Procurement Act 2023 changing landscape, Issue 10: contract performance and implied terms

11 minute read
03 July 2024

Welcome to the tenth bulletin in our changing landscape series on the Procurement Act 2023 (the Act), where we examine the effect of the Act on the transparency of the procurement regime in England, Wales and Northern Ireland. Our last changing landscape bulletin covered the mechanics of transition from the current procurement regime to the new legal framework of the Procurement Act. Here, we turn to look at how the Act will foster greater transparency by requiring contracting authorities to publish more data on contract performance. We also look at the terms the Act will automatically imply into certain public contracts.



An increase in transparency

The Act includes a raft of changes which it will introduce in order to increase the overall transparency of public procurement significantly. Here, we highlight some of the key changes that centre around contract performance and, in particular, the measures designed to increase visibility concerning how well suppliers are delivering on their contractual commitments. These changes mark a significant broadening of the scope of our procurement law when compared to the current procurement regime.

Notices

There are far more types of notices in the incoming regime in comparison to the old regime. The parts of the Act that govern them will come into effect on 28 October, meaning that publishing them will become a legal requirement (for the procurements to which they relate to) from 28 October 2024. The exception is the payments compliance notice: the guidance on transition to the Act, which explains (at paragraph 24) that the phased delivery model of the central digital platform will mean the digital capability to publish a payments compliance notice on that platform will not be available when the Act comes into force. In addition, it means that contracting authorities should therefore continue to publish their notices under regulation 113(7) of the Public Contracts Regulations 2015 as they do currently; until the payments compliance notice obligation under section 69 of the Act comes into force (date as yet to be confirmed).

Key performance indicators

The increased flexibilities introduced by the Act around procurement procedures are, in a sense, kept in check by a range of new measures mandated by the Act to ensure visibility to the public of what authorities are procuring, or intending to procure, how they are going about it, and how well the contractors they select subsequently perform. Key to this visibility is the extensive range of new notices and information - all mandated by the Act and in forms prescribed by the Procurement Regulations 2024 - that contracting authorities will be required to publish at various points in the procurement (and contract) lifecycle. This publicity will include information on key performance indicators.

Where a contracting authority is about to enter into a public contract worth £5 million or more, it must set and publish at least three key performance indicators (KPIs) in respect of that contract.[1] Then, at least once every 12 months during the contract's lifecycle, and on termination, the contracting authority must assess the performance of the supplier against the KPIs previously set and publish this as required under the Act.[2] Failure to publish could be challenged under the Act's remedies regime, and systemic failure to publish notices of this type could also be investigated by the Procurement Review Unit, the new oversight body set up under the Act. Certain types of contracts, such as frameworks and concession contracts, are exempt.

Breach of contract and unsatisfactory performance

If a supplier:

  • breaches their contract leading either to termination, the award of damages or a settlement agreement; or
  • is not performing to the contracting authority's satisfaction and does not improve their performance after being given a proper opportunity to do so,

the contracting authority must (within 30 days of either of these things occurring) publish a notice stating:

  • that subsection 71(5) applies;
  • the circumstances of the breach or poor performance giving rise to its application; and
  • any other information required under the Act.

The publication of information: the central digital platform

The Act requires a Minister to make arrangements to create and operate an online system for the publication of information required under the Act. Such a dedicated system will help to improve transparency by sharing information on the performance of suppliers for free.

The measures above will certainly help to increase transparency in the procurement regime. Suppliers, now knowing that information about their performance can be shared publicly, may feel a greater sense of accountability as poor performance may impact future awards (in certain situations, poor prior performance can constitute a ground for discretionary exclusion from future procurement processes). However, this transparency can also have its downsides. If a supplier has previously performed badly, a contracting authority could end up rejecting their application; even if the contract now being procured is completely different from that to which the poor prior performance related.

Implied terms

There are a wide variety of terms that the Act will now imply into contracts. An important one relates to the payment of suppliers[3]. Under the Act, any sum that a contracting authority is due to pay under a public contract must be paid within 30 days of receiving an undisputed, valid invoice; as long as the invoice doesn't stipulate a later payment date. Furthermore, this condition doesn't just relate to contracting authorities: if a sub-contractor is employed, then the very same term is also implied into these sub-contracts[4]. This goes further than the regime that it replaces.

Contracting authorities will also be required to publish payment compliance notices if they make a payment under an above-threshold public contract, or a sum that they owe under a contract becomes payable before the end of a period of 30 days beginning with the last day of the reporting period[5]. Importantly, that form of notice must contain specified information concerning the contracting authority's compliance with its duty to pay suppliers within 30 days.

Finally, the implied right to terminate a contract in certain circumstances is also worth mentioning. There are three termination grounds implied into every public contract[6]. Contracts can be terminated if:

  1. the contracting authority considers that the contract was awarded or modified in material breach of the Act or regulations made under it;
  2. a supplier has, since the award of the contract, become an excluded supplier or excludable supplier (including by reference to an associated person); and
  3. a supplier (other than an associated person) to which the supplier is sub-contracting the performance of all or part of the public contract is an excluded or excludable supplier.

What changes will you put in place in preparation for the Procurement Act 2023?

The impact for suppliers is significant and, no doubt, they will be wary of negative reporting and the potential impact on future contract opportunities outlined in Issue 8 of our series on the Act (Exclusion under the Procurement Act 2023).

These incoming changes are set to have a significant impact on the procurement regime. Therefore, if you have any questions or need support with navigating these latest developments, please get in touch with Christopher Brennan, Alison Richards, or Alexi Markham.

You can also read more about the changes the Act will bring and the impact for those working in or with the public sector in our articles below:

With grateful thanks to Trainee Solicitor Athar Mirza for his assistance in preparing this bulletin.

Footnotes:

[1]Procurement Act 2023, s. 52.
[2]S. 71.
[3]S. 68.
[4]S. 73.
[5]S. 69.
[6]S. 78.


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