UK: Procurement Act 2023

What is it?

The new Procurement Act 2023 ("the Act") was granted Royal Assent on 26 October 2023. It will replace the current Public Contracts Regulations 2015 ("PCR"), Utilities Contracts Regulations 2016, Concessions Contracts Regulations 2016 and Defence and Security Public Contracts Regulations 2011 with one single act and represents a significant transformation of public procurement law in this country.

Why was there need for a change?

The existing public procurement regime was a product of the UK being a member of the European Union. The various Regulations were the result of the transfer of EU Directives into domestic law. With the UK's exit from the European Union, the Government decided to undertake an overhaul of the public procurement regime.

So is it in force now?

No. The Act is likely to come into force in October 2024, following a six-month lead-in period. So until then, the existing regime will still apply (other than to the procurement of NHS healthcare services for which the new Provider Selection Regime (PSR) came into force on 1 January 2024).

Secondary legislation (in the form of new Regulations) is expected to be laid before Parliament in the next couple of months. This will provide more detail to support the Act.

How is it relevant to your organisation?

Commissioners: If you are a public body that procures services from third party contractors, then the Act will apply to you. That includes central Government, local authorities and many non-departmental public bodies (NDPBs) – but can extend more widely, too. If you receive public funding to carry out work for the public benefit, then the Act may well apply to you – and that includes a number of charities, depending on their funding model.

Suppliers and partners: If you are an organisation that bids for public contracts, then the Act will apply to you. That includes charities and social enterprises – around 5% of public contracts are won by this sector, with the majority of those contracts coming from local authorities.

More broadly, £300 billion per year is spent on public procurement. That accounts for £1 in every £3 of public money spent annually. It is relevant to all of us!

We procure services. What does it mean for us?

We will provide more detail and training in the coming months but key changes from the current regime include:

• An emphasis on transparency. What this means in practice is a significant increase in the number of notices that contracting authorities will have to publish throughout the whole lifecycle of a procurement and then subsequently in relation to their management of the contract. Preparation and publication of these notices is likely to increase the workload on contracting authorities and open up the decisions made during the process to more scrutiny.
• A streamlining of the procedures available. The open procedure from the PCR remains but the restricted, negotiated, competitive dialogue and innovation partnership procedures have been scrapped in favour of a new "competitive flexible procedure". This is intended to enable contracting authorities to design a procedure that they consider appropriate for the purposes of awarding the contract (provided that the procedure is a proportionate means of awarding the contract, having regard to its nature, complexity and cost). In certain prescribed circumstances, broadly similar to those under the PCR, a direct award can also be made.
• Open frameworks. The Act introduces the new concept of open frameworks. These can be established by contracting authorities for a period of up to eight years, provided that they are reopened for competition at least once during the first three years and then at least once during each five-year period. This is intended to give contracting authorities the option of retaining a framework on the same terms for eight years, but refreshing the suppliers on the framework.
• Dynamic markets. Dynamic markets replace dynamic purchasing systems under the PCR. However, a contracting authority can now establish a dynamic market for all procurements, rather than simply for commonly used purchases, as is currently the case.
• From MEAT to MAT. Contracts are now to be awarded to the "most advantageous tender" rather than the "most economically advantageous tender". This is intended to shift the emphasis away from the award of contracts on the basis of price to a broader consideration of whether the tender meets the contracting authority's requirements. For example, it might enable a contracting authority to give more weight to social value or environmental impact in its award criteria than under the current regime.
• Contract modifications. The permitted modifications from the PCR are carried over to the new Act. A modification will also be permitted as a result of "the materialisation of a known risk". In addition, when considering whether a proposed modification amounts to a "substantial" modification (which would normally trigger a new procurement), there is no longer a requirement to consider what the effect of the modification(s) would have been on the original procurement. However, in line with the new emphasis on transparency, any contract modification will have to be preceded by the publication of a contract change notice. And a contracting authority may provide for a voluntary standstill period of not less than eight working days from the publication of the contract change notice.

We're a supplier. What does it mean for us?

All of the above key changes are likely to be relevant to suppliers too.

Increased transparency will mean more opportunities to investigate and scrutinise the market you operate in – including reviewing the terms of any contract change notices published by contracting authorities in relation to contracts delivered by your competitors. However, equally, it is likely to mean greater scrutiny of the public contracts that you deliver.

How much contracting authorities take advantage of the greater flexibility around frameworks and dynamic markets remains to be seen. However, they may present increased opportunities for suppliers than is currently the case.

In addition, the following changes are also worth noting:

• Exclusions and debarments. The mandatory and discretionary grounds for excluding a supplier are (broadly speaking) carried across from the PCR. However, the current high bar for discretionary exclusion for poor performance is going to be significantly lower. This is particularly important as the Act introduces of a new "debarment list", managed by the Government. This will contain the names of all suppliers who are debarred from competing for public contracts. A supplier that has been excluded from a procurement for, for example, previous poor performance or breach of contract, may, following a referral from the contracting authority, be investigated by the Government and placed on the list. The supplier may apply to court to have the decision to place it on the list suspended until the court has had an opportunity to consider whether the decision was fair. However, even the possibility of being placed on the debarment list is likely to have very serious repercussions for a supplier.
• Standstill period. The standstill period under the new Act is now eight working days as opposed to ten days under the PCR. However, more importantly, the automatic suspension which prevents a contracting authority from entering into the contract with the winning bidder will only be triggered if a claim is issued at court and the contracting authority notified before the end of the standstill period. This differs from the current position where it was triggered if the contract had not been entered into, even if the standstill period had come to an end. This may result in the need to issue proceedings to challenge the outcome of a procurement even more quickly than is the case at the moment.
• Assessment summaries. This is the new term for what was the standstill letter or notice of the decision to award under the PCR. The detail of what needs to be included in the assessment summaries will be contained in the secondary legislation but from the draft legislation it seems that there will no longer be a requirement for the contracting authority to provide detail of the relative advantages and characteristics of the winning bidder. We will be able to provide more information when the secondary legislation is finalised, but suppliers will need to be aware of what information they will be entitled to in the assessment summary they receive.
• From principles to objectives. The PCR expressly state the principles upon which the whole public procurement regime is founded, namely the EU Treaty principles of equal treatment, transparency, non-discrimination and proportionality. It is breach of these principles that provides grounds for a supplier to challenge the outcome of a procurement. While these concepts exist as themes within the Act, with the exception of equal treatment, they are no longer set out as overarching duties. Instead, they are replaced by objectives: delivering value for money, maximising public benefit, sharing information with suppliers, and acting with integrity. And a contracting authority "must have regard to the importance of" these objectives in carrying out a procurement, rather than these being legal obligations. It will only be once the Act is in force that we will have a better understanding of the extent to which the courts consider that the circumstances that previously gave rise to a challenge under the PCR are challengeable under the Act.

What should we be doing now?

In December 2023, the Cabinet Office released a number of "Knowledge Drops" for three different audiences: contracting authorities, suppliers, and small and medium sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs). The Knowledge Drops comprise short videos providing a useful introduction to the Act. For example, for SMEs and VCSEs, they include explanations of how the Act makes it easier for suppliers to participate in procurements and the full range of value for money considerations that contracting authorities may consider in their procurements. They can be found here.

We will be running a series of events in the run up to the new Act going live in October, so look out for invites over the next few weeks. We will also be publishing further updates about the changes throughout 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.