The most recent Procurement Policy Note (PPN) updated the three standard contracts used and implemented by central government buyers. As with many recent procurement reforms, the aim is to simplify and streamline bidding activities, thereby encouraging more organisations to become public sector suppliers and making it easier to do business with the government.
Updates to standard contracts for public sector bidding
The principal aim of PPN 08/23 is to update standardised terms and conditions for public sector contracts and commercial activities. The three standard contracts comprise:
- Model Services Contract (v 2.1): Designed as a template for high-value and complex works or services (such as ICT or defence contracts), or those which require additional dialogue or negotiation between buyer representatives and suppliers. Its use is encouraged particularly when the anticipated contract value exceeds £20 million.
- Mid-Tier Contract (v 1.2): The terms and conditions within the mid-tier contract template are for works, goods and services which are not complex and have an estimated contract value of less than £20 million. This is the most common form of contract issued by government buyers.
- Short Form Contract (v 1.4): Issued for works, goods or service procurement where the value will not reach the procurement threshold of £138,760 for central government contracts. Short form contracts are also more typically used for low-value goods and services, such as office supplies or printing services.
Targeted amendments to the three standard contracts were introduced to ensure intellectual property rights clauses work as intended; alter the rights of buyers to terminate contracts for misconduct or poor performance; and update TUPE practices and regulations. With the publication of PPN 08/23, PPN 04/14 and PPN 06/14 are now out of date.
Which buyers will use the standard contracts?
The PPN applies to all central government departments, their executive agencies (i.e. CCS for the Cabinet Office) and non-departmental public bodies, such as Homes England for the Ministry of Housing, Communities and Local Government or the Environment Agency for DEFRA. Other contracting authorities which are not ‘in scope’, such as the NHS, are required to ‘have regard’ for standard contracts.
However, purchasing authorities are permitted to use other templates should more suitable forms be available. For example, if standard departmental terms and conditions are better suited to a particular opportunity, these can be used instead. The same applies for industry-specific standard forms, such as NEC3 contracts for construction projects.
Ultimately, if you are looking to enter the public sector procurement market, you are likely to encounter one of the three standard contracts at some point depending on your industry and market position.
What are the benefits of using standard contracts?
The use of standard contracts has substantial benefits for suppliers in addition to contracting authorities. This includes:
- Encouraging SME participation: All central and sub-central government departments are incentivised to increase the proportion of small- and medium-sized businesses supplying contracts. Standard contracts are designed to be user-friendly and support a ‘level playing field’, ensuring there are no barriers due to administrative burden or specialist knowledge to understand complex legislative language.
- Reducing additional expenditures: As creating bespoke contracts represents significant time and effort, standardised templates will realise cost savings and reduce the administrative burden for buyers and suppliers alike. Standard contracts also minimise the risk of inconsistent positions or references to legislation, introducing efficiencies to the overall bidding and procurement process.
- Ensuring alignment with other PPN updates: By changing the language of standard contracts, the central government effectively ensures compliance with other changes to procurement regulations over the past year. For example, data protection legislation from PPN 03/22 is now applicable, in addition to revised guidance on modern slavery from PPN 02/23.
Familiarity with the relevant standard contracts will ensure you have comprehensive understanding of your requirements as a supplier, therefore giving you the highest possible chance of successfully fulfilling contractual obligations.
Supporting your organisation with public sector tendering
Since our formation in 2009, Executive Compass have advised clients on regulatory and statutory changes within public procurement, ensuring our clients have the best possible chances of success. This approach is consistent across over 7,000 SQ, PQQ and ITT submissions we have supported on behalf of clients.
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