On 11 May 2022 the long awaited Procurement Bill (the "Bill") had its first reading in the House of Lords. The purpose of the Bill, for those that have been following the consultation, is to reform the UK's public procurement regime following its exit from the European Union, creating a simpler and more transparent system, placing value for money at its heart, generating social value and unleashing opportunities for small businesses, charities and social enterprises to innovate in public service delivery.
The Bill, when finally enacted, will aim "to reform the United Kingdom’s public procurement regime following its exit from the European Union (EU), to create a simpler and more transparent system".
As set out in the Cabinet Office's Green Paper consultation, the Bill has been guided by the principles of "value for money, public good, transparency, integrity, equal treatment and non-discrimination".
The Bill had its second reading on 25 May 2022 where it received a generally positive reception from across the political spectrum, albeit some of the rhetoric may not be entirely matched by the detail contained within the Bill.
The Bill contains 13 parts with 11 Schedules addressing a range of issues relating to public procurement and contract management. It will replace the four main sets of rules (the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011) currently in place which consist of over 350 individual regulations.
Whilst the Bill will consolidate the four sets of regulations into a single Act, various aspects will be remitted to supplementary regulation or guidance. These will include powers for Ministers to make direct award justifications under section 40, together with template options for conducting (and presumably coordinating) competitive tendering procedures under the new flexible procedure. This secondary legislation will have important implications for the new regime and details of these regulations are yet to be published.
The draft Bill is distinct from the wording provided within the current procurement regulations, including in particular the Public Contracts Regulations 2015 ("PCR 2015") which may throw into question the application of existing case law, particularly on points of interpretation.
The Bill will extend to England, Wales, Scotland and Northern Ireland. However, it does not make provision for all public procurement in Scotland; it will apply to contracting authorities in Scotland which are either cross-border bodies or exercise wholly reserved functions. The Scottish Government are presently minded to retain their own procurement regulations. This disparity is similar to how the current arrangements operate. However, as the regimes diverge potentially in both language and style, there is clearly much greater scope for alternative approaches to procurement to emerge in both jurisdictions.
As anticipated, the Bill will apply to contracts awarded by most central government departments, their arms-length bodies and the wider public sector, including local government and health authorities, as well as contracts awarded by utilities companies operating in the water, energy and transport sectors, and concession contracts. The definition of a 'contracting authority', however, is slightly different and it may be that it now captures some entities that previously relied on the commercial or industrial nature exemption.
It will not, however, extend to "procurements by the Security Service, the Secret Intelligence Service, the Government Communications Headquarters or the Advanced Research and Invention Agency".
Section 11(1) of the Bill requires contracting authorities "to have regard to the importance of":
- "delivering value for money";
- "maximising public benefit";
- "sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions"; and
- "acting, and being seen to act, with integrity".
In addition, section 11(2) requires contracting authorities to "treat suppliers the same unless a difference between the suppliers justifies different treatment".
Currently, the above requirements are drafted as "objectives" as opposed to a complete set of principles that must be followed by contracting authorities.
Importantly, there is no longer an explicit requirement for contracting authorities to "treat economic operators…without discrimination and [to] act in a transparent and proportionate manner" as set out in Regulation 18 of the PCR 2015.
As noted during the second reading of the Bill, there are concerns that the Bill omits key obligations that may inhibit the UK Government's wider policy objectives. This has resulted in suggestions that the procurement objectives could be amended to include commitments on:
- conducting "sustainable procurement[s]";
- tackling climate change; and
- delivering "social value".
Despite there being "broad support for…increasing transparency" at the consultation stage and a clear intention to include an "overriding requirement for contracting authorities to comply with the principles of non-discrimination, transparency and fair treatment", the Bill does not contain an explicit obligation on contracting authorities to act in a transparent manner.
This has resulted in calls for "a wider duty of transparency" to be included in the Bill noting that, "even in the midst of a crisis, integrity and transparency should be non-negotiable".
That being said, the Bill does aim to improve transparency in places. For example, the Bill will require "notices…to be published at each stage of the commercial lifecycle in an open, accessible format" which will help to "ensure greater transparency of data [and therefore making] it easier to scrutinise procurement decisions".
The Bill introduces a number of reforms that are likely to be welcomed by small and medium-sized enterprises ("SMEs"). This includes, for example:
- requiring "all contracting authorities…to use a single digital platform for supplier registration" with businesses only having "to submit certain types of information to demonstrate their credentials once to be considered for a public sector procurement"; and
- introducing "30 day payment terms [that] will be passed down through public sector supply chains".
However, there are still concerns "that SMEs may still perceive [there to be] significant barriers…associated with engaging with public sector procurement". For example, the volume of information that will be available on the digital platform may ultimately impede SMEs' ability to locate relevant opportunities. The extent to which the digital platform will support SMEs will therefore likely depend upon the usability of the site.
Section 91 introduces a new test to lift automatic suspensions. The new test will replace the current American Cyanamid test which has been the applicable test since the 2010 case of Indigo Services (UK) Limited v The Colchester Institute Corporation.
In considering whether to make an order to lift an automatic suspension, the courts will, under the Bill, be required "to have regard to the public interest in, among other things":
- "upholding the principle that public contracts should be awarded, and contracts should be modified, in accordance with the law";
- "avoiding delay in the supply of the goods, services or works provided for in the contract or modification";
- "the interests of suppliers, including whether damages are an adequate remedy for the claimant"; and
- "any other matters that the court considers appropriate".
The Bill has introduced various requirements to publish notices throughout the procurement lifecycle, including a requirement to publish a "contract award notice" prior to entering into any relevant arrangement.
Unlike the current rules, it is proposed that the standstill period will run for eight working days from the date of publication of the "contract award notice". This will be supplemented by a "contract details notice" which is more akin to the current contract award notice and is published after entry into the relevant contract.
Prior to the publication of the "contract award notice" the contracting authority is also required to provide those participating in a procurement an "assessment summary" outlining the assessment of the relevant tender.
Whilst transparency is a key theme of the proposed Bill, the "assessment summary" does perhaps give rise to a concern that less information on the award decision might be provided to losing tenderers.
Unlike the current rules, however, for those agreements that have an estimated value of more than £2 million, there will now be a requirement to publish a copy of their procured contracts within 90 days of entering into such arrangements. It is not yet clear what or how much of that contract can be redacted.
In a similar vein, section 43(1) will also "mandate the publication of a transparency notice whenever a decision is made to award a contract using a procedure as a direct award".
The Bill is currently at the Committee Stage in the House of Lords where it is certain to come under considerable scrutiny given that there are a number of uncertainties with the current drafting. We can expect some refinement of key provisions listed above, as well as those areas that have diverged already from the text contained in the current set of regulations.
The plan, as we understand it, is to complete the legislative process early next year followed by a 6-month transition period before the new regime goes live. A close watching brief on the progress of the Bill is therefore recommended given that limited time will be available for understanding and implementing new procedures under the enacted regime.
The Bill will go some way in redefining "the formal contractual interface between the private sector and the various aspects of the state". Whilst the objective for the regime is to "be simpler and more flexible" than the current regulations, it is clear that there are still key omissions within the draft legislation and changes that could be made to the Bill to realise this ambition.
DWF will be publishing further articles and delivering workshops on specific aspects and progress of the Bill in due course.
DWF's award-winning public sector team is on-hand to advise on the existing regime as well as what the reforms will mean for both public sector purchasers and private sector suppliers, please get in touch to find out how we can help your organisation.