Procurement Act 2023: What goes in contracts?

We have received queries concerning the requirements with regard to the ability to terminate a Public Contract due to being non-compliant. There has been an important, but subtle change in the law, with the introduction of the New Act (currently to take effect from October as we understand it) which it is worth being aware of.

Currently, under Regulation 73 of the Public Contracts Regulations 2015, whilst there is an implied right to terminate a Contract in certain circumstances, there is also a specific obligation for an Authority to put within a Contract the ability to terminate for either:

1. a breach of Regulation 72(9) – (basically a change in the nature of a Contract); or
2. where a mandatory exclusion ground meant that a Contractor should have been excluded from the process.

Previously, a serious infringement of EU Treaty or Directive obligations was there, but this is of course not relevant following Brexit.

The new provisions are to be found within Section 78 of the Procurement Act 2023 (“the Act”). Importantly, on our reading, these do not impose an absolute obligation to put wording in a Contract related to the ability to terminate, that right is implied under law. Additionally, those grounds to terminate are somewhat broader. They include: 

1. where the Authority considers that the Contract was awarded or modified in breach of the Act (which of course is somewhat more generous in favour of the Authority than the old law);
2. where a Supplier has since the award of a Contract become an Excluded or Excludable Supplier; or
3. a subcontractor to a Supplier is an Excluded or Excludable Supplier. 

The reference to “Excludable” (see Schedules 6 and 7 for definition of “Mandatory” and “Discretionary” exclusion grounds) and allowing for this provision to take effect, in effect retrospectively, ie the event leading to exclusion could justify termination for a Contract for an event that had happened after the Contract was entered into, does represent an enhanced power of Authorities to terminate a Contract, without this having to be explicitly stated within the document at all.

On the positive side, the requirement to insert a specific provision in a Contract now seems to have been removed, which saves a little drafting!