The call follows chancellor Gordon Brown's Budget statement last week, which promised to "remove unnecessary paperwork" for smaller firms.
Industry figures said the government needed to act quickly, as small contractors were being pushed out of markets such as the PFI because they could not cope with the bureaucracy required.
Colin Harding, chairman of Bournemouth contractor George & Harding, said: "Virtually every sector of construction is over-regulated. If the government really wants to help, it must simplify the Building Regulations and cut back on unnecessary demands like the registration of all operatives."
The industry wants the government to simplify PFI procurement to allow small contractors to bid. It is estimated that more than half of the bid cost of PFI schemes is spent on legal negotiations and handling procurement regulations.
Harding said: "The system is now so costly that it is almost impossible for small firms to get involved."
The call for this culture-change comes as a recent report shows that small contractors are doing well, despite their handicaps.
The study, by accountant PKF, found that output and new orders for the sector had risen, although growth was at a slower rate than in the final quarter of last year. The report said partnering contracts and commercial starts had boosted the sector. PKF warned, however, that harder times could be ahead given the overall downturn.
There was also strong growth in public non-housing orders. In the three months to 28 February these totalled £1.9bn, up 78% on the same period last year.