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What is Procurement?

Procurement is the process of buying the products and services a business needs to provide its own products or services to customers. The process can vary depending on the size and complexity of the business, the price, and the length of the contract.

Typically, procurement involves several steps. First, the business defines exactly what it needs and documents these requirements. Then, it conducts market research to find key suppliers, checking factors like the suppliers' insurance, how long they've been in business, and their creditworthiness.

After these initial steps, the business selects a supplier through discussions or a formal tender process. Once a supplier is chosen, the business and supplier negotiate the contract terms.

Simon Roberts, Solicitor at ARAG Law, takes a closer look.

What is public procurement?

Public procurement is where a government body is contracting into the private sector for example for major infrastructure projects like roads, hospitals and schools. This can also extend to services such as prison services or school’s meals. In any event, if an organisation is using public funds then this is considered public procurement.

The organisation in question will follow a procedure to ascertain what bidder would be most appropriate to deliver the product or service. The general principles for public procurement are to ensure a fair process in tendering to ensure it is open/transparent and to ensure the money being used is in the public interest.

What is the purpose of the Procurement Act 2023?

A new procurement regime is to come into force with the aim of consolidating and simplifying the rules associated with the security of public contracts, defence, public contracts, concession contracts and utility contracts.

The intentions of the new legislation under the Procurement Act 2023 are to bring a more flexible and strategic approach to the procedure of procurement. The Procurement Act 2023 states under section 12 that the objectives of the new legislation are to ensure that a contracting authority considers the significance of delivering value for money, maximising public benefit, making information transparent for suppliers to ensure they understand procurement procedures and decisions, and acting and being seen to act with integrity.

The Act will replace the existing regulations:

  • Public Contracts Regulations 2015;

  • Utilities Contracts Regulations 2016;

  • Concession Contracts Regulations 2016;

  • Defence and Security Public Contracts Regulations 2011.

The Act supports the procedure from the outset right up to expiry of the contract. This article will discuss the key changes and key information associated with the new legislation.

When will the new Procurement Act 2023 take effect?

It has been declared that the Procurement Act 2023 will come into force on 24th of February 2025. This is due to the newly elected government reassessing the National Procurement Policy Statement.

Who will be affected by the Procurement Act 2023?

This legislation is intended to affect all contracting authorities such as government departments, local authorities and organisations that are spending public money such as schools, parish councils and housing associations. This will also look to extend to any suppliers that will be bidding into procurement exercises that are formed under this new Act. This will have an impact on all Foreign, Commonwealth and Development Office commercial and procurement procedures in both the United Kingdom and Overseas.

What are the key changes between the Procurement Act 2023 and the previous regulations?

There are various changes that we are set to see in February 2025, some of the key changes are set out below:

  • The award of a supplier will be based on the most advantageous tender in a competitive tendering procedure. There are two options here, either the open procedure or the competitive flexible procedure. The open procedure is a single stage procedure much like the current open procedure, and the competitive procedure can be designed by the contracting authorities.
  • There lies a new obligation on contracting authorities to treat suppliers the same across the board which gives more opportunity to smaller organisations.
  • Throughout the procurement process there is a new requirement for contracting authorities to publish notices to the suppliers: planned procurement notices, preliminary market engagement notices, pipeline notices, transparency notices on direct award of a contract, mandatory contract change notices and termination notices on the termination of a public contract.
  • In terms of excluded suppliers, the list of mandatory exclusions has had a few new additions. The new offences being theft, corporate manslaughter and competition law infringement. Also, there has been changes to the discretionary grounds in that although the current regulations state poor performance should be considered where as a result there has been a breach a contract that has been repudiated or damages have been awarded, the Procurement Act 2023 furthers this in that if the suppliers have not improved their performance despite having an opportunity to do so they could potentially be excluded.
  • The Procurement Act 2023 also looks to introduce a central debarment list, this function can be used by a Minister of the Crown to enter an excluded or excludable supplier’s name. The effect this may have on the supplier is that they may be debarred for a fixed period, unless they’re successful in applying for removal from the list.
  • There is a new requirement for contract authorities to publish key performance indicators (KPI), the obligations are that they publish 3 KPI’s. As these KPI’s are published there is an obligation on the contracting authority once every 12 months to assess the performance of the suppliers based on meeting these indicators and to publish information alongside this.
  • The new Act also changes the standstill period which is the period which happens after the announcement of the preferable bidder prior to the agreed contract. The changes here are that the standstill period should be 8 working days from the day on which a contract award is published. For contracts that do not require a mandatory standstill a voluntary standstill can be followed which should be no less than 8 working days.
  • The Act broadens the implied rights to termination of public contracts where the contract can be considered to have been awarded or modified in material breach of the Procurement Act 2023. Another implied term of termination that we will see with the new changes is that if a contract was awarded and since that has happened the supplier has become an excluded or excludable supplier it may be terminated.

Is the government offering any support to organisations in readiness for the changes coming into force in February 2025?

The Cabinet Office have provided free Transforming Public Procurement Training, this will help facilitate contracting authorities to run the procedure in line with the new changes. There are e-learning modules that consist of 10 x one hour modules that cover the reforms, these modules will become available upon registration at www.govcommercialcollege.co.uk to register.
The Cabinet office also launched the Procurement pathway tool which provides guidance and templates.

There is also a preparation checklist to touch base with as we approach the reform.

For further guidance and the links necessary for Public Procurement please take a look at the government website: Update for schools and trusts on Procurement Act 2023 – are you ready? – Buying for Schools

What does the delay mean for any existing procurement?

There are options if there is an existing procurement exercise scheduled before February 2025. Contracting authorities will have to decide on whether to proceed with the current timetable under the existing regulations or whether to delay the procurement exercise until March 2025.

 

Disclaimer - all information in this article was correct at time of publishing.