On 26 October 2023, the Procurement Act 2023 (formerly the Procurement Bill) received Royal Assent, and is therefore now on the statute book. Despite the Act not being expected to come into force until October 2024, it will represent a radical overhaul of the public procurement regime in all of the UK except Scotland. Many of the Act's provisions mark a significant departure from the current public procurement regime, and some completely new rules will be introduced.
In this webinar, Christopher Brennan gives a short introduction to the Act's key features - explaining in a nutshell how procurement law will change once the Act comes into force. Chris also covers the expected timetable for bringing the Act into force, and outlines how procurers and suppliers will be able to familiarise themselves with more detail about the Act during the run-up to that date.
Christopher Brennan: Hi there everyone. My name is Chris Brennan. I head up Gowling WLG UK's procurement team and I'd like to welcome you to this November 2023 ThinkHouse Webinar providing you with an update on what was until fairly recently the Procurement Bill and to the Procurement Act 2023. In this session I'll be setting out in high level some of the key features of the new Act and also talking a little bit about when it is all going to come into force.
So first of all a bit of background. Why has it been seen as necessary to replace the existing Public Procurement Regime currently in force in England, Wales and Northern Ireland? Well that existing Regime consists of four statutory instruments at the moment, all of which are a product of the time when the UK was a member state of the European Union. At that time, there were procurement directives issued at EU level which had to be transposed into the domestic law of each EU member state and there was limited scope to vary or the extent to which one was at liberty to implement those directives and the chosen approach by the UK at that time was to more or less copy out the text of the directives into the domestic legislation meaning that we had and in fact as of today we still have a set of procurement rules which look very similar to the EU directives which they implement. However now after Brexit well, well after Brexit as it happens, there is freedom as it were to plough our own furrow in terms of being able to design the procurement regime which is perceived as being something much more tailored to the needs and aspirations of the UK as a non-EUI member state. I say the UK, Scotland for various political reasons which I presume you are all familiar with has actually decided to hang on to its current sets of regulations which are derived from the EU regime. Politics I suppose and Scotland is, I think currently or the Government of Scotland is currently aspiring towards independence and towards re-joining the EU at some stage, so for now, the new Regime i.e. the Procurement Act 2023 will extend only to England, Wales and Northern Ireland.
So what stage is the Procurement Act up to as of today? Well the expectation is for the new Regime to come into force in, we think October 2024. That is where all the messaging is currently. Elements of it might commence in phases. We do not yet know that for certain but might happen. The Government commercial function, part of the Cabinet Office which really is tasked with familiarising public authorities with the requirements of the new Act is poised to roll out a six month familiarisation programme to enable contracting authorities, utilities to get used to the Act in the run-up to that point so the Procurement Bill itself received Royal assent on 26 October this year a few weeks ago following its passage through Parliament and in parallel consultations were undertaken earlier this year on such draft secondary legislation which is going to be required in order to bring some features of the Act some part of it into full force. That consultation exercise has already been undertaken and that secondary legislation now has to be formulated.
So as I have mentioned there are currently numerous existing sets of regulations which together comprise the current Procurement Regime in England, Wales and Northern Ireland. These are the Public Contract Regulations 2015, Utilities Contract Regulations 2016, the Concession Contracts Regs 2016 and the Defence and Security Public Contracts Regulations 2011. All of those have been variously amended since they were originally in force, not least as a result of Brexit and the changes which it has been necessary to make to procure the legislation in that light. These are going to be revoked and replaced by the new Act once it entered into force and Schedule 11 of the Act provides for that and these four regimes will be brought together into one consolidated body of legislation in the form of the Act, the aim of which has been to consolidate them as such as possible so that we are not dealing with four sets of separate regs but instead with just one Act.
However there will be some sector specific provisions retained really as legacies from those currently spate regimes. As a result, the Procurement Act is still a rather weighty piece of legislation because of course it has to reach across into all those area even in its consolidated form.
Secondary legislation is going to be needed in order to implement the various parts of the Act including on some key areas the forms of the various Procurement notices which will be required, the subject matter of what is called light touch contracts, more on that later, and also grounds for direct award in a crisis and secondary legislation will from time to time set out what crisis grounds allowing direct award are going to be.
So as we move on from the EU Treaty and existing Procurement Regime, certain themes will continue to be felt I suppose or continue to be familiar in the new Act, the new Act will it Is probably fair to say not be a complete absolute department from what we know. There will certainly be some familiarity, some aspects of it which will be familiar from the current Regimes. The, what we currently call EU Treat principles namely equal treatment, transparency, non-discrimination, mutual recognition and proportionality will broadly survive as I suppose light motives or themes in the new Act even though will not necessarily be mentioned explicitly and in headline terms throughout. Instead under the Act and this is in section 12, I suppose overriding principles of procurement are going to be formulated in a slightly different way and in a new way so here contracting authorities are going to have regard to the importance of certain objectives so rather than Treaty principles, we now are talking about objectives and of course having regard to the importance of something basically means observing it and doing it unless there is a really good reason not to.
So here are the objectives:
- Delivering value for money;
- Maximising public benefit, so much more emphasis here now on the wide public benefits, the societal benefits to be [unclear 00:10:27] through good procurement;
- Sharing information for the purposes of allowing suppliers and others to understand the authority's procurement policies and decisions so lots about transparency, notices as we will discover and also acting and being seen to Act with integrity so very much a focus here on transparency, integrity, accountability and consequently, of course, avoiding any kind of corruption.
Suppliers are going to have to be treated the same unless a difference between them justifies a different treatment and here section 12(2) makes that point. The authorities are going to have to take all reasonable steps to ensure that if there is different treatment then it does not end up conferring an advantage, an undue advantage or disadvantage on particular suppliers – see 12(3) section 12(3) for that and throughout this presentation by the way all references to provisions in the Act are showing red and [unclear 00:12:00] of your properties are going to go again have regard to the fact that small and medium signed enterprises might face particular barriers to participation and are going to have to consider whether such barriers can be removed or reduced so again it is not just about paying lip service to some of this. It is about actually having regard to the fact that SNEs are going to face barriers and actually doing something about it wherever possible to ensure that those barriers are minimised. Authorities are going to have to have regard to the national procurement policy statement which exists at the present time. There is one but it is intended to be a piece of policy overriding the procurement policy to accompany the Procurement Act which will updated, amended and published, re-published from time to time under section 13 of the Act So the NPPS we call it that the National Procurement Policy Statement will enter a statutory footing insofar as it will be published under the Act specifically and insofar as contracting authorities are going to have to make sure they have regard to it in the procurement that they carry out.
Is it only, we talked about Brexit, is it therefore only two UK suppliers that contracting authorities will owe duties under the new Act. No it is not. Contacting authorities and utilities will owe duties to Treaty state suppliers as well under section 89 and must not discriminate against them. Treaty state suppliers are suppliers established in what is called Treaty states which are countries in other parts of the world which are signatories to specified international agreement. Those agreements are all listed in Schedule 9 to the Act so to the extent that a particular supplier in any one of these countries is entitled to the benefits of the particular international agreement in relation to procurement. Then a contracting authority in the UK must not treat that supplier established in that Treaty state any less favourably when it comes to procurement so it must not discriminate against it under section 90. So very important we know whether or not a particular supplier expressing interest in all bidding in a particular procurement once the app comes into force is always not a Treaty state supplier and that should be fairly easy to glean by looking at Schedule 9.
A word on prior market engagement or preliminary market engagement, a preliminary market engagement as it is called is going to continue to be permitted just as it is under the current rules at the moment. However the Act clarifies the allowable ways to conduct it. I don't think the app allows any less in terms of flexibility in terms of how one conducts it but there are certain things which have to be taken on board and done and insured by the contractual authority when they are conducting a preliminary market engagement. Those are set out in section 16 and 17 and in particular preliminary market engagement is going to have to be commenced by way of a preliminary market engagement notice under section 17.
The competitive procedures for the award of contracts under the new Act will obviously continue to exist but there will be fewer of them so from at least half a dozen they will go down to essentially three. Namely an open procedure, a single stage procedure without restriction on who can tender and also another competitive procedure for more complex procurements. The competitive flexible procedure or such competitive procedure as the authority considers appropriate in relation to the particular procurement so sections 19 and 20 cover the area and we will talk about section 19 in a moment, the most advantageous tender. Whichever procedure the authority uses whether it be the open procedure or the competitive flexible procedure, the procedure has to be proportionate means of awarding the contract having regard to the nature and complexity and cost pf the contact. However, other than that there is a free choice between the open procedure and the competitive flexible procedure. There is on top of this though a duty on contractual authorities to consider the use of lots so that is packaging, its requirements, it's contracting requirements up into bite size chunks or lots primarily in order to facilitate entry into the procurement markets by small and medium sized enterprises.
In terms of current conditions of participation the contracting authority is at liberty to set conditions of participation where those are proportionate means of making sure suppliers have both the legal and financial capacity to perform the contract and also technical ability to perform the contract and/or the technical ability.
So authorities are going to be able to set conditions around this and if doing so the authorities must have regard to the nature and complexity and cost involved in the contract in question. The end result is that a supplier can be excluded if particular conditions of participation are not satisfied so potentially a useful tool but maybe not one that is likely to be used particularly or be particularly liberally .
Alongside this there are exclusion grounds so when the supplier bids for a particular contract it might or might not be eligible to tender and there will be two types of exclusion grounds mandatory and discretionary exclusive grounds pretty much as is the case at the moment at the current Regime. In the Act section 57 will spell this out. In schedules 6 and 7 will set out the lists of the mandatory and the discretionary exclusion grounds respectively. When you look at Schedules 6 and 7 you will find that they are broadly symbolists in those Schedules and broadly similar to the lists of exclusion grounds that we currently have.
Of note perhaps in particular is the discretionary exclusion ground for poor performance where if a supplier has breached a relevant contract which is sufficiently serious and by sufficiently serious then the Act means a breach relating in termination the award of damages or a settlement agreement then the discretionary grounds to exclude that particular supplier arises.
Another one that is of note is an exclusion ground arising for improper behaviour on the part of the supplier in relation to a procurement which has put that supplier at an undue and unfair advantage and others of note are an exclusion ground on national security and this extends to associated persons and suppliers associated with a particular candidate.
So quite a bit to note and pick up from Schedules 6 and 7 there.
A new feature in the Act is the introduction of the ability to create a public contracts debarment list. That tis in effect the naughty list of suppliers who are by virtue of having their names included on that list are ineligible to bid for a public contract. Now a minister can add the name of supplier to the list following an investigation which establishes an exclusion ground or a serious failure to comply with the investigation such as to amount to a mandatory exclusion ground. Now suppliers prior to being entered on the debarment list will be given notice of the intention to do so and will be able to make representations. There is a provision in section 62(5) for a standstill period a so called debarment standstill period following a supplier being given notice of the intention to put its name on the list. In response to that notice and during the standstill period a supplier can apply to the Court for interim relief in the form of suspension of the decision to include it on the list. The debarment list is to be kept under review and at any time, a supplier on it can appeal a decision to put it on it and can apply to be removed from the list. Supporting evidence of course will be required citing changed circumstances or whatever new information the supplier might wish to bring to light. Sections 63 to 65 provide for this.
A talked a few minutes ago about the most advantageous tender and how this section 18 of the Act will be re-cast from the language that we currently see in today's Regime. So under the current Regime award is on the basis as you probably know of the most economically advantageous tender or meet under the Act. Economically as a word will be dropped so awards under the Act will take place on the basis of the most advantageous tender in a competitive tendering procedure.
So what is the effect of this, why make this change? Well it is primarily because the Act is acknowledging that the facts making a tender the most advantageous are not exclusively economic. The most advantageous tender is going to be the tender which the contracting authority considers satisfies its requirements perhaps first and foremost and perhaps best satisfies the award criteria when assessed by reference to the all-important assessment methodology and is there is more than one all the criteria which there usually is be relative importance of those criteria. Section 19(2) governs all this.
Of course those criteria are not always going to be economic in nature. There is likely to be a much greater focus perhaps if we move forward on ESG environmental innovation for example factors and criteria. However, tenders which do not satisfy the conditions of participation have to be disregarded. Tenders which fail to comply with the procedural requirement can be disregarded as can abnormally low tenders and as can tenders which are from suppliers who are not as we were considering previously Treaty state suppliers or who intend to subcontract to any such suppliers i.e. non-Treaty state suppliers. Tenders which come from excluded suppliers have to be disregarded in much the same way as the current Regime. A candidate failing to meeting all of the mandatory exclusion grounds must be eliminated from procurement and again reflecting the current Regime the discretion will be there to disregard tenders from an excludable supplier as opposed to excluded supplier. So an excluded supplier is one to whom mandatory exclusion grounds apply and an excludable supplier will be one to whom discretionary exclusion grounds apply.
So have a look at sections 26 and 57 for those provisions. Section 57 setting out the definitions of excluded and excludable suppliers.
A word of two on frameworks we know that under the current Regime contractual authorities can award contracts as a result of having established framework agreements setting out the terms on which contracts over a given period are going to be awarded. Well that will continue but with some embellishment under the new Act so framework agreements will continue to exist. They are defined in section 45 as a contract between an authority and one or more suppliers that provides the future awarded contracts by an authority to that supplier or those suppliers. Frameworks are going to have to include some key ingredients namely description of their scope, estimated value, term and which authority is going to be entitled to use them. The award of contracts must follow competition between suppliers and multi-supplier frameworks unless there is only one supplier or unless there is an objective mechanism for determining which supplier gets the award of a particular contract so rather similar to what we have got at the moment but couched in slightly different language. There will be a maximum framework term of eight years for defence and security contracts and for utilities contracts four years for everything else for the section 47(1).
Now I say with embellishments because a new feature tied on to frameworks of the new Act is this the new concept of what the Act calls open frameworks. Section 49 provides the framework I suppose for open frameworks so open frameworks are I suppose frameworks which allow for the subsequent award of frameworks so an open framework has to provide for the award of a framework agreement at least months during the period of three years following the award of the first framework awarded using the open framework mechanism and every five years following the award of the second framework. Have a look at section 49 which might explain it a bit better than I am but the final framework has to expire no later than eight years from the date of the award of the first framework. So in effect what is going on here is that we have a mechanism for awarding second or subsequent frameworks up to a period of eight years calculated from the date of the award of the first framework and primarily the [unclear 00:30:31] objective here is to allow in fact suppliers to be refreshed so that the general subject matter and term of the framework to be retained but for supplier lists or supplier panels to be refreshed so that there is an opportunity partway into the arrangement for a new list of suppliers.
Dynamic markets a bit like dynamic purchasing systems under the current Regime provided for under the new Act by sections 34 to 40. There are two stages to the award of these and also some subtle differences between these and frameworks. Dynamic markets can be used for types of goods and services which go beyond commonly used for commodity goods and services in contrast with the position at present. There is no limit on the number of suppliers who can apply to be admitted to them. Any conditions around who can be a member of the dynamic market have to be proportionate. Authorities can charge membership fees, calculated as a percentage of the estimated value of an awarded contract. Authorities are not able to modify the membership or the conditions for membership of a dynamic market during the term of that market. There will be no prescribed timescales, no minimum timescales or maximum timescales for the processing of applications for membership but an authority must admit a supplier to the dynamic market as soon as reasonably practicable.
Dynamic markets a bit like dynamic purchasing systems under the current Regime provided for under the new Act by sections 34 to 40. There are two stages to the award of these and also some subtle differences between these and frameworks. Dynamic markets can be used for types of goods and services which go beyond commonly used or commodity goods and services in contrast with the position at present. There is no limit on the number of suppliers who can apply to be admitted to them. Any conditions around who can be a member of the dynamic market have to be proportionate. Authorities can charge membership fees calculated as a percentage of the estimated value of an awarded contract. Authorities are not able to modify the membership or the conditions for membership of a dynamic market during the term of that market. There will be no prescribed timescales and a minimum timescales or maximum timescales for the processing or applications for membership but an authority must admit the supplier to the dynamic market as soon as reasonably practicable. Authorities will do well to monitor the membership of dynamic markets because apart from anything else, excluded suppliers have to be removed and there is a discretion to remove excludable suppliers from the dynamic market.
Direct award is also permitted in certain limited circumstances so I mentioned three award procedures at the start, open procedure and the competitive flexible those being the two broad competitive procedures frameworks and dynamic markets aside of course.
The third is direct award in other words, a procedure which allows award of contracts but is not competitive as the others are. So contract awards have to follow a competitive tendering procedure unless a direct award justification applies. So that is the starting premise. The Act then sets out special situations, special cases in which direct awards are allowed and these are in sections 41, 42 and Schedule 5 so 41, section 41 and Schedule 5 go together and those in effect, set out the special cases which would ordinarily apply to allow direct award. Section 42 on the other hand covers direct awards which are aimed at protecting life or public safety and those situations are prescribed by a minister via regulations which will have to be kept under review and up to date so a slightly different set or sub-category of grounds for direct award under section 42 are rather more specific.
There will be an ability under section 43 to switch to a direct award procedure when no suitable requests or tenders in response to a competitive tendering procedure have been received by the authority. Now there is a specific meaning here to what is not suitable, a suitable or an unsuitable tender. That encompassed a range of situations and those are set out in section 43.
In addition, an authority is going to have to publish a transparency notice before any direct award under section 41 or 43. The exception there being user choice or so called user choice contracts which are essentially defined elsewhere in the Act where basically the contract is awarded to suppliers but the word supplier can be picked essentially by the user of the service and the transparency notice requirements are set out here in section 44.
Light touch regime is light touch contracts we should stop referring to the light touch regime under the new Act. They are instead called light touch contracts. The precise scope of light touch contracts will not be found in the Act as it stands today. It will be confirmed in regulations to be published under section 9. It is like that a higher financial threshold will be applied to light touch contracts compared to what we have at the present time. There will be no minimum time periods which can be imposed during competitive procedure for a light touch contract. There will be no mandatory standstill period under section 51 but if there is any voluntary standstill period applied instead then it cannot be less than eight working days starting on the day the contract award notice is published. See section 51 for that.
There is freedom to modify a light touch contract under section 74 and as with other public contracts, authorities should consider the use of lots in appropriate cases.
Some contracts will be entirely exempted from the scope of the Act and those exempted contracts are essentially carved out of the definition of public contracts to which obviously the Act otherwise applies so 3(2)(b), section 3 deals with that. Exempted contracts themselves are listed out in Schedule 2 and these include a list of arrangements rather similar actually to those we currently have of the sections 10 through to 14 or regulations 10 through to 14 of the Public Contract Regs 2015 at the moment so echo's there so here in Schedule 2 we see for example vertical arrangements with control entities, previously the so-called tech out arrangements, horizontal arrangements, public to public cooperation previously known as Hamburg type arrangements, contracts for the sale of land and buildings without development work, certain legal and financial services are exempted, employment contracts as now are exempted and contracts for R&D services are essentially exempted again as at present os if you look at Schedule 2 you will see, and compare that really with regulations 10 to 14 of the current Regime you will see marked similarities there.
Modification contracts so the [unclear 00:39:25] of the procurement Regime I think is fair to see currently in Public Contract Regulations 2015's regulation 72, reg 72 of course has its counterparts of the utility regs and in the concession contracts regs. There will be new provisions and I would like to think a provision which are rather easier to fathom and to understand in the new Act dealing with modification of contracts. These are going to be set out or these are set out in sections 74 to 77 and/also Schedule 8. There will also be provision for convertible or what's called convertible contracts that is a type of contract which when modified will essentially turn it into a public contract and you will see what I mean by that if you look in section 74(1).
So the process of modifying the public contract is going to have to be kick-started by the publication of contract changes notice under section 75(1) there is a certain level of carve-out from that requirement that is found in section 75(2). Any voluntary standstill which again could be applied has to be not less than eight working days from the publication of the contract change notice and that is section 76.
Transparency is required for qualifying modifications valued at £5 million plus and the transparency requirement there will require contracting authorities to publish either the contract as modified or publish the modification that is section 77.
So sections 74 to 77 set out essentially the mechanical framework for modifying for the ability to modify public contracts. Schedule 8 in turn will set out the list of circumstances in which contract modifications are permitted and those largely it is probably fair to say mirror what we have currently slightly simpler or slightly more simply in places perhaps not in others.
So unambiguous review clauses, if a contract already provides for a contract to be modified then it can be. Probably a less stringent approach there than we have at the moment.
Additional works or services or economic or technical; reasons making them necessary. 50% limit there on the contract value increase before they start becoming significant.
Unforeseeable circumstances again subject to a limit of 50% increase in value or replacement suppliers, that is replacement of suppliers with a supplier that is not and excluded supplier on a corporate restructuring or similar arrangement. Urgency and the protection of life where direct award grounds are established.
Materialisation of a known risk that is a new one in Schedule 8 and again a limit of 50% increase in contract value. In relation to that particular ground permitted modification there is a public interest test to be applied and modification cannot go further than necessary so it has to be identified in the tender or transparency notice. So again some particular transparency requirements around that.
A new body under sections 108 to 110 or section 108 to be more specific is going to be set up to look at systemic failings in procurement and to be tasked with carrying out procurement investigations when appropriate. That body will have the power under section 109 to make recommendations following a procurement investigation and/or under section 110 to publish guidance in the light of having carried out an investigation into a particular procurement practice so this is not to be confused with the remedies regime which is also set out in the Act and which are not covered in detail here today. This oversight function instead is specifically designed to look at systemic failings in procuring practice and to seek to fix them. So not to be confused with the ordinary remedies regime for aggrieved suppliers.
Further reading on the Act or obviously the Act itself can be assessed right here by that link. If by the time this presentation gets to you the link does not work just search the Procurement Act 2023 and you will easily find it on the Goiv.uk Parliamentary Bills page.
That is all I am proposing to say here by way of this brief update but obviously if you do have any further questions or would like to get in touch with us to talk about any aspects of the Act please feel free to do so. As I said before there is plenty of time before the Act comes into force but of course there is also plenty of training both from Government and also from us ourselves to follow between now and then and do look out for our forthcoming series of Changing Landscapes articles on individual aspects of the Act which we hope you will find interesting so that was it from me. Thank you very, very much indeed for tuning in and I hope to see you again soon? Thank you.
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