Procurement Act 2023, now in action

The Procurement Act 2023 is now in action and many of you will be in the full swing of engaging with the new Act. If you are not fully up to speed on this topic and need to be, the Government has very helpfully published a wealth of advice and support. However, if your time does not allow for you to get too immersed in the detail, this article provides a bird’s eye view of the changes now in action. 

Background

On the 24 February, the Procurement Act 2023 (the “Act”) came into force. The Act received Royal Assent on 23 October 2023. This followed the UK’s decision to leave the European Union of 23 June 2016. Since then, following the end of the Brexit transition period, the existing EU legislation in this area has continued to apply, i.e. the Public Contracts Regulations 2015, Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016 and The Defence and Security Public Contracts Regulations 2011 (the “previous law”). 

These Regulations, and the EU Directives from which they were derived, regulated the procurement of above threshold works, services or supplies by public bodies. Their primary aim was to open up competition to public procurements in areas where there might be cross border interest in competing for public contracts. Although the procurement rules were split across different sets of regulations, these were concise and reasonably well-understood.

The new Act brings together the different sets of regulations and puts them in one place, underpinned by regulations and further supported by statutory guidance. The aim is to simplify the procurement process, to make it more accessible and easier to navigate for both contracting authorities and contractors. 

When will the Act apply?

Subject to any relevant exemption, as under the previous regulations, the majority of contracts will fall within scope when their value exceeds the national thresholds, these are currently set at the following until 31 December 2025:

• Supplies and Services: £214,904 (incl. VAT)
• Light Touch Regime: £663,540 (incl. VAT)
• Works: £5,372,609 (incl. VAT)

The new set up

1. The previous law provided a prescriptive and narrow set of competitive procurement routes. The new law only allows for two competitive procurement routes, the open procedure and the competitive flexible procedure. This new approach was intended to allow flexibility and foster innovation and efficiency in the process as under the competitive flexible procedure authorities have the power to design their own bespoke multi-stage procedures. Suggested actions under the competitive flexible procedure include limiting the number of participants, refining a reward criterion, limiting the amount of lots a supplier can tender for and excluding suppliers under the participation criterion or for being outside of the UK or treaty suppliers. However, the downside of the new freedom is that it creates uncertainly and inconsistency about what procedures to use, which could lead to an increase in legal challenges whilst contracting authorities and suppliers learn to navigate the new law. 
   
   
2. The basis for evaluating tenders under the previous law is the most “economically advantageous tender” - the new test, is the most “advantageous tender”. The expressed key difference is a move away from a focus on considering economic factors to a broader approach that, theoretically, could ignore economic factors. The most advantageous tender should be the tender which satisfies the authorities requirements and best satisfies the award criteria when assessed against the assessment methodology. It is therefore important to ensure the award criteria and how it will be assessed is clearly set out in the tender notice and any associated documents to avoid any disputes at contract award.
   
   
3. Transparency is a major feature for the new Act. The Act introduces stricter transparency requirements, requiring contracting authorities to publish more detailed information about procurement processes and decisions. This includes the rationale for awarding contracts and the criteria used in evaluations. Enhanced transparency measures include the publication of procurement documents, contract notices, and award notices. Contracting authorities must also provide feedback to unsuccessful bidders, explaining the reasons for their decision. This increased transparency is expected to improve the quality of procurement processes, as suppliers will have a better understanding of what is required and how decisions are made. However, there is a downside for both contracting authorities and suppliers. Contracting authorities will now face a higher administrative burden which will require significant added resources to manage and keep on top of upcoming notification requirements. As for suppliers, as contract notices include contract performance against KPIs and information on how the contract was terminated, suppliers may feel uneasy about their performance being presented to their competitors which could become a deterrent to suppliers submitting future tenders.
   
   
4. The Act revises the rules governing framework agreements. It changes the maximum duration of these agreements and introduces different rules for specific types of contracts. This adjustment is designed to provide more flexibility and ensure that framework agreements remain relevant and effective over time. Under the new Act, the maximum duration of framework agreements is limited to four years, with exceptions for certain types of contracts. This change is intended to prevent long-term agreements from becoming outdated and to ensure that contracting authorities regularly review and update their procurement arrangements. The new Act also allows for greater flexibility in the use of framework agreements, enabling contracting authorities to adapt to changing market conditions and requirements. This includes the new concept of open frameworks which can run for up to eight years and allow new suppliers to join during the term of the framework. If an authority procures through an open framework, the framework must be re-opened at least once during the first three years and then again during the five years following such. This links back to the above intention to avoid outdated long term agreements. The use of open frameworks will be most beneficial in expanding markets or markets with a high level of good quality suppliers to enable the authority to take advantage of such.
   
   
5. A new requirement under the Procurement Act 2023 is for contracting authorities to consider national procurement policy statements (“NPP”). These statements outline the government’s priorities and aims for public procurement, providing a strategic direction for contracting authorities. This change aims to align procurement practices with broader government policies and objectives. The current NPP, issued on 12 February, sets out the following aims:

• • to drive economic growth through maximising procurement through small and medium sized enterprises and voluntary, community and social enterprises
  • to deliver social and economic value by working in partnership across organisational boundaries; and 
  • to build commercial capability to deliver value for money and stronger outcomes including having the right commercial capability and standards to manage contracts and collaborate with other contracting authorities

Contracting authorities must take these statements into account when planning and conducting procurement exercises. This is expected to ensure that public procurement contributes to the achievement of broader government objectives and delivers maximum public benefit. For contracting authorities this potentially further takes away a degree of freedom that existed under the previous framework, as previously there was very little by way of policy influence on contracting authority procurement policies and potentially politicises the process of buying goods, service and supplies. The NPP guidance sets out a recommendation to keep an audit trail on how authorities’ procurement can contribute to the NPP or as to why they should be disregarded. The current NPP can be found here.

In conclusion, the new Act provides more freedom and flexibility, but with that comes risk and uncertainty. Ultimately, the biggest challenge  will be dealing with the administrative burden imposed by the transparency requirements, the full impact of which has, we suspect, yet to be fully understood and will become apparent over the coming years.