Procurement Act 2023 – Government Contracts, Procurement & PPP


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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.

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