City of York Council has had to review how it classifies the services it buys from businesses after a supplier raised concerns about how it handled a transport contract for taking disabled children to school.

The council was pulled up by the Cabinet Office as part of its SME Mystery Shopper scheme, which investigates instances where businesses feel local public bodies have treated them unfairly.

Under European procurement directives, services provided by businesses to local authorities are classified as either Part A services, or Part B services, which are subject to minimal legislative requirements.

The council handled the contract as a Part B service, and did not allow a period of time following the announcement of the contract being awarded for it to be challenged, as required for Part A contracts.

The Cabinet Office has asked the council to review the process by which procurement contracts are classified, and to look at all new contracts for services that have been previously classified as 'Part B' services.

Zara Carter, head of procurement at City of York Council said the Cabinet office concluded they had not breached any procurement regulations and recognised they proactively briefed all potential suppliers that the contract was a part B service at a bidder event before launching the tender.

She said: “We are absolutely committed to continuous improvement in our procurement service and to making it accessible for SMEs. Indeed, we have recently undertaken a review of our procurement service to ensure that the council is using its buying power effectively, supporting the local economy and providing value for money for residents.”

Minister for the Cabinet Office, Francis Maude, said: "SMEs are crucial to the future of this country and to building a more diverse and rigorous economy.

"Mystery Shopper lets us find out about procurement problems and the cases published today show that our actions are having real results for businesses out there."

Nationally 67 cases have been published today, covering a wide range of procurement issues.The service has received 238 cases, of which 193 have been closed with 81 per cent resulting in a positive outcome, he said.