The Procurement Act 2023 – An Initial Analysis

An indicative ‘go live’ date of October 2024 has been provisionally scheduled, with a six-month notice period before the final implementation date allowing buyers and suppliers alike to adjust their procurement processes and procedures.

Previously, we have written about the Procurement Act 2023 at different stages of its legislative journey. As the Act will govern all government tenders and public sector contracts in England, it will impact roughly £300 billion per year in public funding for goods, works and services. This underscores the importance of understanding the key objectives of the Procurement Act and the changes it will bring to public sector bids and tenders.

Main objectives of the Procurement Act 2023

In addition to delivering simpler, streamlined procurement processes, the stated objectives of the Procurement Act 2023 include delivering value for money, maximising public benefit and acting with integrity throughout the entire tender exercise.

The Cabinet Office has also emphasised how the Procurement Act is designed to encourage and facilitate small- and medium-sized businesses to become suppliers to do more business with the government. Although SMEs comprise 99.9% of private sector businesses, they only received 26.5% of supply chain spend in the 2021–22 financial year. Since the government outlined its object for £1 of every £3 in procurement funding to go to SMEs in 2015, it has missed the target every subsequent financial year.

Simplifying and reducing tender procedures

To complement the more typical open tender procedure, where any interested supplier, providers and contractors are eligible to bid for works or services, The Procurement Act 2023 has introduced the ‘competitive flexible’ procedure to public sector bids and tenders. The two procedures will reduce eight existing type of procurement exercises outlined in the Public Contract Regulations 2015, Utilities Contracts Regulations 2016 and Concession Contracts Regulations 2016.

Under the competitive flexible procedure, buyers may be allowed to limit participants at each stage of the process, in addition to refining or changing the award criteria. As an example, the split between quality and price may favour quality in subsequent stages of a tender exercise. However, the contracting authority will need to be mindful that ‘flexibility’ does not become ‘complexity’, particularly given the parallel obligation to reduce barriers to participation for SMEs.

Ultimately, the change to tender procedures gives buyers more leeway to design their own tender processes, provided they are ‘appropriate’ to the contract. Examples given within Section 20 (5) include rejecting suppliers who are not based in the UK or intend to subcontract portions of the contract to non-UK businesses.

Changes to evaluating the ‘best’ tender submission

The Procurement Act also fundamentally changes the definition of tenders which are awarded the contract from ‘most economically advantageous tender’ (or the commonly employed acronym MEAT) to ‘most advantageous tender’. This suggests a more comprehensive approach which embraces wider public benefits, rather than narrowly focusing on pricing margins, aligning with amendments to the government’s environmental and sustainability policy and wider public procurement policy in recent years.

Somewhat surprising is the omission of social value from the final version of the Act. The phrase does not appear once throughout the Act’s 137 pages. Given its enshrinement in other procurement regulations, such as The Public Services (Social Value) Act 2012 and PPN 06/20, it is rather unusual it would not be mentioned specifically within the government’s flagship procurement regulations.

Nevertheless, the principles of social value have been enthusiastically embraced by many authorities, with local government bodies leading the way in integrating social value into their procurement practices. Consequently, it is unlikely to disappear or fade away from the tender process.

More stringent procedures for key performance indicators and invoicing

As per Section 52 of the Act, the contracting authority is required to set at least three key performance indicators in respect to the contract, with performance assessed and published annually. Key performance indicators can encompass any factor or measure which is assessed as relevant to judging the supplier or provider’s performance. This could comprise quality in delivery, response or resolution times, customer satisfaction ratings and compliance with health and safety.

There is a value threshold of £5 million for the requirement to publish data on key performance indicators. Furthermore, works or services under framework agreements or those which qualify for the government’s ‘light touch’ regime (i.e. most health and social care contracts) are excluded from this requirement – although they can still be included at the authority’s discretion.

Furthermore, Section 69 outlines the requirement for contracting authorities to settle all invoices within 30 days of receipt, adhering to the principles of the UK Prompt Payment Code. This is likely in response to SMEs’ cash flow issues stemming from unpaid invoices – research from Barclays indicates roughly 60% of small- and medium-sized businesses are waiting on late payments from customers.

Stronger measures for excluding underperforming suppliers

The Procurement Act will also give authorities stronger processes for excluding suppliers or providers who underperform on public sector tenders from participation in future bids and tenders. Specific provisions within the legislative text on how suppliers can be excluded include ‘breach of contract,’ poor performance against the new key performance indicator requirement in the above section, and acting improperly in procurement, such as colluding with other bidder organisations.

Two main points of difference from current regulations involve exclusion criteria applying to suppliers with ‘connected entities’ who are excluded, such as subcontractors, and if suppliers are deemed ‘a threat to national security’. The procedures will be strengthened by the introduction of a debarment register listing companies excluded for serious breaches in procurement regulations. There is no specified period of time companies will be subject to the debarment list, meaning it could be indefinite – underlining the importance of awareness of and adherence to all procurement regulations during the tender process.

Executive Compass will continue to monitor how buyers and bidders alike react to changes in our upcoming series of blogs around the Procurement Act. Guidance around the new legislation will be part of the wider bid management support provided via our bid and tender services.