Almost 18 months after it was laid before Parliament in May last year, the Procurement Bill finally received Royal Assent on 26 October and thereby became the Procurement Act 2023 (“the Act“). The Act is expected to enter into force in October 2024 and will replace the existing regulations governing the award of contracts and concessions by public authorities and utilities in England, Wales and Northern Ireland. Those regulations are based closely on EU Directives which, post-Brexit, the Government sees as outdated and overly bureaucratic.
In this blogpost, we outline nine key features of the new Act.
Consolidation, but only limited simplification
As from October 2024, the Act will replace the four separate sets of EU-inspired regulations currently applicable to public procurement in England, Wales and Northern Ireland: namely, the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence & Security Public Contracts Regulations 2011.
As a result, all the procurement rules applicable in the UK (outside Scotland) will be found in a single, consolidated instrument. Nonetheless, the Act still includes numerous special provisions for concession contracts, defence and security contracts, light-touch contracts and utilities contracts, known collectively as “special regime contracts”. Partly for this reason, the Act is a long and complex measure, comprising 128 sections and 11 Schedules.
Furthermore, the Act will be supplemented in due course by various secondary regulations, covering matters such as the required content of published notices, the definition of light-touch services, and specific rules to reduce the burden on private utilities.
Overall, therefore, the Act consolidates the existing regulations but does little to simplify or reduce the rules applicable to the purchasing activities of contracting authorities and utilities in the UK.
Extensive re-wording that may leave scope for judicial re-interpretation
The Act lays down substantively similar rules to those found in the current regulations, governing all aspects of the award of a public contract. However, those rules have been extensively re-written in a style more typical of English legislation, which deviates from the wording originally found in the EU directives on procurement. Such re-wording may allow British judges to interpret the rules in new ways which deviate from previous case law, much of it laid down by the Court of Justice of the EU.
The approach of UK judges to the UK’s new subsidy control regime, which replaces the EU State aid regime that applied pre-Brexit, may provide a relevant precedent. The UK’s Subsidy Control Act 2022 (SCA) fleshes out a ‘bare bones’ subsidy control regime that was framed by reference to the EU State aid regime and agreed with the European Union as part of the EU-UK Trade and Cooperation Agreement. Notwithstanding its origin, in the first case in which the SCA regime fell to be considered by the relevant appellate body, the Competition Appeals Tribunal (CAT), the CAT demonstrated a willingness to deviate significantly from established case law under the EU State aid rules. In particular, the CAT concluded that a public authority engaged in a commercial enterprise cannot provide itself with a subsidy, a conclusion at odds with the EU concept of an ‘undertaking’.
Will a similar trend be seen in future UK case law on procurement? Will UK judges take the opportunity to re-interpret the procurement rules, as re-worded in the Act, in a way that deviates from previous judgments of the EU Court of Justice? Only time will tell, but we consider that this is a real possibility.
Broader policy objectives
The Act lists several “objectives” to which a contracting authority must have regard. Two of these objectives capture the existing principles of transparency (“sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions“) and equal treatment (“a contracting authority must treat suppliers the same unless a difference between the suppliers justifies different treatment“).
Three of the Act’s other stated objectives are included for the first time, namely:
(i) delivering value for money;
(ii) maximising public benefit; and
(iii) acting, and being seen to act, with integrity.
These latter objectives illustrate the wish of Government to move away from the current, narrow focus on ensuring the fairness and openness of contract award procedures. Under the Act, contracting authorities must also take account of wider concerns, including the rather vague and open-ended objective of maximising the public benefit.
A simpler competitive flexible procedure for awarding contracts
The current regulations provide for an overlapping and potentially confusing range of competitive award procedures, including open procedures, restricted procedures, competitive dialogue, the competitive procedure with negotiation, and innovation partnerships. Under the Act, this range is reduced to two main alternatives:
(i) the open procedure: that is, a single-stage tendering procedure in which any party may tender (as under the current regulations); and
(ii) the competitive flexible procedure, which the Act defines as “such other competitive tendering procedure as the contracting authority considers appropriate.”
The latter procedure replaces all of the existing multi-stage procedures with one, less regulated process. A contracting authority is free to structure this new procedure largely as it sees fit, provided it first advertises the contract in the Find a Tender Service. This more flexible procedure represents a welcome loosening and simplification of the current rules.
Provision for longer-term, open frameworks
The Act retains most the current rules regarding the use of framework agreements, which it simply calls “frameworks”. However, the Act allows for a new exception to the general rule that a framework may last for no longer than four years.
Specifically, the Act introduces the new option of “open frameworks”. These are frameworks which may last for a total period of 8 years, provided the framework is re-opened to competition at least once during its first three years and once in the subsequent 5 years. It remains to be seen whether this new option offers any real improvement on the current possibility of awarding two (or more) successive frameworks of four years each.
Increased transparency – and red tape
One recurring theme that runs throughout the Act is the requirement for increased transparency through the publication of a much wider range of notices and information. In addition to the existing prior information notices, contract notices and contract award notices, the Act requires the publication of various new types of notice, such as:
- Preliminary market engagement notice
- Transparency notice (before any direct award)
- Payment compliance notice
- Contract change notice (see below)
- Contract termination notice
- Pipeline notice
Furthermore, before entering into any contract worth more than £5 million, a contracting authority must set and publish at least three key performance indicators (KPIs). The authority must then publish an assessment against those KPIs at least every 12 months during the contract’s term.
These extensive new publication requirements will impose a significant administrative burden on contracting authorities. One of the Government’s stated aims in overhauling the EU-inspired regulations was to make the rules less bureaucratic and burdensome for the public sector, but these new publicity requirements risk having the opposite effect.
New approach towards the debriefing of unsuccessful bidders
Under the current regulations, contracting authorities are required to send a standstill letter to the unsuccessful tenderers, setting out the scores, characteristics and relative advantages of the tender submitted by the winning bidder, and then wait for at least ten calendar days before signing the contract with the latter.
Under the Act, authorities will be obliged to send an “assessment summary” to each tenderer which sets out information about the authority’s assessment of that tenderer’s tender and the tender of the winning bidder. This summary will contain similar information to that found in a standstill letter. However, the authority will then be obliged to publish a contract award notice, publicising its intention to enter into the contract with the winning bidder, and it is only this latter published notice which will trigger the standstill period. Moreover, the minimum standstill period will be eight working days, rather than the current 10 calendar days.
These changes will increase the level of publicity surrounding an intended award decision, before the contract is signed with the winning bidder. This aligns with the general trend towards greater transparency, noted above.
Modified rules on contract modifications
The Act retains the well-established principle that where an existing public contract is substantially modified during its term, this is to be treated as the award of a new contract which must put back out to tender.
The Act also allows for various exemptions from this general principle, which are set out in Schedule 8 of the Act, headed Permitted Modifications. These exemptions are similar to those found in the existing Regulations, including the exemptions applicable where the modification (i) was provided for in an unambiguous review clause in the original contract; or (ii) has arisen from circumstances that could not reasonably have been foreseen by the contracting authority.
The Act adds a new exemption which will apply where the contracting authority considers that, because of the materialisation of a known risk, the contract cannot be performed to the satisfaction of the authority. For this ground to be available, both the known risk and the possibility for modification must have been identified in the original tender notice published by the authority.
The Act also includes a new requirement that, before modifying an existing public contract, the contracting authority must publish a contract change notice, describing the intended modification. This obligation effectively replaces the current option of publishing a voluntary ex ante transparency (VEAT) notice prior to modifying a contract, as well as the current obligation to publish a modification notice when relying on certain of the exemptions. As such, it represents a sensible simplification of the current rules.
A largely unchanged remedies regime
Part 9 of the Act lays down remedies for infringements of the Act. As under the current regulations, any interested supplier who alleges a breach of the Act may bring an action against the contracting authority in the High Court. The remedies available to such a claimant, and the time limits for seeking them, are broadly the same as under the current regulations.
The lack of any meaningful reform of the remedies regime is disappointing. The current system may be criticised as being slow, expensive and burdensome for both claimants and defendants. The Act represents a missed opportunity to address the deficiencies in the current regime.
Conclusion
Overall, the Procurement Act 2023 represents a substantial re-writing and consolidation of the current, EU-inspired rules on public procurement. All contracting authorities and utilities in the UK will need to familiarise themselves with the new legislation in preparation for its anticipated entry into force in October 2024.
For further information, please contact:
Adrian Brown, Herbert Smith Freehills
adrian.brown@hsf.com
