Can Tier 1 contractors win more public work through their SME supply chain? What the evidence says

Adriaan Bekker

4 days ago

12 min read

Research note · Sustainability Sciences Ltd · Published November 2026 · Last reviewed 31 October 2026 · Reading time about 9 minutes

Short answer. Yes, and the case is stronger than most bid teams assume. From 1 January 2027, public value (the Social Value Model) carries a minimum 20% of the score on central government contracts of £5m and above, up from 10% today, and the commitments a bidder makes are written into the contract and reported on publicly. The outcomes that score (local employment, apprenticeships, local and SME spend, resource efficiency, supply-chain carbon) are delivered largely through the supply chain, not from a Tier 1's head office. The Tier 1s that can evidence their suppliers' delivery hold marks their competitors cannot reach. The evidence below is drawn from primary sources: Cabinet Office procurement policy notes, the Procurement Act 2023 and its statutory guidance, client publications from Network Rail, HS2, National Highways and the Environment Agency, and the SCAPE 2026 construction benchmarking dataset. Where the evidence does not exist, this note says so.

Diagram: a Tier 1 tender scored on public value (10% today, 20% on contracts of £5m and above from 2027) asking for efficiency and resilience, local economic impact and skills development, with three SME suppliers (civils, labour supply, M&E) supplying the evidence. Consistent SMEs hold the evidence; credible SME partners win public value marks. — Where the public value evidence sits: the tender's asks are answered by the SME supply chain. Weightings per Cabinet Office PPN 002 and PPN 026.

Key findings

Weighting. Central government: minimum 10% of the total score today (PPN 002); 20% on covered contracts of £5m and above from 1 January 2027 (PPN 026). Carbon reduction and modern slavery requirements may be scored in addition to, not inside, that 20%.
Scoring. PPN 026 evaluates confidence in specific, measurable, time-bound and deliverable commitments on a 0/1/3/6/10 scale. Generic corporate ESG policy "must not be used" as evidence (PPN 002 guide).
After award. On contracts above £5m, at least three KPIs are set (Procurement Act s.52) and performance is assessed and published at least yearly (s.71), with contract performance notices live since 1 January 2026. Poor performance in the preceding five years can support discretionary exclusion from future tenders.
Where delivery happens. Network Rail targets at least 33% SME spend, direct and indirect, through Control Period 7. HS2's supply chain is 70% SMEs, with £4.5bn awarded at Tier 2. The Environment Agency puts 84% of its carbon footprint in its supply chain. In SCAPE's 2026 dataset of 445 projects, 97p in every £1 of measured social value came from local jobs and local spend.
The gap. Research for the Supply Chain Sustainability School and Cardiff Business School identifies limited resources, complex processes and a lack of clear guidance as the recurring barriers for SMEs; RICS reports 46% of construction professionals do not measure carbon across projects.
The unknown. No published UK dataset gives a typical score gap between first and second place, or the share of social value delivered by subcontractors. Both are stated here as evidence gaps, not estimates.

What changed in how public value is scored

Two Cabinet Office policy notes govern central government tenders. PPN 002 (February 2025) requires a minimum 10% weighting for social value in the total score, with a narrow exception to 10% of the quality score where market engagement shows the higher weighting would significantly reduce competition. PPN 026 (August 2026, guidance 28 October 2026) replaces it for procurements with a tender notice on or after 1 January 2027: 0% below £1m, 10% from £1m to £5m, and 20% at £5m and above.

Three details matter more than the headline percentages.

First, the 20% is a floor for the Social Value Model alone. The PPN 026 guidance says requirements such as carbon reduction or modern slavery provisions "should be in addition to" the 10% or 20% weighting rather than counted inside it. On a large infrastructure tender the total weight attached to public value, carbon and supply-chain governance can therefore sit well above 20%.

Second, the model has narrowed its focus. PPN 026 concentrates on jobs, skills and opportunities, and requires criteria to be relevant and proportionate to the contract. That is good news for contractors whose supply chains actually employ and train people on site, and bad news for responses built on corporate programmes far from the work.

Third, the scoring scale rewards confidence in delivery, not the size of the promise. The guidance's example scale awards 0 for no confidence or irrelevant evidence, 1 for limited confidence (including the absence of specific, measurable, time-bound commitments), 3 for acceptable, 6 for good with no material concern, and 10 for excellent. The guidance is explicit that quantity of commitment is not scored as a volume contest. The PPN 002 guide goes further on the opposite failure: criteria and metrics based on a bidder's general corporate policies "must not be used" where they are not relevant to the contract deliverables.

Outside central government the picture is similar in direction and looser in detail. NHS England has required a 10% minimum for net zero and social value since April 2022. Wales applies 10% where social value is included (WPPN 003); Northern Ireland a 10% minimum (PPN 01/21, from February 2025); Scotland sets no universal percentage but requires community benefits to be considered at £4m and above. English councils set their own weightings; Ealing, for example, states 5% to 10%. Network Rail has aligned its procurement questions with PPN 002 and National Highways has embedded the Government Social Value Model, but neither publishes a single client-wide percentage; the individual tender remains the authority.

What happens after the contract is won

The second change is less discussed and, for Tier 1s, more consequential. Social value used to be a bid-stage exercise. It is now a contract-performance exercise with public reporting.

PPN 002 requires all social value commitments made in the procurement to be reflected in the contract as terms, KPIs or performance indicators. The Procurement Act 2023 then does two things. Section 52 requires at least three KPIs on public contracts above £5m (with exclusions for frameworks, concessions and light-touch contracts). Section 71 requires performance against those KPIs to be assessed at least every twelve months and published; those obligations commenced on 1 January 2026, so the first contract performance notices fell due early in 2026. PPN 026 adds that contracts of £5m or more should carry at least one Social Value Model KPI, with departments reporting attainment to the Cabinet Office quarterly.

Ratings are published in five bands: good, approaching target, requires improvement, inadequate, other. A notice is also triggered within 30 days where damages become payable, a settlement follows a breach, or a supplier has been given the opportunity to improve and has not. Cabinet Office guidance confirms that contract performance in the preceding five years can contribute to a discretionary exclusion ground where the statutory conditions are met.

The practical consequence: a Tier 1 that promises apprenticeships, local spend or waste outcomes it cannot see being delivered in its supply chain is no longer taking a bid-writing risk. It is taking a contract and reputation risk that will be visible to every buyer it tenders to for five years.

It is too early for aggregate data. As at 31 October 2026 no official publication separates social value under-delivery from other KPI failures, and this note does not estimate it.

Where the public value actually sits

The outcomes that score are, by their nature, delivered where the work is done. Four independent sources point the same way.

SCAPE and Social Value Portal, 2026 benchmark. Across 445 construction projects worth £4.98bn, £1.1bn of social value was measured, about £0.22 per £1 of contract value. Of that, 97p in every £1 related to local jobs and local spend, and £407m was spend with local micro, small and medium enterprises; the dataset also records 40,531 weeks of training and apprenticeships.
Network Rail. About £7bn a year across roughly 4,000 suppliers, with a commitment to spend at least 33% with SMEs, direct and indirect, through Control Period 7. In 2025/26 more than 400 projects reported through its Rail Social Value Tool; the TransPennine Route Upgrade recorded 59p of social value per £1 of construction spend against a 50p target.
HS2. More than 3,000 suppliers, £11.5bn of subcontract awards, SMEs making up 70% of the supply chain and securing about £4.5bn at Tier 2; civil contractors' SME spend reached £942m in 2022/23.
Environment Agency. 84% of its total carbon footprint sits in its supply chain, which is why its decarbonisation effort is directed at suppliers.

Tier 1s' own reporting says the same. Kier reports £1.2bn spent with SMEs and VCSEs in FY26, about 53% of its total spend. Kier Transportation's audited social value for January 2024 to June 2025 (£154.8m, including 9,699 apprentice weeks and 1,123 employment opportunities) is attributed by the company to collaboration and upskilling across its supply chain.

Two cautions. None of these sources partitions social value into a share delivered by the Tier 1 and a share delivered by Tier 2 and 3; the evidence supports dependence on the supply chain, not a percentage. And monetised social value (the SCAPE £1.1bn) is a measurement of activity using the TOMs method, not a verified welfare gain; Scottish Government policy (SPPN 10/2020) explicitly rejects universal monetary measures of social impact for that reason.

Why a Tier 1 cannot produce this evidence alone

A main contractor's own scope on a typical scheme is management, design coordination and a share of the direct works. The civils package, the labour supply, the M&E, the haulage and the materials are where resource efficiency, local employment, apprenticeships and most of the carbon live. The evidence a high-scoring response needs (reuse rates, apprentice weeks, local hires, fleet data, waste transfer records) is held by those suppliers, if it is held at all.

The problem is that it often is not. Research by the Supply Chain Sustainability School with Cardiff Business School across civil engineering, rail, infrastructure and manufacturing SMEs identified limited resources, complex procurement processes and a lack of clear guidance as the recurring barriers to engaging with social value. RICS's 2025 survey of more than 3,500 built-environment professionals found 46% do not measure carbon across projects, up from 34% the year before, with 30% citing insufficient knowledge and skills. The Public Accounts Committee warned in 2023 that social value requirements can themselves restrict competition where firms cannot satisfy or demonstrate them, and PPN 026 now instructs buyers to avoid criteria that create unnecessary burdens for suppliers.

One figure is missing from the public record: the cost to an SME of answering duplicated social value, carbon and governance questionnaires from several Tier 1s. No construction-specific survey quantifies it. Anyone quoting a number for it is guessing.

What the opportunity is worth, with the assumptions shown

Because no published dataset gives the typical gap between first and second place in UK construction tenders, this note does not claim one. Sustainability Sciences' own tracker of 45 public tenders between 2016 and 2026 puts the usual gap at under five percentage points; that is our data, offered as an observation rather than a benchmark. What can be shown without a benchmark is how far social value scores move a result under stated assumptions.

Take a £10m to £50m central government contract tendered after 1 January 2027, so the Social Value Model carries 20%. Assume, and it is an assumption since Cabinet Office prescribes neither figure, that price carries 40% and other quality 40%. Using the PPN 026 example bands, a response that evaluators rate "good" (6) rather than "acceptable" (3) gains three raw points, which on a linear 0 to 10 denominator is 6 weighted points out of 100. If price is scored on a common relative formula (40 × lowest price ÷ bidder's price), 6 weighted points offset a price around 17.6% above the lowest bid, all else equal; under today's 10% weighting the same movement is worth 3 weighted points, or roughly an 8.1% price difference. Public authorities vary their formulas and the Sourcing Playbook cautions against casual use of relative price scoring, so these are illustrations of scale, not predictions. The direction is not in doubt: from 2027 the social value section on a large tender is worth more than most bid teams' entire pricing margin.

What is known to work, and what is not yet proven

The documented programmes share a pattern: the client or Tier 1 engages suppliers early, gives them a common reporting mechanism and counts the outcomes. HS2's early market engagement grew a 3,000-supplier base that is 70% SMEs. Network Rail combined a 33% SME-spend commitment with supplier guidance, internal SME champions and the Rail Social Value Tool. The Environment Agency used the Supply Chain Sustainability School to build supplier capability. Kier's transport business links its audited social value to upskilling across its supply chain.

What none of them publishes is causality: no study isolates the effect of a supply-chain development programme on a Tier 1's tender scores or win rate, and none reports the programme's cost to the Tier 1 or to suppliers. The honest reading is that the inputs and outputs are well evidenced, the commercial return is inferred from the scoring rules rather than measured, and the first hard data on delivery against promises will come from the contract performance notices now being published.

A practical approach

The evidence points to five elements that a Tier 1 supply-chain approach needs if it is to score and then survive the KPI regime.

Map the evidence to the tender, not the brochure. For each recurring tender theme (resource efficiency and resilience, local economic impact, skills) identify which suppliers hold the delivery and the records, and where the gaps are.
Align supplier objectives to the Tier 1's bid priorities. A small number of specific, measurable, time-bound commitments per supplier, chosen to match what the buyer scores, is worth more than a long list of good intentions. This is what the 6 and 10 bands describe.
Set an evidence standard. Dated records, kept all year, in a form an evaluator or contract manager can check: apprentice enrolments and timesheets, reuse and waste transfer records, local hire records, fleet data, payment performance.
Check it independently. Evaluators are instructed to score confidence. A commitment backed by independently verified records scores differently from one backed by a policy statement, and it holds up when the KPI is published.
Report annually and reuse. Suppliers' evidence should serve every Tier 1 they work for and every buyer the Tier 1 bids to, which is the only way the burden on SMEs identified in the research comes down.

Sustainability Sciences, a UK consultancy established in 2014, runs this approach through its Step-By-Step Partnership programme: SME suppliers work through a short plan of objectives aligned to their main contractors' tender priorities, keep the evidence to a defined standard with quarterly checks, and publish an annual report that the Tier 1 can cite. The programme is funded by the SMEs' membership rather than by the main contractor, which is how the supply-chain analysis and annual reporting are provided to Tier 1s at no cost. We publish the method in the programme's Member Guide and Core Objectives documents rather than claim a return we cannot yet evidence; the first contract performance notices will test everyone's claims, including ours.

Frequently asked questions

What is the minimum social value weighting on UK central government tenders? 10% of the total score under PPN 002 today. From 1 January 2027, under PPN 026, 0% below £1m, 10% from £1m to £5m and 20% at £5m and above, for covered procurements with a tender notice on or after that date.

Does the 20% include carbon reduction plans? No. PPN 026 guidance says carbon reduction and modern slavery requirements may be evaluated in addition to the Social Value Model weighting.

Are social value commitments enforceable? Yes. PPN 002 requires all commitments made in the procurement to be included in the contract as terms, KPIs or performance indicators. On contracts above £5m, performance against KPIs is assessed and published at least annually under the Procurement Act 2023.

What share of social value is delivered by subcontractors? No reliable published figure exists. The evidence shows heavy dependence on supply chains (for example, 97p in every £1 of measured social value in SCAPE's 2026 dataset relates to local jobs and local spend, and 84% of the Environment Agency's carbon footprint is in its supply chain) but does not attribute a percentage to Tier 2 and 3 suppliers.

Is there a typical winning margin in public tenders? Not in the public record. Assessment summaries give each bidder its scores against the winner's, but no national dataset aggregates them. Sustainability Sciences' own tracker of 45 tenders suggests under five percentage points; treat that as one firm's observation.

What does it cost a main contractor to develop its SME supply chain on public value? The published programmes (HS2, Network Rail, Environment Agency, Kier) do not report cost to the Tier 1 or to suppliers. Step-By-Step Partnership provides the supply chain analysis and annual reporting to Tier 1s without charge; suppliers pay membership at a partner rate.

Sources

Sustainability Sciences Ltd is a UK consultancy established in 2014. Step-By-Step Partnership is its programme for SME suppliers and their main contractors. This note is published for information; figures are quoted from the sources listed with their dates, and assumptions in the worked example are stated in the text.