From Compliance to Innovation: Redefining Public Procurement in 2025

Public procurement departments are navigating a complex landscape of challenges, including regulatory shifts, inefficiencies, difficulty building resilient supply chains, and an increasing demand for sustainability and transparency.

Rapid technological advancements and the pressure to deliver value while managing limited budgets further exacerbate these issues. The recently introduced Procurement Act 2023 aims to address some of these challenges; however, to become truly resilient, Commercial departments must take charge of their transformation.

This article highlights the key challenges in public procurement in 2025 and beyond and provides tips for procurement departments to mitigate them effectively.

Public Procurement Challenges in 2025

The challenges public procurement is facing can be grouped into three main categories:

• Regulatory challenges
• Market-related challenges
• Organisational challenges

Regulatory Challenges

Complex regulatory environment and excessive bureaucracy

The regulatory challenges impacting public procurement are primarily attributed to complex legislation and excessive bureaucracy. There are over 300 regulations relating to public procurement in the UK. Government agencies have notoriously complex procurement processes, with administrative tasks and excessive bureaucracy often delaying the procurement of goods and services. In a recent conversation with the Institute for Government, John Healy MP, Secretary of State for Defence, said that his department was “mired in process and procedure”, adding complexity where simplicity is needed. “In procurement, we employ 11 checkers for every one decision maker. So no wonder it takes on average six years for a large program simply to go on contract,” he stated.

Furthermore, small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) often struggle to enter the public sector due to complex bidding requirements and high compliance costs. Moreover, when they lose a bid, SMEs and VCSEs struggle to understand why due to insufficiently detailed feedback and unclear evaluation criteria.

Market Challenges

Market volatility and inflation

Inflation and market volatility negatively impact procurement teams. Inflation creates budget pressure, meaning teams must deliver more with less. Furthermore, inflation often leads to fluctuating prices and unstable supply and demand dynamics, making procurement more complex. This challenge is exacerbated by a lack of visibility in government supply chains, which hinders risk management and makes it difficult to build a resilient supply chain.

Sustainable sourcing

Procurement departments are under increased regulatory and societal pressure to integrate green and ethical purchasing into their supply chains. However, implementing sustainable sourcing is challenging because there are no clear criteria against which to evaluate supplier sustainability, and it is difficult to track whether suppliers are delivering on their green commitments. Furthermore, sustainability goals must be balanced with the need for cost-savings, supply chain resilience and meeting industrial strategy objectives.

Organisational Challenges

Skills shortages

The procurement industry is experiencing significant skills shortages. According to the CIPS Procurement & Supply Salary Guide 2024, almost 60% of those responsible for hiring procurement and supply professionals globally have struggled to find and retain talent in the past 12 months. This difficulty severely impacts Commercial, leading to increased workloads for current staff, burnout, and reduced efficiency.

Furthermore, many public procurement departments don’t sufficiently value deep category expertise (particularly for less common goods and services), which means that purchasing decisions are often made without the necessary facts, data, and insights.

Fixed mindset

Public procurement departments are often heavily focused on process-driven, tactical activities (mainly sourcing) and dedicate a significant portion of their attention to compliance. This means that other crucial aspects of procurement, like category management, stakeholder engagement, and innovative problem-solving, are often neglected.

Limited tech adoption

Procurement technology adoption in the public sector is slow. Many government agencies still use outdated, manual procurement systems and processes, which often lead to inefficiencies and errors. Manual processes also make it difficult for departments to access and report on data related to contract performance, creating concerns about whether taxpayer money is being well spent and preventing data-driven decision-making.

Slow tech adoption is partially due to stringent regulatory requirements for government departments’ use of tech tools. While tech regulation is undoubtedly necessary, it did exclude government agencies from the recent surge in the use of Procurement SaaS solutions.

Duplication of efforts

A lack of coordination between government agencies, and silos within departments, often lead to the duplication of efforts, inefficiencies, and missed cost-saving opportunities. In his conversation with the Institute for Government, John Healy MP, Secretary of State for Defence, said: “We duplicate even the most central tasks. For example, we have 11 separate finance functions and 2500 people doing the same activity in different places, in different ways.”

Meanwhile, government agencies often also set up parallel contracts to the Crown Commercial Services category frameworks instead of buying their goods and services through the existing approved framework. For example, CSS is currently tendering iteration four of the Management Consultancy Framework (MCF), and yet many government agencies are still setting up their own agreements. Many departments also use non-governmental frameworks to buy consultancy services, which come with high commission fees charged by the framework provider.

Procurement Act 2023 – addressing the most pressing regulatory and market challenges

The Procurement Act 2023 aims to address some of the regulatory and market-related challenges Commercial departments face. The Bill received Royal Assent in October 2023, and the new regime will go live on 24 February 2025.

Issues the Procurement Act 2023 aims to address

• Regulatory Complexity: The Procurement Act 2023 aims to simplify the legislative landscape, streamline procurement processes, and remove barriers to entry for SMEs and VCSEs. However, businesses and public bodies are still adapting to new frameworks and compliance requirements, so it’s too soon to determine whether it will be successful.
• Sustainability: The Act makes it easier for government buyers to make sustainable procurement decisions. The Act empowers Commercial to consider a wide range of factors, including environmental impact, when awarding contracts and allows procurement departments to debar underperforming or unethical suppliers more easily.
• Duplication: The Act introduced the Central Digital Platform (CDP), a centralised service designed to facilitate all public procurement notices and tenders. Both suppliers and contracting authorities will register on the platform, receiving unique identifiers that assist in preventing duplication of records. By centralising information and employing unique identifiers, the CDP aims to reduce the likelihood of overlapping efforts among different government departments when procuring similar goods or services.
• Transparency: The Act aims to create a more open and transparent procurement regime, delivering “transparency by default” across the entire Commercial lifecycle. Changes to support this include mandating the publication of notices at additional stages of the procurement process and the introduction of the CDP.

While the introduction of the Procurement Act 2023 is a step in the right direction, its success will depend on how well it is implemented across Commerical. The act may facilitate change, but it’s up to each department to manage and drive its own transformation. Taking advantage of the new regulations will require a shift in mindset and appetite for risk; however, shying away from these new opportunities will only cement the status quo.

Mitigating key organisational challenges – advice for public procurement departments

To deal with the most pressing challenges and become more efficient, Commercial departments must focus on the following aspects:

Become more strategic

Government agencies must aim to move Commercial up the value chain towards category management. By moving towards category management, as opposed to strongly focusing on sourcing and compliance, Commercial can become more resilient in the face of market challenges. A more strategic approach can also enable procurement departments to use the government’s buying power to shape external markets and influence industrial strategy.

Sam Ulyatt, Chief Commercial Officer, UK Home Office, strongly advocates for category management to help Commercial become a directorate of strategic leaders. “My vision is that we can all sit around a virtual table, discussing and understanding market movements and delivering to a common goal. Above all, we must have a plan for whatever our government is going to be facing – no one knows what the future holds. But we do know that if we concentrate on the right strategy, tools and skillsets, we can build the stability that will gear us up for whatever ministerial priorities the future brings,” she says.

Improve organisational processes

Procurement departments should leverage the opportunities the Procurement Act 2023 offers to help them design leaner processes and take advantage of new technologies to automate costly manual, repetitive tasks. Furthermore, Commercial must create an operating model that drives efficiency through greater collaboration. Due to the scale on which most government agencies operate–the NHS, for example, has 4,000 people buying products and services from more than 80,000 suppliers–departments have to focus on skills development and change management to facilitate increased collaboration.

Build organisational capability and retain talent

To remain resilient in the face of legislative, market and organisational challenges and changes, procurement departments must focus on building organisational capability and defining clear career paths to retain top talent.

Capability building in this context encompasses both a mindset shift and skills development. Commercial must incentivise and drive employees to focus more on stakeholder engagement, collaboration, and innovation. They should also ensure their staff receive the necessary training to use digital tools effectively and have opportunities to develop their procurement expertise (becoming experts in what they buy and how they buy it).

Build a resilient procurement function

Public procurement faces various challenges that can feel stifling. However, by developing an operating model that balances organisational, process, talent, and technology requirements, procurement departments can improve their effectiveness, efficiency, and resilience. Ensuring procurement departments act coherently and have deep category expertise to operate efficiently and effectively is the best way to enhance value for taxpayers and stakeholders.

Contact us to discuss your specific challenges and learn how we helped other public sector agencies identify and execute areas for improvement.