What You Need to Know
- Key takeaway #1
Competed defence and security contracts are now governed by the Procurement Act 2023, replacing the DSPCR and broadening the scope of covered goods and services. - Key takeaway #2
The Act introduces key exemptions—including for national security, intelligence, and joint international defence projects—allowing for direct awards in certain scenarios. - Key takeaway #3
The MOD is not required to apply social value criteria, though it may choose to do so; this raises ESG concerns for some defence investors. - Key takeaway #4
The new "Find a Tender" digital platform centralises notices and market engagement, potentially increasing access and competition—especially for SMEs.
Introduction
The UK's new Procurement Act 2023 (the "Act") took effect on 24 February 2025. More information on this can be found in our alerts: Understanding the UK's New Procurement Regime in 2025 and Changes to the UK Procurement Regime in 2025: An Introduction to the Debarment List.
Previously, competed public contracts for the provision of defence and security operated under their own regime within the now repealed, Defence and Security Public Contracts Regulations 2011 ("DSPCR"), which was an EU directive transposed into UK law. Those contracts are now governed by the Act. For non-competed defence and security contracts these continue to be regulated by the Single Source Contract Regulations 2014. Some contracts are exempt and so do not fall into either of the two frameworks above. We consider these in greater detail below.
The decision to repeal the DSPCR and to incorporate defence and procurement contracts into the broader procurement regime was, in part, taken in response to the UK's exit from the EU. The new consolidated system seeks to make competed procurements simpler, quicker, more transparent and less bureaucratic. It also aims to increase open competition, which includes greater access to technology and cost-savings. Since as early as 1998, numerous reports have identified issues of spiralling costs and delays in timeframes within programmes the Ministry of Defence (MOD) and its suppliers seek to deliver.1
The Act coincides with intentions by the MOD to invest in new equipment and supporting existing equipment for the armed forces. Over the next ten years its reported that £288.6 billion (approximately 49% of the forecasted defence budget)2 will be spent on these areas.
It is timely that changes to the procurement regime in the UK have coincided with "the biggest investment in defence spending since the Cold War",3 according to Prime Minister Sir Kier Starmer, and the introduction of the Defence Industrial Strategy4 (the next steps of which are eagerly awaited in "Spring 2025"). The provisions in the Act governing how defence and security contracts are awarded are likely to be heavily tested in the coming years. This article provides insight into what has changed, the exemptions applicable to defence and security contracts, and what Crowell thinks the likely impact will be.
What are the types of competed defence and security contracts the Act applies to?
Defence and security contracts which fall under the scope of the Act are, broadly, a contract for the supply of: military equipment, sensitive equipment, logistics services relating to both military equipment and sensitive equipment, goods, services, or works for wholly military purposes. An additional category included in the Act that was not included in the DSPCR is goods, services or works relevant to the operational capability, effectiveness and readiness for action, safety or security of the armed forces.5 This is intended to include a good or service designed for the civil market which is then used for military purposes.
The Act includes a price threshold6 and only applies to contracts worth, in the case of goods and/or services, at least £429,809, and in the case of works, at least £5,327,609.
While these definitions of the military and security contracts are broad, there are certain exemptions and flexibility built into the Act, seeking to address concerns that may not apply to other procurement contracts.
The exempted contracting authorities:
The Act includes certain provisions permitting direct awards by defence authorities (i.e. avoiding the requirement to run a competitive procurement) for defence and security contracts. The defence authorities are currently: Secretary of State for Defence, the Atomic Weapons Establishment, National Crime Agency and the Oil and Pipelines Agency.7
The circumstances in which a direct award is permitted under the Act include:
- When it is necessary to enhance or maintain the operational capability, effectiveness, readiness for action, safety or security of the armed forces.8 The MOD would need to seek Cabinet office approval if the contract value exceeds a £20 million threshold;9
- When it is required for the supply of air or maritime transport services to the armed forces or security services while they are deployed abroad or in order for them to be deployed abroad;10 and
- Where a contract exists but requires modification and the modification is not substantial and is required due to unforeseeable circumstances or the materialisation of a known risk preventing the existing contract being performed to the satisfaction of the contracting authority.11
The exempted contracts are:
- Contracts with foreign governments;12
- Contracts related to intelligence activities;13
- Defence and security contracts related to armed forces deployed abroad where the operational needs of the armed forced in that location require the contract to be awarded to that supplier or the state where there is a military presence elects a supplier;14
- Contracts which a contracting authority determines are in the interests of national security for the contract to be exempt;15
- Contracts for research and development services only (not goods and works);16
- Defence and security contracts between the UK and another state in connection with the development of a joint product or the exploitation of the product once developed;17
- Contracts for land and buildings;18 and
- Defence and Security Contracts made under a procedure specified in an international agreement or by an international organisation.19
Future exemptions for foreign policy considerations and international co-operation are also anticipated. The exemptions appear to be designed with modernisation in mind, as exemptions are given for contracts for research and development and also where international co-operation with another state can lead to advancements.
We also draw suppliers' attention to the broad exemption for national security contracts. This is an undefined term in the Act so could be applied flexibly depending on the circumstances which arise.
Exemption for social value
Pursuant to the Procurement Policy Note 002,20 the MOD will not be mandated to take into account social value when awarding defence and security contracts. However, MOD delivery teams will have the flexibility to include social value criteria in those contracts on a case-by-case basis if it is relevant to the subject matter of the contract, proportionate, fair and non-discriminatory. Some see this as a step backwards in circumstances where social value is becoming more important to key investors in defence and security companies who want to see ESG, diversity and charitable commitments as non-negotiable obligations in every contract.
Light touch service contracts in defence and security
The Procurement Regulations 2024 include a list of "light touch" services for defence and security contracts.21 The thresholds for a light touch contract are £663,540, and for a concession contract £5,372,609.22 If a contract qualifies as light touch, the procuring authority will benefit from fewer procedural requirements to speed up the process as well as additional flexibility. For example, in the award criteria, if the light touch contract is centred upon an end user, certain views and needs of that end user regarding who should supply the services and proximity of the supplier and end user can be taken into account.23
When taking part in this type of procurement, suppliers should be aware that standstill periods do not apply, and contract detail notices have extended timescales within which they need to be published. This is 120 days rather than 30 days (if the contact is over £5 million this increases to 180 days).24 Light touch contracts are also exempt from contract change notices.25 In our view, this makes the landscape for challenge more uneven and less transparent. Suppliers should be aware that when unsuccessful, mounting a challenge will likely involve additional navigation.
Other provisions to be aware of:
- Contracting authorities are not required to publish a contract award notice before entering a call-off contract awarded under a defence and security framework.26 As a result, it may be harder for unsuccessful bidders to determine when to launch a challenge to an authorities' decision for a call-off contract.
- A defence authority can modify a contract for technological developments or to minimise potential adverse impacts, without needing to publish a change notice.27
- The maximum term for a defence and security framework (e., a contract for the future award of public contracts, under which call-off contracts are issued for specific goods and services) is eight years - for other frameworks, it is four years. However, this is subject to the discretion of the contracting authority to require longer term, provided they publish their rationale in the tender or transparency notice.28
Non-competed defence and security contracts
If a contract is non-competed it may fall within the scope of the Single Source Contract Regulations 2014, as amended by the Single Source Contract (Amendment) Regulations 2024 (SSCR 2024). There are certain requirements, such as the value of the contract must be over £5 million and are not an excluded contract (e.g. contracts with foreign governments, contracts for land and buildings, and contracts made within the frameworks of a cooperative international defence programme).29
An objective of the SSCR is to deliver value for money in non-competitive procurements. Schedule 10 of the Act makes minor changes to Part 2 of the Defence Reform Act. Amongst other changes, there are some changes to pricing of contracts and contract profit rate.30
Find a Tender
The Act creates a central digital platform called "Find a Tender" to facilitate the publishing of required notices and documents, making it easier and more efficient to find and bid for contracts and for buyers to meet their transparency commitments.
The new system modifies the prior approach to the publication and redaction of information. Previously, when publishing contract award notices, certain information on the award of the contract or the conclusion of the framework agreement could be withheld from publication on the grounds that its release would impede law enforcement or otherwise be contrary to the public interest, prejudice the legitimate commercial interests of a particular economic operator or might prejudice fair competition between economic operators. In contrast, the Act provides that there is no requirement to publish information if the contracting authority is satisfied that withholding the information from publication or other disclosure is necessary for the purpose of safeguarding national security or the information is sensitive commercial information and there is an overriding public interest in its being withheld from publication or other disclosure.31 This more limited test should provide for greater transparency. It also requires that, if a contracting authority withholds information on these grounds, the fact that information is being withheld must be published, together with the relevant ground, unless doing so would be contrary to the interests of national security.
One such notice that would be published is that of "preliminary market engagement".32 Before a public contract tender notice is published, a contracting authority may engage with suppliers and other persons to develop the authority's requirements and approach to procurement, design a procedure, conditions of participation or award criteria, prepare the tender notice and associated documents, identify suppliers and likely contractual terms, and build capacity among suppliers in relation to the contract being awarded. It is anticipated that such a system will allow for greater participation opportunities by SMEs.
The platform also provides suppliers with information on upcoming bidding opportunities, details on contracts that have been let, how contracts are being changed among other useful information.
The Find a Tender platform can be accessed here.
Final Thoughts
Contracting with the MOD, the biggest contractor awarder in the UK, is notoriously difficult. The promise of greater efficiency, transparency and accountability resulting from the Find a Tender platform, the direct award provisions,33 preliminary market engagement, the obligation to consider lotting and the debarment list is therefore to be welcomed. Our hope is that opportunities for SMEs increase due to these efforts. Nevertheless, with an influx of suppliers wanting to take advantage of the UK Government's renewed appetite for defence spending these provisions will certainly be tested. As always, the proof will be in the pudding on whether the Procurement Act can deliver on its promises.
This article was also authored by our trainee solicitor, Elise Marguerite Borg.
Footnotes
1 House of Commons, Research Briefing: Defence Procurement: Challenges and reform Research Briefing by Louisa Brooke-Holland, dated 13 September 2024, page 9.
2 House of Commons, Research Briefing: Defence Procurement: Challenges and reform Research Briefing by Louisa Brooke-Holland, dated 13 September 2024, page 5.
3 Defence spending as % of GDP targeted at 2.5% by April 2027 and 3% by next parliament.
5 Procurement Act 2023, section 7(1). These terms are further defined in section 7(7).
6 Procurement Act 2023, Schedule 1.
7 Procurement Regulations 2024, Regulation 46.
8 Procurement Act 2023, Schedule 5, Section 20.
9 Cabinet Office – Guidance – Defence and Security Contracts (HTML) updated 9 December 2024, Paragraph 34 (c).
10Procurement Act 2023, Schedule 5, Section 18.
11 Procurement Act 2023 Schedule 8, Sections 4 and 5 and Section 19.
12Procurement Act 2023, Schedule 2, Section 4.
13 Procurement Act 2023, Schedule 2, Section 26.
14 Procurement Act 2023, Schedule 2, Sections 27 and 28.
15 Procurement Act 2023, Schedule 2, Section 25.
16 Procurement Act 2023, Schedule 2, Section 22.
17 Procurement Act 2023, Schedule 2, Sections 29 and 30.
18 Procurement Act 2023, Schedule 2, Section 8.
19 Procurement Act 2023, Schedule 2, Sections 23 and 24.
20 Procurement Policy Note 002: Taking account of social value in the award of central government contracts, updated 5 March 2025. Procurement Policy notes provide guidance on best practice for public sector procurement.
21 Procurement Act 2023, Section 9 and Procurement Regulations 2024, Schedule 1, Table 2.
22 Procurement Act 2023, Schedule 1.
23 Procurement Act 2023, Section 9 and Section 23(6).
24 Procurement Act 2023, Section 53(1) and (3).
25 Procurement Act 2023, Section 75 (6)
26 Procurement Act 2023, Section 50(6)(a)
27 Procurement Act 2023, Schedule 8, Section 10 and Section 75(6)(a)
28 Procurement Act 2023, Section 47.
29 The Single Source Contract (Amendment) Regulations 2024, Section 4.
30 Procurement Act 2023, Schedule 10 Section 3 and Section 9.
31 Procurement Act 2023, Section 94(1).
32 Procurement Act 2023, Section 16.
33 Procurement Act 2023, Section 41.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
