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Key updates to the UK Government's Model Services Contract version 2.0

09 June 2022

The Model Services Contract ("MSC") for complex and high risk services contracts (i.e. those over £20m) has just been updated. Below we comment on some of the key changes and what that means in practice.

On 11 April 2022, the Cabinet Office and the Government Legal Department published version 2.0 of the MSC ("Version 2.0") and associated guidance (the "Guidance"). 

Version 2.0 reflects changes in policy, government priorities, regulation and the market and replaces the earlier MSC version 1.7 (previously named the Model Agreement) and accompanying Model Services Schedule version 1.9.

The Digital, Data and Technology Playbook ("DDTP") was published on 28 March 2022 and provides guidance for public bodies on contracting, procuring and managing digital, data and technology projects. The DDTP must be followed by central government departments and arm's-length bodies, and be taken into account by the wider public sector. Accordingly, the DDTP should be considered in conjunction with Version 2.0 when any public body is procuring digital, data and technology products and services and where total contract charges exceed £20 million.

Data protection

A significant variation to the MSC is that the suggested supplier liability cap for breaches relating to data protection has been revised from £10 million per contract year to a range of £10-20 million per contract year. The Guidance advises that this cap is a suggestion and in some cases, it may be appropriate to set a cap outside of this range. The exact figure should be determined by considering:

  • the sensitivity and volume of data involved; and
  • the likelihood and extent of a potential breach.

It comes as no surprise that references to outdated EU legislation have been updated or removed, which includes replacing the EU GDPR provisions with current UK GDPR provisions. Helpfully, those looking to update their GDPR clauses in new contracts can utilise the amendments contained in clause 21 to update the proposed drafting from PPN 02/18 (Changes to Data Protection Legislation & General Data Protection Legislation).

IPR

Version 2.0 provides drafting for a range of different ownership models for foreground IPR, as opposed to single default option of authority ownership of foreground IPR that was available in the previous version of the MSC.

As the Guidance outlines, Chapter 8 of the DDTP states that intellectual property ownership models should be considered on a case-by-case basis and on the balance of commercial benefits and risks. Version 2.0 adopts this flexible approach and there are an additional four drafting options for IPR ownership structures available to authorities, which represents industry practice and the ability for public bodies to set more market-friendly terms.

Whilst moving the IPR clause to Schedule 32 is understood, it remains to be seen whether this will have other consequences for interpretation, for example where there is an inconsistency in the drafting.

Sustainability and compliance

Version 2.0 strengthens the position on sustainability and streamlines some of the requirements that featured in earlier versions of the MSC. Intended as a starting point in any procurement, the Guidance reminds authorities to ensure that any requirements are relevant, proportionate or achievable in the procurement.

These sustainability requirements ensure suppliers comply with, where relevant:

Version 2.0 proposes some optional sustainability requirements that may be useful to some procurements, such as requirements for suppliers to:

  • have in place a documented management system and controls to manage the environmental impacts of delivering the services;
  • comply with the authority's specific sustainability requirements; and
  • minimise the consumption of resources (including water and energy) and ensure that they are used efficiently.

Whilst the drafting on sustainability perhaps could have gone further (e.g. by utilising drafting from The Chancery Lane Project), additional optional provisions have been added to assist with delivery of Net Zero and Equality, Diversity and Inclusion, including an ongoing requirement to publish and maintain a credible Carbon Reduction Plan in accordance with PPN 06/21 for certain contracts.

The new contract also contains provisions that require suppliers to comply with whistleblowing, modern slavery, all applicable employment law and conflicts of interest.

Social value

Another important change is a new requirement to create and report on social value targets, which will take the form of KPIs and PIs linked to social value. Version 2.0 defines social value as "additional social benefits that can be achieved in the delivery of the Contract".

The Guidance advises that such social value targets should be specific, measurable and time-bound commitments. In view of the move to increasing transparency of the performance of contracts, the UK Government intends to publish the top KPIs on the majority contracts. This Guidance states that the most important social value KPI or social value PI must be selected, which can then be published.

Exit management

Provisions for exit management have been amended, including the introduction of two new Termination Assistance Services and a revision to the Ethical Wall Agreement.

Security

The new contract refreshes the Security Management Schedule by revising the security requirements for suppliers and subcontractors in relation to end user devices processing or holding authority data, along with encryption requirements.

Comment

Clearly, the thread that connects these Version 2.0 changes is the increase in requirements on suppliers that contract with the public sector. The enhanced transparency and compliance provisions will ensure that public confidence in public sector contracts is maintained. 

The new contract is however, a large and complex document, meaning it will not be suitable in all circumstances.  Legal advice should always be sought on the suitability and/or requirement to adopt the draft for certain projects.  

The updates are welcomed though as they continue to provide a great resource for public sector bodies of largely well drafted and comprehensive provisions.  In time they should also help to standardise and create market norms for certain provisions (e.g. caps on liability for certain risks).

DWF Law LLP's lawyers have a wealth of experience in advising both contracting authorities and suppliers throughout the life cycle of procurement and contract management on all forms of the UK Government's standard contracts. Please free to get in touch if it would be useful to discuss any of the issues raised in this article or other matters related to public sector contracts and procurement.

Written by: Colin Murray, Alexander Rose, James Lupton, Paul Hopton, Adelani Ayoola and Alex Eaton  

Further Reading