The way private businesses secure work from public bodies is changing, bringing with it both risk and reward in equal measure. We have partnered with Stephen Alexander, a provider of outsourced bid, marketing, and business development support, to explore what these changes mean, and how private businesses can secure more work under the new Procurement Act 2023.
What is the Procurement Act 2023?
Passed by the UK Parliament in October 2023, the Procurement Act 2023 (‘the Act’) represents one of the most significant upheavals to public procurement in the UK’s history.
Its enactment stems from Brexit, which provided the UK with an opportunity to recast the legislative framework around the procurement of public contracts, unifying its separate regulations – including the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, and the Utilities Contracts Regulations 2016 – into one overarching piece of legislation.
This new Act enhances transparency throughout the lifespan of a procurement process, whilst also attempting to make said processes simpler and more streamlined. In particular, it places a duty on contracting authorities to have regard to the Act’s four objectives: delivering value for money, maximising public benefit, sharing information, and acting with integrity.
Public procurement is a key lever in achieving the Government’s missions by sourcing goods and services that deliver value for money, including social and economic value across the commercial lifecycle that drives sustainable economic growth and benefits local communities, raising living standards in every part of the United Kingdom.
From the private business side of procurement, there is also a greater obligation to demonstrate how a supplier will meet both the Act’s objectives, and those of the UK Government. These include:
kickstarting economic growth;
making Britain a clean energy superpower;
breaking down barriers to opportunity; and
building a National Health Service fit for the future.
What are the most important changes for private businesses?
Any business that bids for work from a public authority must be aware of the Act, which significantly changes both the tendering, selection and contract monitoring processes.
Transparency is embedded throughout most of these changes, particularly regarding the introduction of publicly available notices at various stages of the contract lifecycle, some of which are mentioned below.
Of particular importance to private businesses are the following changes:
Financial criteria no longer necessarily take precedence when contracting authorities select a supplier. This is because the measure for how public contracts will be awarded has changed from the Most Economically Advantageous Tender (‘MEAT’) to the Most Advantageous Tender (‘MAT’). The aim of this is to increase the competition by making contracts more accessible to small and medium-sized businesses.
Contracting authorities must publish Key Performance Indicators (KPIs) and suppliers will be held publicly accountable for meeting them. Under section 52(1) of the Act, contracting authorities must set and publish at least three KPIs for contracts with an estimated value of more than £5m. Suppliers must then be assessed against these KPIs at least once in a 12-month period, with the results published in a publicly available contract performance notice. Suppliers will need to consider how they will monitor such notices and manage risk by preparing their responses, should any notice fail to fairly or accurately reflect the work they have done.
Contracting authorities have significantly enhanced rights to terminate a contract. Under section 78(2) of the Act, a contracting authority has three implied circumstances – or ‘termination grounds’ in which a contract may be terminated, in addition to any grounds explicitly referenced in the contract. With the increased risk of contract termination comes greater potential for reputational harm, given that contracting authorities must publish a contract termination notice explaining the reasons for the termination within 30 days of the contract being terminated. In some cases, suppliers could also be placed on a Debarment List, excluding them from bidding for future public contracts for a period of time. Managing these risks effectively will require routine monitoring of any and all notices the contracting authority publishes, as well as checking the termination rights and processes stipulated in the contract.
Suppliers can add key details to a centralised procurement platform, something which will save a significant amount of time for both bidders and buyers. Suppliers must ensure this information is correct and adequately maintained to give the best first impression to a contracting authority.
Ministers have increased powers to permit direct contract awards, but at the cost of greater transparency. Direct contract awards eschew the regular competitive tendering procedure and are, therefore, only permitted in limited circumstances. Under section 42 of the Act, these circumstances have expanded to include where it is necessary “to protect human, animal, or plant life or health or to protect public order or safety.” Before doing so, however, contracting authorities need to publish a transparency notice explaining what the direct award is for, to whom it has been given, and why a direct award was necessary. Recipients of direct awards should, therefore, be prepared to encounter greater scrutiny of their business practices, both before and during the contract.
How can suppliers meet the new requirements of the Procurement Act 2023?
Here, Stephen Timmins, director of Stephen Alexander, provides practical guidance on meeting the new requirements and securing more public sector work.
The Procurement Act has been introduced to support a more competitive, flexible procedure, allowing for easier negotiation and partnership with public sector bodies, and increasing opportunities for small businesses and social enterprises.
To support the introduction of the Act, the Cabinet Office has created a new Procurement Review Unit (PRU), which has responsibility for overseeing public procurement. The PRU will engage with public sector bodies across all sectors to collectively achieve the shared ambition to raise standards in public procurement and ensure that the changes introduced by the Act are successfully implemented.
To take advantage of key changes introduced within the Act, businesses bidding for public sector contracts should:
Register on the Central Digital Platform (CDP). Suppliers will be required to register their companies on the CDP to access and participate in procurement opportunities. Under the Act, registration is mandatory to submit tenders on the platform. Organisations will need to re-register on the new platform, even if they had previously registered on the Government’s ‘Find a Tender’ website. The process will require businesses to provide comprehensive information about their organisation, including financial records and certifications. Prior to registration, it is crucial to gather all necessary documents, including your business registration and VAT numbers, recent accounts, and details of key personnel. This will facilitate a smooth registration process.
Focus on sustainability and social values. Currently, the success of many tenders focuses on price. With the move to the ‘most advantageous tender’ criteria, however, comes a greater focus on environmental, social and governance (ESG), including a business’s carbon footprint, how it supports the local community, and whether its business practices are ethical. Large companies previously benefitted from economies of scale. Now, smaller companies have an opportunity to compete by showcasing the work they do at an ESG level.
Take advantage of increased transparency and feedback. A previous pain point for bidding businesses was that they were often left with little to no explanation for why a contract was awarded to a different bidder, and where their bid fell short. Public sector bodies are now required to provide consistent feedback to suppliers, explaining their strengths and weaknesses to support continuous improvements.
Remember the 30-day payment terms. The Act mandates 30-day payment terms for all public sector contracts. This should improve cash flow for businesses.
What should businesses do next?
Although the new Act aims to streamline procurement processes, it will undoubtedly require greater internal resource on both sides during the procurement and then over the lifetime of the contract.
For example, most notices published by a contracting authority come with a window of just 30 days in which to challenge the content of that notice. As such, it is important for private businesses to ensure they have adequate available resource to monitor any and all relevant notices and respond where needed.
Whilst the UK Government is offering free training and resources to help businesses understand, and prepare for, the new public procurement framework, the Act’s complexity may necessitate more tailored training and legal guidance.
Our team of public procurement specialists can advise both bidders and contracting authorities on all aspects of the public procurement process, whether contentious or non-contentious. We can also provide tailored training sessions to help key stakeholders understand and adapt to the new processes in a way that best meets the business’s objectives.
The Procurement Act 2023 presents a rare opportunity for new businesses to enter the world of the public sector – a world that offers around £385bn in potential spend every year. Preparing the groundwork now will ensure businesses can fully harness the opportunity and, in so doing, support the UK in meeting its potential as a home of innovation.
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