Winning a public sector contract feels like a promotion. Somebody official has assessed your business against a scoring matrix and decided you are good enough, the revenue is contracted rather than hoped for, and the buyer is not going to go bust owing you money. For a small firm that has spent years chasing private clients, it is an enormous relief.
Then the reality arrives, and it is not that public work is bad. It is that public work has a completely different shape to the work you are used to, and the shape is the thing nobody warns you about. What follows is the honest version — illustrative figures, but a familiar sequence.
The bid costs more than you think, and you cannot invoice for it
The first surprise is how much of your own time a serious bid consumes. Policies you do not have, references you have to arrange, method statements, insurance certificates, financial accounts, social value commitments, quality assurance evidence. For a small firm this is usually the owner, in the evenings, for two or three weeks.
That is a real cost with a real number attached. If bidding takes 60 hours of your time and your chargeable rate is £65 an hour, the bid cost you around £3,900 whether you win or lose. Firms that bid casually for everything and win one in six are running a marketing spend they have never once totalled up.
The fix is not to bid less. It is to bid deliberately: fewer bids, better targeted, with a reusable library so the second submission takes a fraction of the first. And to walk away early when the specification tells you the incumbent wrote it.
What actually changed in 2025
The Procurement Act 2023 went live on 24 February 2025 and genuinely improved things for small suppliers, mostly by removing repeated form-filling.
The Central Digital Platform is now the single place where suppliers register their core information — company details, financial information, exclusion grounds — and reuse it across bids, rather than re-entering it for every authority. Notices are published there too, so the market is easier to see in one place.
The payment provisions matter more. Section 68 implies 30-day payment terms into every public contract, and section 73 does the same for public sub-contracts, so the terms flow down the supply chain rather than stopping at the main contractor. From 1 October 2025 contracting authorities have had to capture payment data and publish payment compliance notices on the Central Digital Platform, which means their record is visible before you bid rather than discovered afterwards. Check it. An authority that consistently misses 30 days is telling you something about your future cash flow for free.
Thirty-day terms are a legal position, not a cash-flow plan. The clock still starts when the invoice is accepted, and acceptance can take a while.
Mobilisation is where the cash goes
The gap between winning and being paid is the part that hurts, and it is entirely predictable if anyone sits down and maps it.
Take an illustrative three-year contract worth £180,000 a year, invoiced monthly at £15,000. Before you deliver anything you need two extra people recruited and inducted, uniforms and identification, DBS checks, additional equipment and an insurance uplift the specification requires. Call it £14,000 of spend in the four weeks before the contract starts.
Now the timeline. Month one you deliver and pay wages weekly. You invoice at the end of month one. Payment lands 30 days later, if everything goes smoothly. So you have funded roughly £14,000 of mobilisation plus two months of payroll — perhaps £22,000 more — before the first £15,000 arrives. That is a £36,000 hole, on a contract that is genuinely profitable over its life.
This is why firms with good contracts still run out of money. Nothing about that sequence indicates a bad deal. It indicates a working capital requirement that had to be arranged in advance, and often was not.
The margin conversation nobody has before signing
Public specifications are precise, which is a virtue right up until you price them from your private-work instincts. Private clients accept a bit of flex; public contracts define the standard, the frequency, the reporting and the response time, and then hold you to all four.
Price the whole obligation, not the visible work. Monthly reporting takes someone half a day. Contract review meetings take an afternoon and travel. Key performance indicator evidence has to be collected as you go. None of that is billable and all of it is mandatory, and on a small contract it can quietly consume several points of margin.
Fixed pricing across a multi-year term is the other trap. If your costs are mostly wages, and wages rise every April with the National Living Wage, a three-year fixed price is a decision to become less profitable each year. Ask about indexation before you bid, not at the first review.
Concentration is the real risk
A £180,000 contract inside a £400,000 business is not a customer. It is nearly half the company, delivered under terms you cannot change, on a schedule that ends on a known date whether or not you win the re-tender.
That is the same trap described in the client who became sixty per cent of revenue, with an added twist: public contracts end cleanly. There is no drift into an informal continuation. There is a re-tender you might lose to someone cheaper, and a date in the diary when the revenue simply stops.
So treat a win as a deadline to diversify, not a reason to stop selling. The firms that handle public work well use the contract's stability to fund business development, rather than letting it absorb every hour they have.
Six questions to answer before you bid
First, what does the bid cost in hours, and what is your realistic win rate on this type of work? Second, what does mobilisation cost in cash, and where is that cash coming from? Third, have you priced the reporting, the meetings and the evidence gathering, not just the delivery? Fourth, what happens to your price if wages rise — is there indexation, and if not, what does year three look like? Fifth, what percentage of turnover will this be at its peak, and can the business survive losing it at re-tender? Sixth, what does the authority's published payment record look like?
If you cannot answer the second and fourth, do not bid yet. And whether the work is public or private, the discipline underneath is the same one covered in how to write a quote that wins the job: understand what the job actually costs you before you decide what to charge.
Would we do it again
Yes, but differently. Public work is genuinely good for a small firm. It is contracted, it pays, it builds a track record that unlocks the next tender, and the 30-day terms now implied through the supply chain are better than most private clients volunteer. The mistake is not bidding for it. The mistake is treating a win as an arrival rather than as an investment with a defined payback period.
Go in with the cash arranged, the margin honestly calculated, the non-delivery obligations priced, and a plan for the day the contract ends. Do that and the contract is exactly what it looked like from the outside. Skip it and you will spend three years working very hard for a customer who always pays, and still wonder where the money went.
Common questions
How quickly do public sector bodies have to pay small suppliers?
Section 68 of the Procurement Act 2023 implies 30-day payment terms into every public contract, and section 73 does the same for public sub-contracts, so the terms are passed down the supply chain rather than stopping with the main contractor. Since 1 October 2025 contracting authorities have had to capture payment data and publish payment compliance notices on the Central Digital Platform, so an authority's actual record is visible before you bid. The practical caveat is that the 30 days runs from the invoice being accepted, and disputed or incorrectly submitted invoices restart the process, so submission accuracy matters as much as the legal position.
Do I need to fill in the same supplier information for every bid?
No, and this is the main practical improvement of the current regime. Suppliers register their core information once on the Central Digital Platform — company details, financial information, exclusion grounds and connected persons — and that information is reused across procurements rather than re-entered for each one. Procurement notices are published in the same place, which makes the market easier to monitor. You will still write bid-specific content: method statements, social value commitments and quality responses are always tailored. Building a reusable library of those answers is what turns a three-week first bid into a three-day second one.
How much working capital does a new public contract need?
More than most owners plan for, because mobilisation spend comes before the first payment. On an illustrative contract worth £15,000 a month, you might spend £14,000 on recruitment, uniforms, checks and equipment before day one, then fund roughly two months of payroll before the first invoice is paid at 30 days. That is around £36,000 of cash out before any cash in, on a contract that is profitable across its term. Map the sequence week by week before you bid, and arrange the facility in advance — an overdraft or invoice finance line negotiated when you are calm is far cheaper than one negotiated in month two.
Is it worth bidding as a subcontractor rather than the main contractor?
Often, for a first contract. As a subcontractor you take a smaller share and give up the direct relationship, but you also avoid the full bid burden, the reporting obligations and much of the mobilisation cash requirement, while still building a public sector track record you can cite in your own future tenders. The 30-day payment terms now flow down to public sub-contracts, which removes the traditional worst part of the arrangement. The main thing to check is what the main contractor requires of you contractually — the obligations passed down are sometimes heavier than the share of the revenue justifies.
