Public procurement is set for a huge shake-up later this year, with a significant simplification of the EU public procurement and utilities procurement rules which the UK retained post-Brexit. The Procurement Act 2023 (the Act), which received Royal Assent on 16 October 2023, will create a single regime for public procurement across England, Wales and Northern Ireland (but not Scotland, which will continue to operate its own devolved procurement regulations derived from EU law). Secondary legislation (regulations) will be introduced during 2024 to give effect to some elements of the Act covering areas such as cybersecurity, environment, social value and responsible sourcing.
The Act is expected to come into force in October 2024, although the government has promised to give at least 6 months’ advance notice of its effective date.
Background
When it received Royal Assent on 27 October 2023, the Cabinet Office’s press release noted that the Act drew “on newfound Brexit freedoms” for the benefit of British businesses, and will “create a more transparent procurement system”, lauding a range of benefits for the new public procurement regime, including:
- simpler and more transparent procurement processes which support small and medium-sized businesses to secure a greater share of public expenditure,
- clearer and faster competition processes for use in emergency situations such as pandemics, and
- enabling contracting authorities to embrace innovation more, and procure in more flexible and innovative ways.
More than 350 individual regulations derived from EU Directives (contained in the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011) have been repealed by the Act although they will continue in force until the Act becomes effective. Contracts awarded under the old regime will continue to be so governed, including framework agreements which typically last for four or eight years depending on the applicable regulation.
Overview of the Act
Including its Schedules, the Act runs to some 128 pages. It covers contracts awarded by central government departments, their arms’ length bodies and the wider public sector, including local government and health authorities, as well as by utility companies (water, energy and transport) and concession contracts (i.e. where the supplier takes the operating risk for the supply of certain works or services). There is a simplified regime for lower-value contracts and a carve-out for procurements under the Health and Care Act.
Summary of the changes
While the Procurement Act doesn’t really bind suppliers directly, it will have a huge impact on suppliers doing business with the public and utility sectors. Secondary legislation (see above) will provide a much better indication of how the new regime will work in practice. However, some of the main changes affecting suppliers include:
Procurement objectives
With the Act moving away from familiar EU Directive terminology to a more UK-centric approach, contracting authorities will, going forward, need to give due regard to the following four objectives:
- delivering value for money;
- maximising public benefit;
- sharing information to allow suppliers and others to understand procurement policies and decisions; and
- acting, and being seen to act, with integrity.
Contracting authorities must also treat suppliers in the same way unless a difference between the suppliers justifies different treatment.
MAT
Contract awards will be made on the basis of "most advantageous tender" (replacing MEAT - "most economically advantageous tender"). In addition, more focus will be placed on the contract lifecycle which will see, for certain contracts, the need to set KPIs and annually publish an assessment of performance against such KPIs.
Transparency and accountability
The Act will introduce updated transparency principles and, for major projects, new sustainability reporting duties for contracting authorities, aimed at improving their accountability.
Flexible procurement processes
The Act will introduce simplified bidding processes intended to make it easier to bid, negotiate and work with the public sector. The new processes will be (a) Open (b) Competitive Flexible Procedure, and (c) Limited Tendering (i.e. direct award). Frameworks will be more flexible, so prospective suppliers are not shut out for long periods of time and, if not included at the start, can potentially join at certain stages during the framework’s term.
Dynamic purchasing systems
Contracting authorities will be able to use e-dynamic purchasing systems for any type of purchase, open to any supplier that meets the selection criteria, and open to access at any time. Contracting authorities will also be able to use sub-categories within a dynamic purchasing system.
Digital procurement platform
The Act will create a new central digital platform. Suppliers will need to register on the platform and upload their details which will then be available to be used for multiple bids. The platform will also provide a single view of all opportunities in the public sector.
Disbarment regime
There will be a public debarment list to prevent some suppliers bidding in sensitive areas such as defence and national security, which will be policed by a new National Security Unit for Procurement, as well as excluding suppliers who have performed badly on past public sector contracts or based on modern slavery or other misconduct grounds.
Responsible contracting
Public bodies will have to roll out policies which set out due diligence and anti-corruption standards for suppliers and their subcontractors, intended to ensure ethical behaviour across the public sector supply chain.
Payment terms
Section 68 of the Act requires contracting authorities to pay undisputed invoices within 30 days of the date the invoice is received or payment fell due. Section 73 implies the same payment terms into subcontracts. Pursuant to Section 69, contracting authorities must publish to a central platform (i.e. Find A Tender) a Payments Compliance Notice setting out details of compliance against the Section 68 requirement.
Subcontractors
Of particular note for bidders will be the impact on subcontracting (see Sections 28-30 of the Act). Bidders are advised to introduce processes and checklists which ensure that they always check that proposed subcontractors are not on the debarment list and that they include appropriate warranties and termination rights in their subcontracts e.g. allowing termination for cause in the event that a subcontractor is placed on the debarment list.
Standstill
The Act provides for an eight working days standstill period (down from 10 days from contract award under the current regime). Automatic suspension will only be available if a claim is brought (and the contracting authority is notified) within that period.
Remedies regime
The remedies regime for challenging procurement decisions will change, with a new High Court Procurement Division to be set up with exclusive jurisdiction over procurement disputes. The Act will also introduce new remedies, such as the power for the court to impose financial penalties on contracting authorities for breaching procurement rules, and the power to order the suspension or termination of contracts awarded unlawfully.
Resources for practitioners
More information is available on the Government’s Transforming Public Procurement website. There is also a series of video Knowledge Drops and Supporting Factsheets aimed at contracting authorities, suppliers, SMEs and voluntary, community and social enterprises (VCSEs), and a growing body of Guidance and Support documentation, such as a useful Planning and Preparation Checklist for contracting authorities gearing up for the new regime, which outlines initial actions in four key areas - policies and processes, systems, people, and transition. Commercial procurement staff working across government will be required to undertake formal learning and professional development, leading to a Practitioner Certificate.
If you have any questions or queries about the new Procurement Act, please contact Tim Wright or your usual Fladgate contact.
