The Procurement Act 2023 reforms UK public procurement. Coming into force in October 2024, the Act makes public procurement more efficient, transparent, and aligned with national priorities.
What is the Procurement Act 2023?
The Procurement Act 2023 received Royal Assent on 26th October 2023 and reforms procurement rules in England, Wales, and Northern Ireland. It is based on the green paper “Transforming Public Procurement” published a little over 3 years ago. The Act consolidates the general, utilities, concessions, and defence regulations, into one comprehensive legislative framework, and replaces regulations such as the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, Concessions Contracts Regulations 2016, and the Defence and Security Public Contracts Regulations 2011. It acts as a unified primary legislative document and requires public authorities to abide by its new directives. It’s important to note that any procurement processes started before the new Act comes into effect will still be governed by the previous regulations.
What is the Procurement Act 2023 aiming to achieve?
The government’s policy objectives driving these changes, as outlined in the House of Lords Library Briefing on May 20, 2022, include:
- Enhancing transparency and accountability in all stages of the procurement process.
- Broadening market access to include more opportunities for SME suppliers.
- Streamlining the procurement process to be more efficient and to have clearer goals.
- Achieving better value for money for both contracting authorities and the public.
- Procurement to support ‘national priority outcomes,’ as outlined in PPN 05/21.
The Act marks a departure from the principles of the European Treaties, pivoting towards a nationally oriented framework. In this context, contracting authorities should shift their focus to prioritising value for money, maximising public benefit, and maintaining integrity. While it remains essential for authorities to treat suppliers equitably, the Act allows for differentiated treatment of suppliers if justified by distinct circumstances or characteristics of the suppliers. This nuanced approach will permit more flexibility while ensuring fairness and efficiency.
Authorities should now focus on several key areas: (a) ensuring procurement delivers good value for money; (b) enhancing the benefit to the public; (c) disseminating information to help suppliers and others comprehend the procurement policies and decisions of the authority; and (d) maintaining and demonstrating integrity in actions. Additionally, it is mandatory for authorities to provide equal treatment to all suppliers, except in cases where distinct differences between suppliers warrant a different approach.
Some aspects of current procurement regulations will remain, such as the default 4 (four) year duration of “closed” framework agreements. But a new concept of “open” frameworks will allow for 8 (eight) year’s duration, and they must be reopened to consider new entrants. This is a welcome and exciting change that is likely to be one of the most significant changes, given the huge volume of business that is awarded via frameworks.
Summary of the most significant changes
Scope
- The Act replaces all existing rules in England, Wales & Northern Ireland from Oct ’24.
- Scotland has opted out.
Frameworks
- New class of “Open” Frameworks must be reopened at 3 (three) and 5 (five) years and may run up to 8 (eight) years. “Closed” frameworks are largely unchanged.
Supplier Registry
- Suppliers will be able to register once to pre-populate pre-qualification Supplier Questionnaires.
Procurement Process Changes
- Buyers will have increased flexibility to design the way in which they buy.
- Buyers will be evaluating to choose the “Most Advantageous Tender” (as opposed to the current “Most Economically Advantageous Tender”). This will allow selection of suppliers based on broader criteria.
- Buyers will have increased grounds for direct award.
- The standstill period will be 8 (eight) working days.
- Any change of duration or value of more than 10% will require re-competition.
- Buying Procedures will either be a “open” or can be any mix of self-designed procedures.
- Mid-process changes are allowed but must be announced by buyers.
- Additional transparency notices must be published.
Contract Management
- Changes can be made mid contract, subject to new guidelines.
- Contracts over £5m require 3 KPIs and annually published outcomes.
- Buyers have enhanced contract termination rights, e.g., for newly excluded suppliers.
Supplier Exclusion
- A register will be kept of debarred suppliers with appeals and rules defined.
- Enhanced supplier exclusion grounds have been added.
Remedies
- Much has been retained from the existing rules.
- “Ineffective” has been changed to “set aside”.
- Challenges are not allowed for inclusion on the Debarred list.
- Any challenge made during standstill will automatically stop the process.
- A set of interim orders for courts to apply have been defined.
More Detail on the Changes
Frameworks & Dynamic Marketplaces
Framework agreements will be classified as either “Open” or “Closed”. The rules for Closed frameworks are similar to the existing rules but Open frameworks may last for up to 8 (eight) years. Also, Open frameworks must then be reopened for new applicants to be considered within 3 (three) years of the first award, and again at 5 (five) years, if over 4 year’s length. A reopened framework will automatically terminate previous instances. Closed frameworks may also exceed 4 (four) years as an exception, e.g., for highly specialised technical supply.
The new rules redefine existing dynamic purchasing systems as “Dynamic Markets” and have expended the concepts and rules for their use. E.g. a competition may be held that is restricted to members of a particular Dynamic Market.
Supplier Registry
The Act introduces a new supplier registration system to centralise supplier information . This should be the single place of entry e.g., for Supplier Questionnaire (SQ) details that procurements should then reference for core supplier information. This should reduce administration and the costs of bidding and buying.
Procurement Process Changes
Increased Flexibility in Procurement Procedures & Terms
Instead of adhering to strict procurement procedures, authorities now have the discretion to choose their preferred method. They can opt for either a “competitive tendering procedure” (which is the equivalent to a current unrestricted single phase “Open” procedure) or an entirely flexible one, which can be self-designed to incorporate any procedure that suits their needs, e.g., a two-stage competitive dialogue for a restricted set of specialist providers. So, contracting authorities will have the flexibility to design their own procedures, provided they are “appropriate” to the procurement in question, and must be described at the advert stage, not designed ad hoc or mid process.
Although it’s likely that many bidding processes will continue to resemble current practices, it will be intriguing to observe how contracting authorities might adopt more innovative methods as they become better acquainted with the new legislation, e.g. by mixing multi-phase processes approaches to down select bidders or introduce a Best and Final Offer (BAFO) last phase.
Changes to Evaluation
The Act changes from choosing the “most economically advantageous tender” (MEAT) to selecting the “most advantageous tender” (MAT). This change potentially provides more flexibility to authorities in how they determine their selection criteria. It should prompt contracting authorities to consider adopting a broader perspective in determining the “most advantageous tender,” allowing greater importance on aspects like quality and social value. Contracting authorities should still use a weighted point system to evaluate bids against a set of criteria, but bids could be evaluated purely on non-financial criteria.
The Act also allows contracting authorities to reserve certain competitions for UK-based bidders. More broadly, the Act also places a greater obligation on authorities to consider SMEs throughout the procurement process.
Exclusion and Transparency Notices
Additionally, the Act permits contracting authorities to modify the terms of an ongoing procurement process, provided these changes are made before crucial deadlines, and providing that the change will not allow previously excluded suppliers to then progress in the procurement. There will be up to 25 notice classifications published on a central registrar, defined in secondary legislation.
Increased Grounds for Direct Award
The capacity to directly award contracts has been enhanced, particularly in situations deemed critical by the Crown for safeguarding human, animal, or plant life and health, or for maintaining public order and safety. This directive can be issued by a Minister and seems to stem from insights gained during the COVID-19 pandemic. However, the criteria for determining the necessity of these direct awards might still be subject to discussion.
Standstill Period
The Act modifies the ‘standstill period’ from 10 calendar days to 8 (eight) working days from the publication of the contract award notice. The standstill period doesn’t apply when a contract is directly awarded or for frameworks’ further awards. Automatic suspension of the contract award process is available if a challenge is made within the period.
Contract Management
Modifications / Contract Changes
The Act introduces new contract modification rules. These describe permissible justifications for modifications during a contract’s term, allowing authorities to take advantage of developments in technology, for example. Changes can be made to enable urgent protection of life, to deal with the “materialisation of a known risk” or to secure developments in technology in for example, defence contracts. These sit alongside those which broadly correspond with the current permitted grounds, e.g., duration and non-material changes in scope or volume.
Perhaps of more consequence will be the need to publicise most changes prior to implementation. Note that the modification must be “unambiguously provided” for in the advert; these include:
- Urgency and the protection of life;
- Unforeseeable circumstances;
- Materialisation of a known risk;
- Additional goods, services or works;
- Transfer on corporate restructuring; and
- Defence authority contracts.
The Act states that a substantial modification includes those which would increase or decrease the term or estimated value of the contract by more than 10%; materially change the scope of the contract; or materially change the economic balance of the contract in favour of the supplier. Such changes should trigger a new procurement. There is however no longer a need to consider the impact on the outcome of the initial procurement process.
Key Performance Indicators, Payment & Monitoring
The Act introduces a new obligation for contracting authorities to set and disclose at least 3 (three) Key Performance Indicators (KPIs), unless they determine that the supplier’s performance cannot be effectively evaluated using KPIs, or for contracts with an estimated value below £5 million. Frameworks and Dynamic Markets are excluded too.
Additional duties have been included to require payment of invoices within 30 days.
Termination of Contracts
Termination grounds now include where: the contract was awarded or modified in material breach of the Act, which could reasonably result in a successful legal challenge; and when supplier or sub-contractor has become an excluded or excludable supplier. This is a significant risk to misbehaving suppliers as all business could be terminated.
Of particular interest to suppliers and their sub-contractors may be the additional discretionary grounds which permit potential exclusion for “breach of contract”, “poor performance” or for “acting improperly in procurement”.
Debarment / Excluding Suppliers
The Act includes changes to both mandatory and discretionary exclusion grounds. There is now a debarment list and instructions on how those listed should be dealt with by contracting authorities. An “excluded supplier” must not be permitted to bid.
Suppliers on the list will be debarred from applying for public contracts for a specified period but may apply for their removal from the list, if there has been a material change in circumstances. Even if a supplier is not on the Debarment List, contracting authorities must consider these exclusion grounds during tender exercises. Suppliers may also inform authorities about their competitors’ negative reports.
The Act largely retains the existing grounds for mandatory exclusion such as modern slavery (as outlined in PPN 02/23), with the addition of new offences such as theft, corporate manslaughter, competition law infringement, environmental misconduct, breach of contract, poor performance and acting improperly in procurement. Some of the new discretionary exclusion grounds may be useful to contracting authorities as they allow the opportunity to exclude suppliers in respect of previous performance.
Enhanced Grounds for Exclusion
A significant update in the Act is the emphasis on previous poor performance of suppliers and or their sub-contractors as criteria for exclusion. This includes scenarios where a supplier has not enhanced their performance despite being given chances to do so.
As a supplier, being aware of changes to supplier exclusion is critical. You must understand what the new rules are and ensure that you abide by them.
Court Remedies for Authorities’ non-compliance or challenges
The Act retains remedies from the existing procurement rules but introduces some modifications, including changes in terminology. For instance, “declarations of ineffectiveness” made by the court are now termed “set aside”. Additionally, the Act brings in a new criterion for courts making interim orders, particularly concerning lifting automatic suspensions of the procurement processes related to entering into or modifying contracts.
What Does The Act Mean For You?
The Cabinet Office has recently announced plans to implement the necessary secondary legislation this year, with the new system expected to be operational from October 2024. Understanding the nuances of the Act is important, as is paying attention to guidance such as Procurement Policy Notes and the upcoming secondary legislation. More clarity on how the system will function will emerge as further details are released. There will also be a six-month preparation period for buyers to prepare new procurements under the rules.
Stakeholders, including authorities and suppliers, are advised to start acquainting themselves with the new rules and consider updating their procurement policies, procedures, and tools accordingly, e.g. social value propositions and KPI monitoring/definition. It’s also recommended that we all stay informed about the Cabinet Office’s educational resources.
In the meantime, we’d be happy to answer any initial questions you might have or if you’d like to discuss any key aspects of the Act. Please get in touch.
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