The Impact of Clarification Notices: The Hidden Barrier to SME Success in Defence Procurement

Small and Medium-sized Enterprises (SMEs) are integral to the UK’s defence, security, resilience, and humanitarian sectors. They offer agility, innovation, and specialised expertise that larger corporations often lack, or find difficult due to their scale and internal bureaucratic process.

During the Westminster Hall debate on SME participation in defence procurement, numerous MPs raised concerns over the barriers faced by smaller firms in securing Ministry of Defence (MOD) contracts.

Despite their recognised value, SMEs continue to face significant obstacles when competing for public sector contracts. One of the most detrimental and often overlooked of these obstacles is the use of clarification notices—modifications to tenders that can disrupt or even eliminate an SME’s chance of securing vital procurement opportunities.

Building on the themes discussed in our previous article, we examine here how clarification notices impact SMEs, particularly in the resilience, humanitarian, security, and defence sectors. We also examine how outcome orientated procurement frameworks can provide a more predictable and SME-friendly alternative, as well as providing enhanced support for national security.

Clarification Notices: A Disruptive Force in SME Procurement

The tendering process for defence and security contracts is highly competitive, detailed, and rightly rigorous. This, however, means SMEs must carefully allocate their limited resources to bids that they feel they have a good chance of winning, given how much time, energy, and effort it will take up and its opportunity cost to such businesses. Unlike large firms with dedicated procurement teams, SMEs must be strategic in selecting which tenders to pursue. It is a matter for them of balancing the risk, effort, and reward.

A clarification notice—issued midway through a procurement process—can change the scope, eligibility criteria, technical requirements, or pricing expectations of a contract. While intended to provide additional information or correct ambiguities, these notices can create chaos for SMEs that have already invested heavily in preparing their submissions.

Clarification notices can render previous work redundant; SMEs may have spent weeks tailoring a proposal to specific requirements, only for a clarification notice to make their bid irrelevant. Worse, if a notice narrows the eligibility criteria, an SME that initially qualified may find itself suddenly ineligible. In many cases, a single tender process can be subject to multiple clarification notices, each introducing changes that can significantly impact SMEs.

These notices often arrive at different stages of the tendering period, requiring SMEs to revise their submissions repeatedly or, in some cases, withdraw entirely if the new criteria exclude them. This creates an unstable and resource-draining environment for smaller businesses, which lack the dedicated bid teams of larger corporations. There have been instances where tenders lasting as little as six weeks have had six or more clarification notices. As a result, the pool of potential suppliers is inadvertently continuously narrowed, not necessarily based on quality or capability, but rather due to an SME’s inability to keep pace with unpredictable changes, ultimately favouring larger firms with more resources to absorb the disruptions.

The impact this can have on SMEs and the market as a whole is hugely detrimental. The financial and operational disruption clarification notices can have on SMEs is not to be underestimated. Often SMEs have to prioritise tenders over other business opportunities. A last-minute change can leave them unable to reallocate resources effectively, impacting their ability to generate revenue, invest, and ultimately grow. This negatively impacts the local and national economy, an industry and its development. It means less opportunity for increased local employment, and at worst puts jobs at risk.

The cumulative effect of repeated clarification notices causes a severe erosion of trust in the procurement process. Repeated experiences of changes to tender requirements through clarification notices only act to discourage SMEs from participating in tender processes, leading to reduced competition and a weaker supply chain. These impacts cannot be underestimated: on our economy and to our national security.

Security Implications of Limited SME Engagement

In sectors where national security and resilience are paramount, the instability caused by shifting procurement criteria can have far-reaching implications. As highlighted in the Westminster Hall debate, there is a pressing need for defence procurement to support domestic SMEs and ensure that contracts contribute to national security and economic growth. However, the overuse of clarification notices can lead to outcomes that directly contradict these objectives.

When clarification notices disrupt SME participation, public sector bodies can be limited to products and services from foreign suppliers, or sole producers that can’t be replaced if issues  arise. This presents serious risks, particularly when dealing with suppliers linked to adversarial nations, who often exploit dependencies in critical areas. For instance:

• A UK-based SME developing cybersecurity solutions may initially meet a tender’s requirements, only for a clarification notice to alter specifications in a way that favours a non-UK provider.

• Procurement decisions could lead to the acquisition of resilience and humanitarian equipment from Chinese manufacturers, bypassing UK SMEs due to last-minute changes that disqualify domestic suppliers, or it is hard for them to compete on a pricing point.

• Defence technology contracts may shift towards global firms rather than UK innovators, undermining efforts to build sovereign capability.

The underrepresentation of SMEs not only hampers economic and technological progress but also poses security risks and undermines broader policies reducing reliance on foreign supply chains and enhancing the UK’s resilience in times of crisis.

Overreliance on foreign suppliers for critical defence equipment can compromise national security and there have been a number or well documented incidents that underscored these vulnerabilities:

• Chinese Surveillance Equipment: Reports have revealed extensive use of Chinese-made surveillance cameras, such as those from Hikvision, across UK public sectors, including police forces raising concerns about potential espionage and data security risks associated with such equipment. (The Guardian)

• Military Apparel Sourcing: The Ministry of Defence faced criticism for spending £70 million on military clothing sourced from China, including essential gear like "anti-microbial pelvic protection drawers." This reliance on foreign manufacturing for critical military supplies has raised questions about supply chain security and the potential for compromised equipment. (The Scottish Sun)

• Technology Transfers: Chinese AI chip firms, blacklisted over concerns related to advanced weapons and surveillance systems, have accessed cutting-edge technology from UK-based companies, highlighting the risks of intellectual property transfer and the potential for adversarial exploitation of sensitive technologies. (The Guardian)

A Solution: Framework-Based Procurement

A key theme of the Westminster Hall debate was the need for structured procurement processes that offer stability and predictability for SMEs. Procurement frameworks provide a structured alternative to traditional tenders, mitigating the disruptive effects of clarification notices.

RSF has developed a framework approach that enhances SME participation by offering:

1. Fixed Procurement Criteria: Unlike open tenders, framework suppliers operate within predefined requirements, eliminating the risk of shifting specifications.

2. Pre-Vetted Suppliers: SMEs approved under RSF frameworks undergo due diligence in advance, ensuring they remain eligible for relevant procurement opportunities.

3. Alignment with Objectives, Not Just Specifications: Instead of seeking predefined products or services, RSF works with public sector bodies and customers to procure for an objective, ensuring that the right solutions are sourced from the outset, and later clarifications are not necessary.

4. SME-Focused Engagement: RSF ensures that when tenders are issued, only those SMEs whose capabilities match the requirements are invited to bid, reducing wasted effort and improving success rates.

Objectives rather than Specification: Why objectives produce better results and keep tenders competitive

A critical weakness of the traditional procurement model is its focus on specific product or service specifications rather than the underlying objectives of the procurement. It ensures that procurement decisions reflect actual operational needs rather than rigid bureaucratic criteria, reduces the likelihood of later-stage modifications (clarification notices) that disrupt SMEs, and creates a more efficient and effective procurement ecosystem where SMEs have the confidence to invest in the bidding process.

Reforming SME Procurement

If the UK is serious about leveraging its highly skilled SME base in defence and security, it must address the systemic challenges caused by inconsistent procurement practices.

Key recommendations based on the findings of the Westminster Hall debate and RSF’s work in procurement include:

• Eliminating unnecessary clarification notices by ensuring that tender specifications are rigorously assessed before being issued.

• Ensuring an outcome based approach to procurement, to ensure that the best solution available, rather than a narrow pre-identified solution is artificially selected.

• Enhancing SME engagement by creating a more transparent dialogue between SMEs and procurement officers.

• Expanding framework-based procurement to provide SMEs with more stable and predictable contracting opportunities.

• Ensuring alignment between procurement and national security policies to prevent foreign suppliers from displacing UK firms due to process inefficiencies.

Clarification notices may seem like a minor procedural aspect of procurement, but their impact on SMEs is profound. They introduce uncertainty, increase costs, and discourage participation, ultimately weakening the UK’s defence and security supply chains.

A shift towards framework-driven, objective-based procurement models, as championed by RSF, offers a way to enhance SME success, reduce waste, and align procurement with the UK’s national security priorities. By adopting these approaches, the UK government can create a more resilient, innovative, and SME-friendly defence procurement ecosystem—one that supports growth, investment, and long-term economic stability.

For SMEs seeking stability in the procurement process, or for procurement officers looking to streamline engagements with trusted suppliers, RSF provides a reliable, structured alternative to traditional tenders—one where SMEs can participate with confidence, free from the disruptive effects of shifting criteria.