Procurement law in England is about to be transformed through the long-awaited Procurement Act 2023. The Bill aims to transform public procurement prioritising efficiency, transparency and international compliance. In this article, we’ll explain what procurement is, how procurement law is about to change in England, and what that means for your business.
What is procurement?
Procurement means obtaining or purchasing goods or services, typically for business purposes. Procurement is important to businesses because companies solicit services or purchase goods, usually on a large scale.
It can also include the overall procurement process, which is important for companies leading up to a final purchasing decision. Companies can be on both sides of the procurement process as buyers or sellers, though here we mainly focus on the side of the soliciting company.
Public procurement law regulates the purchasing by public sector bodies and certain utility sector bodies of contracts for goods, works and services. The current procurement laws apply to the award of certain contracts by “contracting authorities”. Contracting authorities cover the majority of public bodies in the UK including government departments, local authorities, NHS trusts and police authorities.
Some other entities that are not “contracting authorities” may also be subject to procurement laws if they operate in the water, energy, transport or postal services sectors. All these bodies have to comply with UK procurement laws if they are looking to purchase goods and services. This means that as a small business you will have to submit a tender following the procurement rules if you want to sell goods or services to these bodies.
Procurement law reforms
Since 2015, the procurement laws in England have become fairly outdated and there are over 350 different procurement regulations. The new Act aims to consolidate all of these regulations into a single regime.
UK Government states that this transformation of public procurement represents a big change for all public bodies, which between them spend £300bn per year. It will create simpler, more flexible and effective procurement. The Procurement Act 2023 brings a range of benefits, including:
- Creating a simpler and more flexible commercial system that better meets our country’s needs while remaining compliant with our international obligations.
- Opening up public procurement to new entrants such as small businesses and social enterprises so that they can compete for and win more public contracts.
- Taking tougher action on underperforming suppliers and excluding suppliers who pose unacceptable risks.
- Embedding transparency throughout the commercial lifecycle so that the spending of taxpayers’ money can be properly scrutinised.
Introduction to the Procurement Bill
One in every three pounds of public money is spent on public procurement. That’s around £300 Billion a year. The reforms proposed within the Procurement Bill are important because they’ll shake up an outdated procurement system so that every pound goes further for our communities and public services.
They intend to place value for money, public benefit, transparency and integrity at the heart of the procurement system, modernise and unify systems and processes, and get tough on poor performers and fraudsters.
The Bill will reform the UK’s public procurement regime, making it quicker, simpler, more transparent and better able to meet the UK’s needs while remaining compliant with our international obligations. It will introduce a new regime that is based on value for money, competition and objective criteria in decision-making.
It will create a simpler and more flexible, commercial system that better meets our country’s needs. And it will more effectively open up public procurement to new entrants such as small businesses and social enterprises so that they can compete for and win more public contracts.
It will strengthen the approach to excluding suppliers where there is clear evidence of their involvement in Modern Slavery practices, and running throughout each part of the Bill is the theme of transparency. The Bill wants to deliver world-leading standards of transparency in public procurement and intends to pave the way for that.
Leaving the EU has provided the UK with the opportunity to overhaul the public procurement regulations. There are currently over 350 different procurement regulations spread over several different regimes for different types of procurement, including defence and security.
The Procurement Bill will consolidate these into a single regime that is quicker, simpler and better meets the needs of the UK. We have removed the duplication and overlap in the current four regimes to create one rule book which everyone can use.
The Bill will require the creation of a digital platform for suppliers to register their details once for use in any bids, while a central online transparency platform will allow suppliers to see all opportunities in one place. This should accelerate spending with SMEs.
Summary of provisions
This is a large and technical Bill. It includes several regulation-making powers which are necessary to ensure that the legislation will continue to facilitate a modern procurement structure for many years to come and will allow us to keep pace with technological advances, new trade agreements and ahead of those who may try to use procurement improperly.
This Bill has been delivered by all the nations of the United Kingdom. The result is a piece of legislation whose general scope applies to all contracting authorities in England, Wales and Northern Ireland. This will ensure contracting authorities and suppliers can benefit from the efficiencies of having a broadly consistent regime operating across the constituent parts of the UK.
The Scottish Government has opted not to join the UK Government Bill and will retain their own procurement regulations in respect of devolved Scottish authorities. This is similar to how the current regulations operate, with the Scottish Government having transposed the EU Directives into their own statute book.
Part one of the Bill sets out which authorities and contracts the Bill applies to. It covers contracts awarded by most central government departments, their arms-length bodies and the wider public sector including local government and health authorities. This also includes contracts awarded by utility companies operating in the water, energy and transport sectors and concession contracts.
The Bill also sets out a small number of simpler rules which apply to lower-value contracts. And the Bill makes provision to carve out those procurements regulated by the Health and Care Act, to ensure clarity about which regime applies.
Defence and security
This Bill consolidates the current procurement regimes and, therefore, extends to defence and security contracts. Defence procurement will benefit from the simplification and increased flexibility of the core regime.
There are a limited number of derogations that meet the specific needs of defence and security procurements and will support the delivery of the Defence and Security Industrial Strategy published in March 2021. A national security exemption has also been retained to protect our national interest.
The Bill also includes a separate Schedule to enable reforms to the Single Source Contract Regulations 2014. The proposed reforms seek to ensure these regulations fully support the delivery of the Defence and Security Industrial Strategy by supporting a more strategic relationship between the Government and the defence and security industries.
Principles and objectives
Part two of the Bill is focused on the principles and objectives that allow for the awarding of a public contract. Contracting authorities must focus on delivering value for money, maximising public benefit, transparency and acting with integrity. Integrity must sit at the heart of the process.
It means there must be good management, prevention of misconduct, and controls to prevent fraud and corruption. The Bill also includes a duty on contracting authorities to be aware of the barriers facing SMEs, and what can be done to overcome them.
Part five of the Bill sets out the particular requirements on contracting authorities to identify and manage conflicts of interest.
Public procurement should also support the delivery of strategic national priorities. This part of the Bill makes provision for a National Procurement Policy Statement, and a Wales Procurement Policy Statement to support this.
Undertaking a procurement
In Part three, the Bill sets out how a contracting authority can undertake a procurement and award a contract. Competition is at the heart of the regime.
The Bill introduces a new procedure for running a competitive tendering process - the competitive flexible procedure - ensuring for the very first time that contracting authorities can design a competition to best suit the particular needs of their contract and market.
There will continue to be a special regime for certain social, health and education services, specifically identified by secondary legislation, which may be procured as ‘Light Touch Contracts’. This leaves room for authorities to design procurement procedures that are more appropriate for these types of services. These Light Touch Contracts are still subject to the necessary safeguarding requirements.
The Bill also continues the existing ability to reserve certain contracts for public service mutuals and supported employment providers.
There are a limited number of circumstances in which it may be necessary to award a contract without competition. The Bill sets these out, including new rules governing the award of contracts to protect life and public order.
Under the new Act, there has been a move from evaluating the “most economically advantageous tender” to the “most advantageous tender” when assessing the “best tender”. This means that contracting authorities should look beyond pricing when assessing bidders.
Exclusions and disbarments
Part three also sets out the circumstances in which a supplier may be excluded from a procurement due to serious misconduct, poor performance, or other circumstances. Contracting authorities will be able to more easily reject bids from suppliers who pose unacceptable risks.
Part three also legislates for the introduction of a public debarment list for serious cases of misconduct. For too long, unscrupulous suppliers have continued to win public sector contracts due to the complexity of the rules, multiplicity of systems and lack of central effective oversight. This Bill will see an end to that.
The important work on procurement doesn’t stop once a contract has been awarded. Part four of the Bill sets out steps that must be taken to manage a contract. This includes the strengthening of rules ensuring that suppliers are paid on time and new requirements to assess and publish information about how suppliers are performing.
The Act provides for greater flexibility in terms of awards that can be made by contracting authorities. Contracting authorities can now decide on what procedure to use for the procurement process.
It will now also be possible to amend the terms of the procurement after it has been issued (before key deadlines are reached). Contracting authorities will be able to change the award criteria after the procurement has been issued subject to certain rules.
Running throughout the Bill are requirements to publish notices. These are the foundations for the new standards of transparency, which will play a crucial role in the new regime. The aim is to ensure that procurement information is publicly available not only to support effective competition but also to provide the public with insight into how their money is being spent.
Part eight of the Bill provides for regulations which will require contracting authorities to publish these notices.
Part nine details what remedies are available to suppliers for breach of the new regime, where it has resulted in loss or damage. Having an effective and well-functioning remedies system is essential. Any claims made during an applicable standstill period (between the award decision and the entering into of the contract) will result in the procurement being automatically suspended.
Part ten of the Bill gives an authority oversight over contracting authorities and the power to investigate their compliance with this new Act, as part of a new Procurement Review Unit.
International trade agreements
The UK is already party to several international agreements which guarantee valuable market access for UK suppliers. For example, our membership of the World Trade Organisation’s Agreement on Government Procurement gives British businesses access to £1.3 trillion in public procurement opportunities overseas.
Access to these markets is a two-way street and requires the UK to ensure that treaty-state suppliers have equivalent access to UK markets. Part seven prohibits a contracting authority from discriminating against suppliers from those states.
This Part also contains the power to make regulations specifying the agreements listed in that Schedule. This provides greater flexibility to be able to extend the procurement regime to cover matters covered by the UK’s international procurement agreements, both current and future.
This is a well-defined and tightly restricted power which will enable the procurement aspects of future trade agreements to be enacted efficiently. It’s not an open door to changing UK procurement regulations to meet international commitments.
This power only allows for the extension of the UK procurement regime to cover overseas suppliers, covered by such agreements. Amendment of the UK’s procurement rules is outside the scope of this power, even if it were to be required as part of an international agreement.
This power would not, for example, allow the opening up of NHS clinical healthcare procurements to private providers from the USA. To do so would require broader legislative changes and this power has been carefully drafted so as not to allow for that.
When will the Procurement Bill become law?
After receiving royal assent on the 26 of October 2023, the Bill now going through readings in the House of Lords and House of Commons before it goes live in October 2024.
Get legal assistance from LawBite
If you’re unsure of how the Procurement Act will impact your business, or want help negotiating a contract, you should speak to a legal expert. To speak to one of our contract lawyers book a free 15 minute consultation or call us on 020 3808 8314.