The Procurement Act 2023 (the "Act") entered legal force on 24 February 2025 and aims to simplify and streamline procurement in the UK.
Recent UK Government guidance has been published to address the exclusion category of national security under the Act, which grants contracting authorities the power to exclude suppliers posing a threat to the national security of the UK from certain procurements or to terminate existing contracts.
To support the implementation of these powers, the National Security Unit for Procurement ("NSUP"), which sits in the Cabinet Office, has been established to assist Ministers in assessing national security exclusions and terminations under the Act.
Assessing threats and making referrals
Contracting authorities must assess the national security threat and risk posed by suppliers (including associated persons and sub-contractors) in covered procurements under the Act.
The UK Government guidance outlines various aspects of national security interests that can be affected, from disruption to critical national infrastructure to interference with UK capabilities (including the military, intelligence, technology and security) and adversary capabilities (including supporting the defence systems and technologies of those with hostile intentions). The guidance also highlights the potential forms of attack (including cyber, physical, technical and personnel), and emphasises the need to be extra vigilant of suppliers under foreign ownership or control that may pose a real threat to UK security.
An exclusion relating to national security under the Act may be based on a mandatory or discretionary exclusion ground (depending on the particular circumstances).
Unlike other mandatory and discretionary exclusion grounds under the Act, a national security exclusion or termination requires a referral to the NSUP by a contracting authority, for approval by a Minister. However, where the authority is a Minister of the Crown, government department or Corporate Officer of the Houses of Parliament, no referral or approval is required, although consultation with the NSUP is still required.
Caution is encouraged to ensure that referrals are only made where absolutely necessary and where there is a genuine threat to the UK's security. A response to a referral typically takes two months, so referrals made in good time are essential.
Grounds for exclusion
Exclusion on national security grounds comes in two forms:
Mandatory exclusion
If a supplier poses a national security threat to public contracts of a particular description, as noted on the debarment list, they will be subject to a mandatory exclusion. Contracting authorities are prohibited from entering into contracts matching the description in the supplier's debarment list entry.
Discretionary exclusion
Discretionary exclusion applies where the contracting authority considers the supplier poses a threat to UK national security. In contrast to the mandatory exclusion ground, it is not specific to contracts of a particular description, and it applies to any type of public contract where the authority concludes the discretionary ground applies, or where the supplier has been placed on the debarment list based on a discretionary exclusion ground.
The government guidance sets out a three-stage test to assist contracting authorities in assessing whether to exclude the supplier from the procurement.
Authorities must consider:
- Could the supplier pose a threat to national security?
- Is the national security threat continuing or likely to reoccur?
- Should the supplier be excluded from this procurement?
Conclusion
The exclusionary powers under the Act are crucial to remove suppliers from the procurement / terminate existing contracts, who pose a threat to national security. Any action under the Act should be targeted and proportionate. It is anticipated that these powers will not need to be exercised regularly, although they are useful tools to protect the UK's public sector supply chains on national security grounds.
Please contact our team if you would like further information or clarification on this topic.
With assistance from Megan Holroyd, who is a trainee in our Commercial Team
