New federal government procurement rules designed to lift the proportion of work handed out to small to medium enterprises have been criticised as “underwhelming” by the small business lobby.

Rules that came into effect on Monday require agencies to source 25 per cent of contracts below $1 billion and 40 per cent of jobs below $20 million from local companies with less than 200 employees, known as SMEs. Previously the shares were 20 per cent and 35 per cent respectively.