Welcome to the first bulletin in our Changing Landscape series where we look at the changes soon to be made to the public procurement regime in England, Wales and Northern Ireland by the Procurement Act 2023 ("the Act").

Between now and when the Act comes into force, we'll be publishing a series of bulletins looking at the key features of the Act, and at what public bodies and suppliers can be doing now in order to prepare themselves for a seamless transition to life under the new regime.

What is the Procurement Act, and what will it do?

In simple terms, public procurement is the spending of public money on goods, services and construction work. It is governed by a complex set of rules which require public bodies to follow particular procedures when selecting suppliers, and to conduct procurement in particular ways so as to ensure value for money. The rules also impose requirements aimed at ensuring that public procurement is fair on suppliers, so that all eligible suppliers bidding for public contracts have a fair crack at the whip. The procurement rules which currently apply in this country date from the time when the UK was a member of the European Union (EU), and embody EU rules (directives) on public procurement dating from 2014 – which every EU member state at that time (including the UK) was required to implement in its own national laws. In the UK (other than Scotland), these laws currently comprise four main pieces of legislation, each of which governs a different broad type of public procurement (public contracts, utilities sector contracts, defence and security contracts, and "concession" contracts in which operating risk is handed over to a contractor in return for the right to make money from operating an asset).

Now that the UK is no longer part of the EU, it is free to replace the current EU-derived rules with new ones of its own. The Act received Royal Assent on 26 October 2023. When the Act comes into force, it will represent a radical overhaul of the law governing public procurement in England, Wales and Northern Ireland. The aim of the Act is to create a body of procurement rules that better serve the UK's particular interests than the current EU-derived procurement regime which currently applies. The Act is currently expected to come into force in February 2025. The Act contains the power for the Government to determine the precise date on which the Act will come into force, and also the power to bring different parts of it into force on different dates (section 127).

The Act does not extend to Scottish devolved authorities; Scotland has instead decided to retain its own current public procurement regime. The Scottish procurement regime is also derived from the EU procurement directives, and is principally based on them (with some Scottish domestic legislation supplementing the directives-based framework).

The Act itself does not represent the whole body of domestic procurement law that will apply once it is in force. Secondary legislation – that is, sets of Regulations – will be needed in order to supplement a number of the Act's provisions in order to give full effect to them; the power to make such regulations is given by the various sections of the Act where the secondary legislation is required.

The secondary legislation is not yet in settled form; drafts were subject to consultation during 2023 and will be finalised over the coming months.

Scope of the Act

As mentioned above, four separate key pieces of procurement legislation together make up the existing procurement regime which the Act will replace. They are:

  • The Public Contracts Regulations 2015, which govern most public procurement currently undertaken and cover the bulk of government contracting – for example, central government procurement; local authority projects such as highways, waste services, and care services; and, for now, much NHS procurement;
  • The Utilities Contracts Regulations 2016, which apply to procurement by utility companies in connection with their regulated activities (such as the provision of gas and electricity) and to the procurement of transport infrastructures such as high-speed rail;
  • The Defence and Security Public Contracts Regulations 2011, which govern the procurement of contracts in the defence sector and for various national security purposes; and
  • The Concession Contracts Regulations 2016, which apply to the procurement of so-called "concession" contracts, where a contractor agrees to run a particular asset (for example, a leisure centre, event or attraction, or a toll road) and thereby exploit it for profit – while in return taking on significant operating risk in doing so.

All four have been amended to some extent during their period in force, most notably to incorporate changes made necessary by Brexit. When the Act enters force, all four of these sets of Regulations will be revoked (Schedule 11 of the Act), and the four regimes brought together into one (albeit with some sector-specific provisions retained) in order to consolidate them as much as possible. The result – despite the consolidation – is still a weighty Act.

As outlined above, further secondary legislation (more Regulations) will be required in order to implement various parts of the Act. These will include Regulations which prescribe:

  • the various forms of notices which procurers will have to publish about their procurement, as part of a drive for better transparency which the Act will introduce;
  • the subject-matter of so-called "light-touch contracts" – those which, by their nature, can benefit from a lighter set of rules around their procurement; and
  • specific "crisis" situations which, if and when they arise, would allow the direct award of some contracts (this clearly builds on learnings from the COVID-19 pandemic, which threw into sharp relief some of the limitations of the exiting regime around the ability to make direct awards).

As well as consolidating into one Act all of the areas of procurement currently governed by separate rules, the Act will expressly exclude some types of procurement from its scope altogether. Of these, a number are already excluded from the scope of the current rules – for example, certain types of financial and legal services, and most research and development contracts. However, one area of procurement – namely that of healthcare services for the purposes of the NHS in England – has spent the last decade being (in effect) dual-regulated by both the Public Contracts Regulations 2015 and by the NHS (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. The two regimes have overlapped in some respects but differed in others – with confusing results. From 1 January 2024, NHS procurement will come under its own, all-new "Provider Selection Regime" ("the PSR") – and the Public Contracts Regulations will no longer apply to it. Later in 2024, when the Act comes into force, NHS procurement will fall outside the scope of the Act and instead will continue to be regulated only by the PSR.

Principles and objectives of procurement under the Act

Anyone involved in public procurement will be familiar with the EU-Treaty-based principles which apply to procurement that the current regimes regulate – namely equal treatment, transparency, non-discrimination, mutual recognition, and proportionality. Procurement has to be conducted in accordance with these principles.

In the new Act, these principles will broadly continue to survive as themes, and several of the Act's provisions pick up on them by creating particular obligations. However, the general principles of procurement have been somewhat recast by the Act, which refers to particular "objectives". The Act will require contracting authorities to have regard to the importance of the following "objectives":

  • delivering value for money;
  • maximising public benefit;
  • sharing information for the purpose of allowing suppliers and others to understand the contracting authority's procurement policies and decisions; and
  • acting, and being seen to act, with integrity.

Suppliers are to be treated the same unless a difference between them justifies different treatment, and contracting authorities will have to take all reasonable steps to ensure different treatment does not confer an advantage or disadvantage on a supplier. Contracting authorities will have to have regard to the fact that small and medium-sized enterprises may face particular barriers to participation, and consider whether such barriers can be removed or reduced. All contracting authorities are to have regard to the National Procurement Policy Statement ("NPPS"), published and updated by the Government from time to time. This, in effect, places national procurement policy on a legal footing, as contracting authorities who conduct public procurement will effectively be required to comply with the NPPS unless they have a good reason not to.

Thresholds

Value thresholds will continue to apply to public procurement under the Act, just as they do currently. On 1 January 2024, some of the UK procurement thresholds will increase very slightly, to the following (inclusive of VAT):

Contract type New threshold from 1 January 2024 (VAT-inclusive)

Public works contracts

£5,372,609

Public services and supply contracts (central government authorities)

£139,688

Public services and supply contracts (sub-central government authorities)

£214,904

Works contracts (utilities)

£5,372,609

Public services and supply contracts (utilities)

£429,809

Concession contracts

£5,372,609

Light-touch regime contracts

£663,540 (unchanged)

Small lots

£70,778 (services and supplies) (unchanged)

£884,720 (works) (unchanged)

New procedures

The current procurement regime provides for seven different procurement procedures in total, each appropriate for a different situation. The Act will replace these seven procedures and replace them with three, namely:

  • A single-stage procedure without restriction on who can tender – an "open procedure";
  • Such other competitive procedure as the contracting authority considers appropriate for the procurement in question – a "competitive flexible procedure". This procedure allows contracting authorities to design a form of procedure that works best for their particular procurement; and
  • Direct awards, which are available in some specific situations.

Whatever the procedure chosen, it must be a proportionate means of awarding the contract having regard to the nature, complexity and cost of the contract. Contracting authorities will be under a duty to consider dividing large contracts into smaller lots, so as to facilitate access to public contracts for smaller businesses.

Procurement under the Act will lead to the award of a public contract to the supplier that submits the "most advantageous tender" in a competitive tendering procedure, as opposed to (at present) the "most economically advantageous tender". The fact that the Act recasts the language in this way when referring to a winning bid underlines the fact that contracting authorities may identify the winner by using award criteria that reach well beyond factors that are merely financial. It is likely that social value, the environmental and net-zero-related aspects of bids, and other broad policy-driven factors are likely to feature large in the award decisions of many contracting authorities in future.

The duty to "Treaty State" suppliers

Even though the Act is (in a sense) a product of Brexit, the duties which it will impose on contracting authorities when undertaking procurement will not extend only to UK suppliers. Free Trade Agreements to which the UK is party exist with a significant number of other countries of the world, and, where those agreements concern procurement, UK contracting authorities must not discriminate against those countries' suppliers. The full list of specified international agreements (on the basis of which duties to "Treaty State" suppliers arise under the Act) is set out in Schedule 9. It is of course possible that, in time, the list could be added to.

The countdown to February 2025

The Cabinet Office has indicated that six months prior notice will be given before the Act is brought into force, so that there is enough time for contracting authorities and wider public procurement markets to gear up.

The Act's landing page can be accessed here. The Government Commercial Function is running a learning and development programme - to be rolled out between now and when the Act comes into force - comprising (in this order) a series of free, on-demand knowledge drops of up to an hour each; a self-guided e-learning course ending in the opportunity to gain a Skilled Practitioner certificate of achievement; a three-day, virtual advanced course of deep dives into the Act and its key themes; and finally the launch of "Communities of Practice" – events that provide opportunities for groups to come together and foster collaborative learning by sharing best practice, innovative approaches and challenges. We can expect to hear more on the timings for the launch of these initiatives over the coming weeks and months.

Details of the Cabinet Office's learning and development programme can be found here. To complement it, we will be publishing a series of insights on key aspects of the new Act in further editions this "Changing Landscapes" series.

If you have any questions or need support with navigating these latest developments, get in touch with Christopher Brennan, Alison Richards, Alexi Markham or Robert Breedon.