The forthcoming Procurement Act will change the way public sector contracts are handed out. Kristina Smith canvasses industry opinion on the changes

The Procurement Act was due to come into force on 28 October 2024. Designed to wrap four pieces of legislation drafted under EU law into one, the act was created with promises of simpler processes, greater transparency, better value and more work for SMEs.

With the industry fighting to get up to speed, and some details still rather sketchy, in September the new Cabinet Office pushed back the act’s go-live date to 24 February 2025. The reason for its delay, according to Georgina Gould, parliamentary secretary for the Cabinet Office, was that Labour wants to rewrite the Planning Policy Note (PPN) that underpins it. The PPN is important because it will dictate the spirit in which public sector procurers execute the letter of the law.

“Procurers will have to be involved all the way through, which is a good thing and something we advocate”

Kingsley Clarke, SCF

The announcement must have triggered a collective sigh of relief from public sector procurement teams across England, Wales and Northern Ireland (Scotland isn’t covered by the act). Word was that councils were rushing to get projects underway before the October deadline, with some intending to devote November to training staff and rewriting standard documents and questionnaires.

Among the missing details causing concern were how public reporting of key performance indicators (KPIs) will work; what the central online database at the heart of the new process would look like; and the ramifications of new powers to debar unsuitable suppliers from tendering. So with an extra four months of breathing space, what does the sector need to know about the forthcoming changes in the Procurement Act?

Long time coming

The new act will replace four existing pieces of legislation: the Public Contracts Regulations 2015 (PCR), the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011. It will apply to public contracts awarded by most central government departments, arms-length bodies, local government, health authorities and schools; utilities contracts in the water, energy and transport sectors; concession contracts for works or services; and defence and security contracts.

“Removing the word ‘economic’ suggests there is less focus on cost and more focus on issues like social value and on quality”

Chris Murray, Eversheds

Its creation began under Boris Johnson’s Conservative Government, which published the green paper ‘Transforming Public Procurement’ at the end of 2020. When the Procurement Bill was published in December 2022, some, including peers in the House of Lords, were dismayed that all references to ‘social value’ had been erased despite the green paper mentioning it 12 times.

The government’s argument at the time was that PPN 05/21, referenced by the act and currently being rewritten, says that contracting authorities should consider social value and local priorities such as creating new businesses, improving supplier diversity and tackling climate change. Labour’s new PPN is likely to go further, with contracting authorities having to post up to four times the number of notices and a debarment list among the changes.

“We all want to see more standardisation of processes and procedures as opposed to reinventing the wheel”

Chris Farr, Wilmott Dixon

At the heart of the act is greater transparency – making more information about projects available to everyone through a free-to-access online database and portal. For contracting authorities, this means that rather than posting three notices – as they must under the PCR –  they will have to post up to 13. For contracts over £5m, they will also have to publish annual updates on contractors’ performance on the portal in the form of three KPIs. The exact nature of these KPIs is still unknown, though details may be provided in upcoming supporting guidance.

That’s quite an upheaval for councils and other public bodies, says Kingsley Clarke, operations lead for the Southern Construction Framework (SCF), which is run by Devon and Hampshire county councils for authorities in London, the South East and South West. Under the new rules, procurement and contract management departments – currently siloed teams – must work together, as some of the notices will be published during the construction phase.

“Procurers will have to be involved all the way through, which is a good thing and something we advocate on our frameworks now,” says Clarke. “But there could be unintended consequences, which we are waiting to see.”

“One of the potentially transformational things is that procurers will be able to design tender competitions to suit the needs of their area”

Precious Zumbika-Lwanga, Carus

While the procurers’ workloads ramp up, the act aims to reduce time burdens for tenderers. The idea is that they can upload key bidding information onto the online portal just once, rather than resubmitting it with every tender, which SMEs in particular think will be a real time saver (see box on facing page).

Also on the portal for all to see will be a debarment list of contractors that have fallen below the mark. Although companies can currently be excluded under the PCR, the act will extend the grounds for debarment to include poor performance.

More for SMEs?

One of the central stated goals of the new act is to allow contracting authorities to create more diverse supply chains, with more opportunities for SMEs and social enterprises.

“Having worked with clients to get onto public sector works, I have seen that there are typically lots of barriers to entry to SMEs and to voluntary and social enterprises too,” says Precious Zumbika-Lwanga, managing director of Carus Advisory Services. “One of the potentially transformational things in the act is that procurers will be able to design tender competitions to suit the needs of their area and their market.”

“It’s important that contractors don’t think there will be opportunities for manipulations”

Shamayne Harris, Pagabo

The act uses the term ‘most advantageous tender’ (MAT) to replace the ‘most economically advantageous tender’ (MEAT) in existing legislation, suggesting that procurers could give a higher weighting to issues such as social value or deploying more innovative practices. Some local authorities are already pushing in that direction, says Chris Murray, a partner at Eversheds Sutherland. “The move to MAT is just a clarification of what is possible now,” he says. “Removing the word ‘economic’ suggests there is less focus on cost and more focus on issues like social value and on quality. I am not sure the change in legislative language will do that. It will be driven by policy.”

There has been talk of procurers deploying ‘innovative KPIs’ to help them choose suppliers that will feed into local goals. This could make sense, says Chris Farr, national frameworks manager at Wilmott Dixon – the emergency services have different needs to councils, for instance – but it potentially introduces risk if contractors think new KPIs could be tricky to meet. “We would have to review every opportunity on its merit,” he says. “We all want to see more standardisation of processes and procedures as opposed to reinventing the wheel.”

“If suppliers have any concerns that exclusion grounds are lurking… they may think that they won’t take the risk”

Helen Rowland, Eversheds

Zumbika-Lwanga, whose firm is itself an SME, thinks tailored KPIs are vital. “It comes back to the ability to create a competitive tender that suits the needs of the market and your project. KPIs should be aligned to the critical success factors of the project or programme and authorities will need to bring their supply chain along so that they understand the basis and the value of those KPIs.”

Clarke muses that having high-level KPIs means some procurers could make them less demanding. For instance, councils or framework providers could aim for higher social value by setting demanding targets for local employment; but if a contractor fails to hit, say, an 80 per cent target by 1 per cent, that’s a ‘fail’. A less ambitious council with a lower target would, meanwhile, be reporting success. “We don’t want to have a lot of suppliers not meeting the targets,” says Clarke. “One way would be to make the targets easier.”

Frameworks, such as those provided by SCF, Pagabo and others, will not be changed much by the act: – there are “tweaks” only, says Murray. However, they will be renamed ‘closed frameworks’ as the act is introducing ‘open frameworks’. These will be able to run for up to eight years with openings every two years to add new members.

Clarke can’t see these being used to deliver building programmes as the lawyers that SCF consulted think that opening them up would be as much work for procurers as setting up a new framework. However, they could be useful in faster-moving markets such as low-carbon technology.

Shamayne Harris, head of procurement at Pagabo, thinks the open framework concept is exciting. “It won’t suit all markets but in those that are not particularly complex but have new entrants and ideas, it could really drive best value.”

As the original October go-live date for the act approached, Farr wondered if local authorities might be tempted to jump onto existing frameworks that still have a few years to run. Since these were set up under the old regime, this would allow ‘business as usual’ for procurement teams as they geared up to the new regulations.

Clarke notes that SCF has more clients today than it did 12 months ago. Driven by factors such as uncertainty in the market and the introduction of the Building Safety Act, authorities are looking for the specialist advice, support and resources that frameworks can provide. “The Procurement Act is another tick in the box,” he says.

Debarment list

One issue that contractors need to get their heads round now is the debarment list. “One of the key issues that keeps coming up is the relevance of setting KPIs and contractors potentially being put into the debarment list if they don’t meet them,” says Murray.

“It could mean that suppliers are potentially a lot more selective in terms of contracts they bid for,” warns Helen Rowland, a partner at Eversheds Sutherland. “If there are any concerns that exclusion grounds may be lurking within the supply chain or wider group …suppliers may well think twice before bidding given the risks they may face with the new debarment regime.”

There are also concerns that the list could be misused by contracting authorities, says Farr. “The framework providers believe that this could be a real headache because grounds for debarment could be open to interpretation and therefore abused.”

Harris urges against any scaremongering. “It’s important that contractors don’t think there will be opportunities for manipulations,” she says. “The debarment register will be managed by the Cabinet Office. It is a really clearly defined process including a request from the contracting authority to apply for a supplier to be on the register, an independent investigation, opportunities to self-clean, and an appeals process”.

Contractors should look carefully at their supply chains and within their own organisations, says Murray, paying close attention to any potential competition infringements.

‘Risk’ is a word that occurs frequently in any conversation about the Procurement Act. And, as with any new legislation, there’s no case law to fall back on, points out Clarke.

The government’s decision to delay the act going live will reduce some of the uncertainty – and risk – as more secondary legislation and guidance is published and procurement teams have more time to train.

“There’s a lot that does feel the same when you look at the new Act…but the slight changes in wording could lead to potential pitfalls,” warns Rowland. “Authorities and suppliers need to pay close attention to make sure they won’t be caught out.”