value, high-volume purchases, often processed outside of formal channels
• Direct vs. indirect procurement: Direct procurement includes any materials and services directly used for goods and services that you sell to customers. Indirect procurement covers all other expenses, such as utilities, travel, office supplies, and IT
• Goods vs. services procurement: Goods procurement refers to tangible products that can be easily evaluated based on price, quality, and delivery. Services procurement is typically more complex and variable, and requires assessing factors such as expertise, methodology, and historical performance.

To ensure you find the right balance for your procurement mix, consider the Pareto principle: typically, 80 percent of spend comes from 20 percent of your suppliers. 

Weigh your efforts towards the critical 20 percent by negotiating better agreements and building collaborative partnerships with those suppliers. The remaining 80 percent of transactions, your tail spend, can benefit from automation and standardisation instead of manual intervention.

Strengthen your procurement strategy

Procurement in the UK is both a legal requirement and an important cost centre for your organisation. Effective procurement helps you save money, build resilience, and innovate faster.

The Procurement Act 2023 raises the bar for transparency, social value, and supplier access. However, it also increases the need for efficient systems and compliance with regulatory standards.

Amazon Business enables cost-effective, compliant procurement for UK organisations. We provide the tools, data management, and supplier access you need to make procurement smarter and more efficient. Discover how Amazon Business provides tools to help your organisation simplify procurement and efficiently meet your regulatory requirements.