The Procurement Act 2023 – Royal Assent Granted

Background

The UK Government "sees…reform of the UK’s EU law-based procurement rules as an opportunity to better tailor the procurement framework to the country’s needs." Making "procurement simpler, quicker, more transparent and less bureaucratic."

Since the UK's departure from the European Union, the UK Government has been able to set its own procurement rules and move away from EU Directives – provided this is within the constraints of its "international obligations on public procurement" including the World Trade Organisation Agreement on Government Procurement and the EU-UK Trade and Cooperation Agreement. The new Procurement Act 2023 (the "Act") forms part of the UK Government's commitment to move away from EU legislation and get Brexit "done".

The Act aims to create a simpler and more transparent procurement system which delivers the best value for money for contracting authorities whilst improving the way in which contracting authorities conduct procurements. By streamlining the approach in which companies bid for public contracts, the process will be simplified, whilst also giving contracting authorities room to secure the most innovative solutions, at the best prices. This simplification aims to help small and medium-sized enterprises secure a larger portion of the roughly £300bn spent on public procurement each year.

At a headline level, the Act will "consolidate the current four sets of [procurement] regulations, which transpose EU Directives into UK law, into a single regime." The Act will replace the existing:

• "public contracts, awarded by most central government departments, their arms-length bodies and the wider public sector including local government, health authorities and schools" in accordance with The Public Contract Regulations 2015 ("PCR 2015");
• "utilities contracts by utilities operating in the water, energy and transport sectors" that fall within the scope of The Utilities Contracts Regulations 2016;
• "concession contracts for the supply of works or services where public authorities give a supplier the right to exploit works or services" awarded in accordance with The Concession Contract Regulation 2016 ("CCR 2016"); and
• "defence and security contracts" awarded under The Defence and Security Regulations 2011.

The Act will apply in England and to "procurement by devolved authorities in Wales and Northern Ireland." The Act contains "arrangements covering joint and cross-border procurement with Scottish contracting authorities" but Scotland, having opted out of the new procurement regime, "will maintain its own legal framework".

When does the Procurement Act 2023 come into force?

Following a six-month preparation period (estimated to commence in Spring 2024), the Government Commercial Function has advised that it expects the Act will come into force in October 2024. This preparation period will include a government training programme and the phased release of statutory instruments and guidance to inform how the new regime will work in practice.

What will the transition to the new legislation look like?

The approach to transition will likely follow the approach taken when the PCR 2015 first came into force. The guiding principle being that any procurement that commences before the new Act comes into force will continue to be governed by the applicable procurement regulations (i.e. the applicable rules under the current regime). Procurements that are commenced on or after the Act comes into force will be regulated by the rules under the Act.

What are the new principles of the Procurement Act 2023?

Section 12 (Covered procurement: objectives) sets out the "Procurement Objectives" that will form the backbone of the new procurement regime. In carrying out a "covered procurement" (i.e. the "award, entry into and management of a public contract"), Contracting Authorities must have regard to:

• "delivering value for money";
• "maximising public benefit";
• "sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions"; and
• "acting and being seen to act with integrity".

In addition to the above objectives, contracting authorities must also:

• "treat suppliers the same unless a difference between the suppliers justifies different treatment";
• "take all reasonable steps to ensure it does not put a supplier at an unfair advantage or disadvantage" unless different treatment is justified in a particular case; and
• "have regard to the fact that small and medium-sized enterprises may face particular barriers to participation" and consider whether such barriers can be mitigated.

When compared against the equivalent provision in the PCR 2015, it is clear the express transparency principle will fall away under the new regime. Whilst contracting authorities will be required to share information to allow suppliers and others to understand an authority's procurement policies and decisions, this is a lower standard than what was provided for under the PCR 2015.

Whilst there is no express proportionality principle in the Act, there are various sections of the Act that require contracting authorities to ensure its discretion is exercised in a manner that is proportionate to the nature, cost and complexity of the contract.

In addition, all public procurement should help deliver the government's national policy priorities. The Act makes provision for two policy statements: the National Procurement Policy Statement and a Wales Procurement Policy Statement to support this.

Concession and utilities contracts

Part one of the Act sets out which authorities and contracts the Act applies to, and this includes concession contracts. "Concession contracts" are defined in section 8(1) (Concession contracts) of the Act as:

"a contract for the supply, for pecuniary interest, of works or services to a contracting authority where –

(a)   at least part of the consideration for that supply is a right for the supplier to exploit the works or services, and

(b)   under the contract the supplier is exposed to a real operating risk."

The Act also covers contracts for the supply of goods, services or works that are wholly or mainly for the purpose of a "utility activity". This includes, for example, the operation of a network for the production, transport or distribution of gas, heat, electricity or drinking water.

Whilst concession and utilities contracts will be generally subject to the new rules under the Act, there are a number of notable exceptions. This includes the following carve outs:

• setting key performance indicators where the public contract has a value of more than £5m;
• implying certain payment terms into a public contract (not required where it is a concession contract or a utilities contract awarded by a private utility); and
• publishing information about large payments by a contracting authority under a public contract (again, not required where it is a concession contract or a utilities contract awarded by a private utility).

Procurement procedures

The Act intends "to make [procurement] procedures more flexible and less prescriptive". Whilst there are a number of detailed procurement procedures under the PCR 2015, the Act reduces the competitive tendering procedures available to either:

• a single stage tendering procedure that does not restrict who can submit a tender (the "Open Procedure"); or
• "such other competitive tendering procedure as the contracting authority considers appropriate" (the "Competitive Flexible Procedure").

Key aspects of the multi-stage Competitive Flexible Procedure include:

• enabling contracting authorities to "limit the number of participating suppliers, generally or in respect of particular tendering rounds or other selection processes";
• refining award criteria if "the tender notice or associated tender documents" provide for this or where the contracting authority "is yet to invite suppliers to submit tenders";
• prohibiting "the participation of suppliers that did not submit a tender in the first round of tendering or that were excluded following an earlier round"; and
• enabling contracting authorities to exclude suppliers "by reference to conditions of participation" or "intermediate assessment of tenders" or where suppliers are not "United Kingdom suppliers or treaty state suppliers".

This new procedure aims to give contracting authorities the necessary flexibility to design bespoke competitions which suit their needs, as well as the wider market. The Act allows contracting authorities to flex their procedure as long as it is proportionate to the nature, complexity and costs of the contract. The UK Government has signalled that it will issue a set of template documents and guidance which are intended to be flexible enough to cater for a broad range of different requirements.

Direct Awards are set out in Schedule 5. The grounds for direct awards are broadly similar to those under the PCR 2015, but the Act introduces some new, additional grounds. This includes where a Minister of the Crown considers it is necessary to "protect human, animal or plant life or health" or to "protect public order or safety".

National security

The new rules have a focus on protecting national security. The Act introduces a public debarment list, which allows procurers to place any suppliers who are deemed to be high risk onto the list, and prevent them from bidding for certain types of goods and services (for example, in relation to defence or national security), while allowing them to continue to bid for contracts in non-sensitive areas.

Contracting authorities will also be able to be exclude bidders for other reasons. This will include situations where bidders have links to modern slavery in their supply changes, in the event of professional misconduct or if they have a history of performing poorly on other public contracts.

The Act also imposes a new duty upon ministers to pro-actively consider suppliers for a potential debarment. A new body, the National Security Unit for Procurement will be set up to enact this, and help protect the UK's national security by assessing whether companies should be placed on the debarment list and prevented from securing public contracts.

New notices

One of the guiding principles of the Act is transparency. The Act introduces requirements to publish transparency notices at various stages of the procurement life cycle. This will ensure that key procurement information is publicly available – enabling the public to have greater oversight on how public money is spent, and to foster improved competition.

Further information on the transparency reforms that will apply under the new rules is available here. 

Remedies

Part 9 of the Act sets out the different remedies available for suppliers to challenge contracting authorities where they seek to bring a claim. The remedies available under the current procurement regulations are broadly similar to those set out in the Act.

The declaration of ineffectiveness (i.e. where an awarded contract is cancelled from the date of the declaration) under the PCR 2015 has effectively been replaced with "Set-Aside". Time limits for bringing Set-Aside proceedings will be the earlier of "30 days beginning with the day on which the supplier first knew, or ought to have known, about the circumstances giving rise to the claim" or "the end of the period of six months beginning with the day the contract was entered into or modified." 

In addition, section 102 of the Act enables the court to make a variety of different interim orders including modifying or lifting an automatic suspension, suspending a procurement, suspending contract performance and suspending the making of a contract modification.

Comments

The Act has been described by the Cabinet Office as "one of the largest shake ups to procurement rules in this country’s history". The Act has the potential to streamline procurements in several places and offer greater flexibility to contracting authorities. However, this should be weighed against the loss of certainty that surrounds the current rules and the resource and time that contracting authorities will need to commit in preparing for the new regime. Clearly, major change is on the horizon but contracting authorities have time to prepare given the Act is not expected to come into force until October 2024.