No sooner had the Subsidy Control Act 2022 received Royal Assent than the Government tabled the next major post-Brexit shake-up of the rules on how public bodies spend money: the Procurement Bill 2022.

Background

In the Queen's Speech in May 2022 it was announced that the UK public procurement regime would be reformed following the UK's exit from the European Union. The Bill will give effect to the policies that were set out in the Government’s Green Paper 'Transforming Public Procurement' (which we blogged on previously here) and the Government’s response to the consultation published in December 2021 (which we covered here).

The Government has explained that the reforms are guided by “principles of public procurement” set out in the Green Paper: value for money, public good, transparency, integrity, equal treatment and non-discrimination.

What does the Bill do?

The procurement of goods, services and works by public bodies and some utilities is currently governed by rules originally set out in EU Directives. The Bill will revoke the following Regulations which implemented the EU regime:

The stated aim of the Bill is to create a new public procurement regime, which builds on greater flexibility outside the EU to make procurement quicker, simpler and more transparent.

The Bill extends across the UK but expressly excludes from its scope "devolved Scottish authorities", defined as any authority whose functions are exercisable only in or as regards Scotland unless its functions relate solely to reserved matters. In other words, the Bill will not change the way that the majority of public bodies in Scotland do procurement, which will remain subject to, primarily, the Public Contracts (Scotland) Regulations 2015 and the equivalent Utilities and Concessions Regulations.

Key components of the Bill

The Bill embeds a number of key principles (non-discrimination and equal treatment) and objectives (value for money, maximising public benefit, transparency and integrity) in public procurement decisions. Unlike the wider duties set out in the procurement regulations, the Bill only imposes an overarching duty in respect of equal treatment of suppliers. There are requirements to act proportionately or transparently in specific circumstances, but the overarching general duties of proportionality and transparency are gone, replaced by a duty to "have regard to the importance of" being transparent and acting with integrity alongside value for money and public benefit.

The Bill also:

  • requires evaluation criteria that identify the ‘Most Advantageous Tender’ (a change from 'Most Economically Advantageous Tender') and will require contracting authorities to have regard to delivering value for money and maximising the public benefit from the contract;
  • sets out new, more flexible procedures for awarding public contracts that allow contracting authorities more room to design processes how they wish (subject to other specific rules), including the potential for more negotiation with suppliers;
  • requires all contracting authorities to use a single digital platform for supplier registration, so suppliers only have to submit their credentials once to be considered for public sector procurements (in effect, a further simplification of the SPD);
  • aims to make it easier for buyers to take account of poor supplier performance, with clearer and broader grounds for excluding suppliers who pose unacceptable performance risks, as well as setting up a central 'debarment' list;
  • imposes new obligations around proactive assessment and mitigation of potential conflicts of interest;
  • introduces new arrangements for how procurement should be conducted in an emergency such as the Covid-19 pandemic – specifically there is a new power for Ministers to make provision in regulations allowing the direct award of contracts when necessary to protect life;
  • introduces the new concept of "open frameworks", where one framework can be replaced (multiple times) by another one on "substantially the same terms" and with the same suppliers re-appointed, up to a maximum of eight years from the award of the first framework;
  • replaces the existing standstill period with a new one of eight working days (rather than ten calendar days) beginning on the day a contract award notice is published (rather than the day standstill letters (now 'assessment summaries') are issued to bidders); and
  • provides that automatic suspension will only be triggered where proceedings commence before the end of the standstill period, not any time up until the award of the contract – this will apparently mean it will no longer be possible for challengers to agree a standstill extension with the contracting authority to give them time to decide whether to start proceedings (which will almost inevitably result in a lot more litigation by parties who have no other way to protect their position).

Otherwise many key rules, including the grounds for a direct award, the circumstances in which a contract can be modified, and substantive remedies, remain very similar to the existing procurement regulations.

From a litigation perspective it is interesting to see the Bill specifically provide for claims "in Scotland" to be brought in the Court of Session, creating a truly UK-wide legal regime for contracting authorities other than devolved Scottish authorities. Presently the Public Contracts Regulations require any action for breach of a duty to be brought in the High Court. There is nothing to explain when a claim will be "in Scotland", for example whether this will be based on where the contract is to be performed (such as a Ministry of Defence contract for works on a Scottish base).

Looking forward

As we have previously noted, procurement by devolved authorities in Scotland will be unaffected by the Bill and the signs thus far are that the Scottish Government will continue to stick closely to the EU public procurement directives (though we can perhaps expect some changes to the Scottish rules, in particular to allow for more use of environmental, social and governance ("ESG") objectives).

The Bill is in its early stages and will likely take several months to complete its passage through Parliament. The UK Government has announced that there will be a minimum of six months' notice before the new regime 'goes live', and that this will not be until 2023. In the meantime the existing legislation remains in force, and will also continue to apply to procurements started under the old rules even after the Bill takes effect.

It may therefore take some time before we see any practical effect. One lesson from the changes to subsidy control law under the UK-EU Trade and Cooperation Agreement, and now the Subsidy Control Act, is that the speed with which public bodies will begin to take advantage of newly conferred flexibility will depend on each body's risk appetite – using the "old" mechanisms might be attractive to some authorities as a way to minimise the risk of overstepping what the new regime allows, at least until other authorities have taken the plunge first (and courts have started clarifying whether or not they have done so correctly).

We can expect the Bill to be complemented by subordinate legislation and guidance, likely to be published in draft before the Bill comes into force, to help contracting authorities and contractors navigate the new regime. Guidance can be expected to encourage contracting authorities to use the changes (such as the new Most Advantageous Tender test and exclusions based on past performance) to give greater weight to ESG criteria.

In addition, the single platform for supplier registration should make life easier for bidders, and particularly smaller suppliers, compared to completing a fresh SPD for every contract – though the onus will remain on the supplier to make sure the details held on the system remain up to date.

The Bill represents an evolution in procurement law more than a revolution, and the broad 'feel' of the regime under the Bill is likely to be (both for contracting authorities and bidders) very similar to the current regime under the various Regulations based on EU Directives. That said, this is still the biggest change to public procurement rules since 2006 and in that change lies the opportunity for buyers and suppliers to do things differently.