What is The Procurement Act 2023?

The Procurement Act 2023 (the Act), which received Royal Assent 26 October 2023, is one of the UK government's flagship pieces of legislation following the UK’s exit from the EU.

The Act is set to come into force in October 2024 and will impact public bodies and utilities procuring services, works, and supplies, as well as impacting organisations that tender for publicly procured contracts.

Some of the key impacts of the updated Procurement Act

Streamlining the current legislation

The aim is to create a single unified set of procurement rules. When in force, it will replace the previous regime that exists under the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016, and the Defence and Security Public Contracts Regulations 2011.

The Act provides that any “devolved Scottish authority” within the definition set out in the Act is an excluded authority for the purposes of the Act (as is any person that is subject to public authority oversight only by reference to a devolved Scottish authority) and so in terms of procurement in Scotland, procuring bodies will need to carefully consider whether they fall within that definition in order to determine whether the Act applies to their procurements.

This is likely to be welcome by most organisations - however, the Utilities and Defence procurement regimes previously incorporated more flexibility than the equivalent public sector regime, therefore organisations using those regulations at present will be keen to understand how the new rules affect them. In relation to utilities, for example, many of the sections of the Act currently contain a provision which notes they do not apply to private utilities. Private utilities are stated to be persons that, other than a public authority or a public undertaking, carry out a utility activity. Under the Act a “public undertaking” is stated to be a person that is subject to public authority oversight and operates on a commercial basis.

New procurement processes

The Act requires contracting authorities to follow a “competitive tendering procedure”. This is stated to be either a single stage procedure with no restrictions on who can submit a tender (the “open procedure”) or such other competitive tendering procedure as the Contracting Authority considers appropriate for the purpose of awarding the contract (a “competitive flexible procedure”).

The competitive tendering procedure therefore allows much more flexibility for contracting authorities to design their own processes and is less prescriptive than current procurement legislation. This may be welcomed by some contracting authorities, but it will mean that procurements can vary significantly, which may not be so helpful from the perspective of bidders. It will also mean more planning at the outset of a procurement.

Open Frameworks

The Act provides for an ability to have Open Frameworks, which are effectively a series of successive frameworks on substantially the same terms.

Award criteria

The reference to “most economically advantageous tender” (MEAT) has been replaced with “most advantageous tender”, which is stated to be the tender which the Contracting Authority considers best satisfies their requirements and also the award criteria when assessed against the assessment methodology in section 23(3)(a) and the relative importance of the criteria under section 23(3)(b) of the Act. This therefore appears to be more flexible than the previous MEAT requirements.

Direct Award

The Act contains provisions allowing Direct Award in certain circumstances, which are included within Schedule 5.

These include various grounds, some of which are similar to the grounds under the existing regulations for use of the negotiated procedure without prior publication of a notice, such as extreme urgency and the protection of exclusive rights.

Exclusions

The Act sets out a clear set of mandatory and discretionary exclusion grounds. This will be of interest to both Contracting Authorities and the private sector.

Of particular interest is the discretionary ground for exclusion due to poor performance. This now allows exclusion where a supplier breaches a contract and the breach was “sufficiently serious”.

A breach is deemed to be sufficiently serious where it results in termination, damages, or a settlement agreement. It will be interesting to see how this is used in practice as in certain industries, such as construction, there are often claims that result in settlement agreements.

The Debarment List

The Act specifies that a centrally held Debarment List will be created and maintained by a Minister of the Crown.

Contracting Authorities will be able to access this, and it will clearly set out entities that must be excluded. This is likely to be very helpful for Contracting Authorities and is also likely to be significant for the private sector.

Award Notices, Assessment Summaries, and Standstill Periods

The Act details that rather than bidders receiving a notice setting out the characteristics and advantages of the winning contractor, they will instead receive an assessment summary before the Contracting Authority publishes the Award Notice.

This is likely to be helpful for bidders and could lead to more robust evaluations where a detailed assessment summary must now be provided.

The mandatory standstill period is now eight working days from the date of publication of the Contract Award Notice.

Publishing contracts

The Act requires Contracting Authorities (but not private utilities) to publish all contracts with a value of more than £5 million within 90 days of entering into the contract.

Key Performance Indicators

Contracting Authorities (but not private utilities) will have to set and publish at least three KPIs for contracts with an estimated value in excess of £5 million.

Implied payment terms

The Act contains implied payment terms. Parties will need to consider these in terms of their contracts and they will need to be factored in against other requirements, for example construction act compliant payment provisions.

Remedies

The remedies available pre and post contract are set out in the Act and are similar to the existing regime (with ineffectiveness orders replaced with set aside orders).

Modifying procurements

The Act contains provisions around modifying procurements as well as modifying contracts themselves. This is likely to be seen as positive from the perspective of Contracting Authorities.

Updates to the thresholds

In terms of the existing regime, new thresholds have been published which will be effective as of 1 January 2024.

The thresholds (including VAT) have increased as follows:

Public Contracts

The thresholds in the Public Contracts Regulations and Public Contracts (Scotland) Regulations will be increased to:

  • Works Contracts: £5,372,609
  • Services and Supply Contracts (Schedule 1 Bodies): £139,688
  • Services and Supply Contracts (Other 1 Bodies): £214,904
  • Subsidised Service Contracts: £214,904

The thresholds that apply to the Procurement Reform (Scotland) Act 2014 have not changed.

Concession Contracts

The threshold for application of the Concession Contracts (Scotland) Regulations 2016 and the Concession Contracts Regulations 2016 is £5,372,609.

Utilities Contracts

The thresholds contained within the Utilities Contracts (Scotland) Regulations and the Utilities Contracts Regulations 2016 will be increased as follows:

  • Supplies and Services: £429,809
  • Works: £5,372,609

The new thresholds do not apply to procurement commenced prior to 1 January 2024.