The government published the Procurement Bill on 11 May 2022, setting out its proposal for a “once-in-a-generation” overhaul of public procurement in the UK. The Bill paves the way for significant reforms that will affect public authorities and suppliers, especially in the real estate and construction industries. These include:
- reducing the number of regulated procurement procedures;
- consolidating all (or almost all) procurement rules into a single regulation; and
- changing the basis on which contracts are awarded, with more emphasis on non-economic criteria.
This article looks at the key areas of reform and explains the implications of the government’s plan to create a “simpler and more flexible” system for public procurement.
1. A simpler regulatory framework
The Bill consolidates the legal regimes for public contracts, utilities, concessions and defence and security, all of which are currently governed by different regulations. This is intended to make the procurement rules more consistent across different sectors, making “a single regime for [buying] everything from paperclips to tanks”.
The Bill does not, however, create a one-stop shop for all procurement law. First, multiple public procurement rules exist under separate enactments (such as the Equality Act 2010), which will remain in force as further sources of regulation.
Second, the Bill anticipates that there will be extensive secondary legislation to deal with certain important issues – for example, the scope of light-touch services (section 8(1)) and the contents of notices required under the Bill (section 86).
Third, the procurement of health services will likely be removed from the scope of the Bill entirely and will be governed by the new Provider Selection Regime to be enacted under the Health and Care Act 2022.
2. Fewer procurement procedures
The Bill reduces the number of regulated procedures and gives public authorities more flexibility to design their own procurements. The seven procurement procedures in the current regulations will be replaced by three:
- a “flexible competitive procedure”, which lets contracting authorities implement their own procurement procedures providing they comply with certain general rules (for example, in relation to award criteria, timing and technical specifications);
- an “open procedure” for straightforward procurements – a single stage process similar to the current open procedure; and
- a “direct award procedure”, which can only be used in very limited circumstances, such as extreme urgency.
Public authorities may welcome being able to design their own procedures rather than having to use one of the current procedures, which are relatively inflexible. On the other hand, less experienced procurement teams may be unsure how to plan an effective procurement that complies with key rules and gets best value. For suppliers, these changes may mean having to comply with procedures that vary from authority to authority rather than the uniform procedures with which they are familiar today.
3. Central government oversight
The Bill establishes a new procurement oversight body that will have powers to investigate, report on and make recommendations to authorities regarding their compliance with the Bill (or Act, as it will be).
The oversight body will be able to require contracting authorities to provide documents and information in the course of its investigation. Once the compliance investigation has been completed, the oversight body will publish its findings and make recommendations to the authority concerned. The recommendations will not be binding (meaning the body cannot approve or block a procurement), but the contracting authority must “have regard” to any recommendations and submit progress reports if requested to do so.
4. Rewarding the most advantageous tender
The Bill specifies that contracts should be awarded to the “most advantageous tender” rather than, as currently, the “most economically advantageous tender”. The implication of this change is that procuring entities will have more scope to consider wider policy objectives when they award contracts, such as environmental and social objectives, rather than purely economic considerations. Conversely, many authorities find non-economic criteria difficult to assess, and for suppliers it can be unclear how to score highly on these broader questions.
5. Major reform of rules on exclusion
The Bill establishes a new framework for the exclusion of suppliers from procurement processes. These include:
- A new “past poor performance” exclusion criterion, which can be used when a supplier has breached a prior public contract resulting in termination, damages or settlement, or when a contracting authority is dissatisfied with a supplier’s performance and the supplier fails to improve despite being given the opportunity to do so.
- There will be a national register of past poor performers, which can be used as a basis to exclude suppliers from procurements on that ground. This will have serious implications for suppliers and risks unintended consequences, such as stifling the settlement of legitimate disputes and reducing competition for challenging contracts.
- A national debarment list will record suppliers that have been excluded from procurements (on grounds other than poor performance, eg, breaching modern slavery rules). Again, inclusion on this list will have very serious consequences for suppliers.
- A five-year time limit will apply in cases of discretionary, as well as mandatory, exclusion (an increase from the current three-year limit that applies to discretionary exclusions).
6. Frameworks
The Bill introduces “open frameworks”, ie, framework agreements that new suppliers can join after they have been set up. Open frameworks will have a maximum duration of eight years and must be reopened at least once in that time. Closed frameworks can still be used but must be limited to four years (eight for utilities) except where a longer period can be justified.
7. New transparency requirements
In an effort to ensure transparency is observed throughout the procurement lifecycle, the Bill requires contracting authorities to publish a range of notices and other documents.
In addition to the notices that authorities already have to publish – such as tender notices at the start of a procurement and contract award notices at the end – new mandatory notices include a “contract change notice” when authorities make certain variations to an existing public contract. Authorities will also have to issue a “preliminary market engagement notice” if they intend to engage with suppliers before a procurement, eg, to test the market.
While these measures should improve transparency for suppliers, there will inevitably be an increased burden on contracting authorities to comply with these requirements.
8. Limited changes to challenges and remedies
The reforms to the current remedies system are relatively limited. Rather than issuing standstill letters before awarding a contract, authorities will be required to send bidders an “assessment summary” that contains “information about the contracting authority’s assessment” of the bidder’s offer and the winning offer. The wording of the Bill suggests these summaries may contain less detail than is found in a compliant standstill letter under the current rules. Moreover, the standstill period that applies after an authority awards a contract and before they can sign has been changed from 10 calendar days to eight working days (section 49(2)). This is intended to ensure consistency, for instance to avoid time constraints when the standstill period falls over a bank holiday.
If an interested party issues proceedings during the standstill period, this will cause the contract award to be suspended (as is already the case). However, there will be a new test for the courts to apply when authorities seek to lift the automatic suspension. This moves away from the current three-part American Cyanamid test (American Cyanamid Co (No 1) v Ethicon Ltd [1975] UKHL 1) to a more general test balancing the interests of all involved. It remains to be seen whether this will have any impact on the approach of the courts in practice, as often the current “balance of convenience” part of the American Cyanamid test is approached in a similar manner.
9. Reforms for effective supply chain and contract management
The Bill implements a previous government proposal to require prompt payment of suppliers and subcontractors and to require authorities to report on their compliance with the maximum 30-day payment term (sections 63-65 and 68).
10. What next?
The Bill is likely to take a number of months to pass through parliament and may be amended further. To help authorities and suppliers prepare, the government has pledged a six-month “go live” period will apply once the Bill has been enacted before it enters into force.
Will Sparks is a partner in the competition – antitrust practice at Squire Patton Boggs
