On 1 August 2023, the Cabinet Office published its latest updates to all three of its Standard Contracts and accompanying guidance, namely:
- the Model Services Contract (v2.1);
- the Mid-Tier Contract (v1.2); and
- the Short Form Contract (v1.4).
The latest updates follow industry roundtables and update the approach on key topics such as intellectual property, termination rights and indexation.
Procurement Policy Note (PPN) 08/23: Using Standard Contracts has also been published alongside the updates, providing guidance on when to use each of the Standard Contracts.
Which Standard Contract should be used when?
Where there is no suitable government framework, PPN 08/23 requires 'In-Scope Organisations' to adopt the Standard Contracts as the base templates (adapted for Departmental needs, if required) for relevant procurements, rather than creating bespoke contracts. Which contract is to be used is to be determined by value, complexity and criticality of the underlying requirement:
- Model Services Contract: to be used for complex services (approx. £20+ million in value over the entire term, or if rated "Gold" on the Cabinet Office Contract Tiering Tool) and which typically require formal dialogue or negotiation with suppliers. It has been drafted with Business Process Outsourcing and/or ICT services in mind, but can be (and has been) used for other complex services.
- Mid-Tier Contract: for goods and/or services procurements that are not particularly complex (less than £20 million in value over the entire term, but above the relevant procurement thresholds) and do not require formal dialogue or negotiation with suppliers.
- Short-Form Contract: for goods and/or services procurements where the contract value over the entire term is below the relevant procurement threshold (unless the contract is more complex or critical whereby the Mid-Tier may be more suitable).
However, PPN 08/23 provides that you don't have to use the Standard Contracts if more suitable forms of contract are available such as Department standard terms and conditions for attaching to purchase orders or industry-specific standard forms such as NEC for construction.
PPN 08/23 replaces PPN 04/14 (which previously stated that those in-scope organisations "should" use the Model Services Contract) and PPN 06/14 (which previously stated that those in-scope organisations "may" use the Short Form Contract).
What's changed in the updated Standard Contracts?
There are nine key themes to the Standard Contract updates:
To make them more user friendly. Efforts have been made to shorten the Short-Form and Mid-Tier contracts, removing unnecessary definitions and clauses and amalgamating related clauses (for example relating to supply chain flow down);
To refine the intellectual property rights ('IPR') clauses in order to ensure that they work as intended. This includes:
- updated instructions and guidance for contracting authorities on the drafting options for the ownership and licensing of Foreground IPR, referring out to the IPR Guidance Note that accompanied the Digital, Data and Technology Playbook;
- amending the drafting in 'option 3' across the Model Services Contract and Mid-Tier (which provides that the Supplier owns Foreground IPR and the contracting authority has a licence to this for the current contract) so that it only applies for the contracted services and 'replacement' services insofar as they fall within the Termination Assistance Period of the contract;
- clarifying that when the contracting authority is a Crown Body, the Supplier is contracting with the Crown as a whole, and providing guidance about how this interacts with IPR;
- further aligning the IPR drafting across the Standard Contracts;
- amending the breadth of contracting authority licences to non-COTS Background IPR so that the licence the contracting authority gets depends on how this Background IPR is used in a deliverable; and
- treating non-COTS Third Party Background IPR similar to non-COTS Supplier Background IPR, so that, as a base position, the contracting authority gets a direct licence to this IPR from the Third Party. In the event that Suppliers cannot, after commercially reasonable endeavours, get that licence, alternative options are open to the contracting authority.
- To align key positions across all three Standard Contracts, including indemnities and termination rights. In particular:
- The right of the Buyer to terminate a contract where the Supplier embarrasses or brings the contracting authority into disrepute or diminishes the public trust in the contracting authority has been added to the Model Services Contract to align it with the position in the Mid-Tier and Short-Form contracts.
- The right of the contracting authority to terminate for Supplier default of particular named clauses (e.g. data protection, confidentiality, IPR) has been narrowed so that it is only triggered by repeated or material defaults (this was only the case in the Model Services Contract previously);
- Ensuring that indemnities are capped/unlimited in line with cross-government policy (e.g. the TUPE indemnity from the contracting authority to the Supplier is unlimited whereas the indemnity for wilful default is capped);
- The following indemnities from the Supplier to the contracting authority have been added to the Model Services Contract (previously they were only in the Mid-Tier and Short-Form): (i) wilful misconduct of the Supplier / Supplier Staff that impacts the contract; (ii) costs resulting from a breach of applicable Law to do with the contract; (iii) damage / injury / death caused during delivery or installation of goods (iv) costs arising out of recall of goods have been added to the Model Services Contract. In all three Standard Contracts, it has been made clear that these indemnities are capped.
- To implement PPN updates over the past year – for example, adding the model data protection clauses in PPN 03/22, reflecting the revised Modern Slavery guidance in PPN 02/23;
- To update Schedule 7 (Staff Transfer);
- To update the indexation provisions to reflect the recent updates to the Sourcing Playbook on inflation and indexation. CPI is removed as the default index to reflect the Sourcing Playbook policy of using the index that best represent the cost drives subject to inflation. Indexation is kept as standard in the Model Services Contract, optional in the Mid-Tier Contract and not included in the Short-Form;
- To update the security requirements, including:
- requiring the Supplier to make accessible back-ups of all Government Data from "every 6 Months" to "upon reasonable request"; and
- adding guidance dealing with when Cyber Essentials should be required (and which levels) by reference to the Cyber Essentials PPN, and the 14 Cloud Security Principles.
- To implement updates to the Sourcing Playbook and Digital, Data and Technology Playbook, including requiring contracting authorities and Suppliers to comply with the most recent version of the Supplier Code of Conduct (v3) and adding guidance around indexation;
- To update the insurance schedules in the Mid-Tier and Model Services Contract to state that where the Supplier intends to claim under any of the insurances for any matters that are not related to the contract, the Supplier only need to notify the contracting authority where such a claim is likely to result in the level of cover available being reduced below the minimum specified limit of indemnity, and not in every case.
Full summaries of the updates for the England and Wales versions are available:
Does PPN 08/23 apply to me?
If you are a Central Government Department, an Executive Agency to a Central Government Department or a Non-Departmental Public Body ("In-Scope Organisations"), then "yes".
If you are a contracting authority that falls outside of the In-Scope Organisations such as the NHS, then you are asked to "have regard" to these Standard Contracts.
When does PPN 08/23 come into effect?
Now. In-Scope Organisations must use the Standard Contracts as soon as possible – although the Cabinet Office recognises that it may take some In-Scope Organisations longer to implement than others.
Why has the Government highlighted the use of the Standard Contracts?
- To standardise terms and conditions and facilitate government to maximise value for money for the public purse;
- To implement and support the Sourcing Playbook and Digital, Data and Technology Playbook policies;
- To ensure implementation of other government policies;
- To create a level playing field for small and medium sized enterprises by reducing administration, resourcing requirements and costs when contracting with government; and
- To avoid government creating additional expenditure, increased negotiation with suppliers, inefficient procurement procedures and timetables, re-inventing the wheel and risk of inconsistent policy positions.
Need help in using the Standard Contracts?
Our Government Sector team have in-depth experience of advising both public and private sector organisations on using the Standard Contracts in procurements, and we were one of the original co-authors of the Model Services Contract.
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