Out-Law Analysis 8 min. read

The UK’s overhaul of procurement legislation

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On 26 October, the Procurement Bill completed its passage through the UK parliament and became the Procurement Act 2023. This constitutes an important milestone in the transformation of the UK procurement law regime which for the moment continues to be governed by rules that are based on EU legislation.

The Act, which is not expected to take effect until October 2024, introduces a number of changes which are intended to simplify the procurement regulatory framework and the conduct of procurement procedures. At the same time, a number of other changes, including the way in which key procurement law concepts and principles have been reformulated, are likely to render the new legal framework different but not necessarily less complex.

Consolidating the procurement framework

The Act consolidates procurement legislation into a single legal framework. This might be seen as simplifying the current state of affairs, where separate sets of regulations apply to the award of public, utility, concession and defence contracts. In truth, however, the position is more complex than this might suggest.

The Procurement Act itself, for example, does not contain all that is necessary for a contracting authority to carry out a compliant procurement process. Instead, contracting authorities will also need to consider secondary legislation, on which consultations were held earlier this year, that would deal with issues such as the content of notices that relate to planned procurements, preliminary market engagement, tender and contract award notices, as well as statutory guidance that will aid the correct interpretation of the Act. 

Separately, while it seems that the government did not intend to change the scope of many of the concepts that are in use under current procurement legislation, the decision to reformulate the way in which some of these concepts are expressed has given rise to some confusion and unintended consequences. For example, the definition of a contracting authority in the Act can be interpreted differently from that under current procurement legislation.

Equally, the definition of what constitutes ‘covered procurement’, which will be regulated under the Act, can arguably be interpreted in a way that brings contracts that are currently not subject to regulation within the scope of the new law. These issues add to the perception that the new law would not be as simple as the government might have initially intended.

Providing greater flexibility

Under current legislation, contracting authorities are subject to extensive rules in relation to how they design and conduct competitive award procedures. First, there is the open procedure, a single-stage process that permits the submission of tenders from all interested parties capable of meeting the conditions for participation in the competition; then there is the restricted procedure, a two-stage process that involves the shortlisting of a minimum of five bidders who are then invited to submit tenders; and finally, there are three overlapping procedures that involve negotiations. 

In contrast, the Procurement Act introduces greater flexibility with a choice of two competitive procedures: the single-stage ‘open’ and the multi-stage ‘competitive flexible’ procedures. It would be for each contracting authority to determine whether an open or flexible procedure would be more appropriate for the award of a particular contract, unlike the current position where the use of procedures that involve negotiation may only be used when certain conditions are met.

Similarly, subject to complying with certain principles and requirements, contracting authorities would be able to design the competitive flexible procedure in the way that they consider most appropriate for the award of a particular contract, no longer limited by the detailed prescriptive requirements that competitive procurement procedures involve under current legislation. The Act also features, for the first time, the use of ‘open frameworks’: frameworks that suppliers can join not only when a framework is first set up but also at certain points during its term, which may last for up to eight years.

The Act introduces numerous other procedural flexibilities, all of which are, in principle, welcomed. However, it remains to be seen how contracting authorities would use such flexibility and whether this might have a negative effect on regulatory compliance. This is particularly true in relation to smaller contracting authorities that might not have the necessary resources to design and carry out complex procurement procedures.

Changes to procurement principles

Another noteworthy change is the set of principles and objectives with which contracting authorities must comply or, in certain cases, take into account when carrying out procurements under the new law.

Under the EU procurement directives, the principles of equal treatment, non-discrimination, transparency and proportionality form the core pillars on which the legislation is based. Compliance with these principles is required at all stages of a procurement process and these principles inform the more specific obligations that are set out in the legislation, including those that relate to the amendment of public contracts following their conclusion.

For the moment, these principles continue to be enshrined in the current EU-derived UK procurement legislation. However, the Act appears to have created some confusion as to the extent to which these principles will continue to be equally relevant and important under the new law, with changes in language, apparent omissions and the introduction of a new set of objectives. For example, only equal treatment is retained explicitly as a ‘procurement objective’ with which contracting authorities must comply when carrying out a covered procurement, although the principle has now been reframed as an obligation to ‘treat suppliers the same unless a difference between the suppliers justifies different treatment’. This is a clear but not necessarily succinct alternative formulation.

At the same time, contracting authorities now have an explicit obligation to “have regard” to the importance of:

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

Although the ‘transparency’ principle is not mentioned explicitly by name in this list, it is still present in these objectives. It is also present throughout the Act in the form of new and explicit obligations for contracting authorities to publish notices and make available certain other documents, including sometimes contracts before or after certain decisions have been made.

Indeed, the all-pervasive nature of transparency obligations in the Act, in combination with the fact that equality of treatment is a principle that contracting authorities must comply with at all times, should assuage any concerns that transparency is somehow absent or relegated to an objective to which contracting authorities must merely have regard. Confusing as the Act’s approach in this regard might appear at first, in practice it would be very difficult for contracting authorities not to treat transparency as a core obligation when carrying out a procurement. 

Although the ‘non-discrimination’ principle is not listed as a specific objective or principle in the legislation, the latter contains separate explicit provisions that require contracting authorities not to discriminate against ‘treaty state suppliers’, that is, suppliers from countries or entities, such as the EU, with which the UK has agreed reciprocal rights of non-discriminatory access to each other’s public procurement markets.

In practice, this is no different from the position under EU procurement legislation that prohibits discrimination against economic operators from other member states or from third countries with which the EU has agreed reciprocal procurement access commitments. Under both UK and EU legislation, therefore, the non-discrimination principle in respect of third country suppliers extends only to the award of public and utility contracts of the specific types and value for which a particular international agreement that binds the UK or the EU, respectively, provides.

Another explicit omission from the list of objectives and principles with which contracting authorities must comply, or to which they must have regard under the new law, is ‘proportionality’. However, once again, the change is arguably more presentational than substantive. For example, the Act includes separate provisions that require contracting authorities to take proportionality into consideration, including as regards the choice and design of a competitive tendering procedure, the conditions of participation and the award criteria.

Equally, despite the fact that proportionality is not mentioned specifically in a number of other relevant contexts, the wording of the legislation incorporates requirements that make it clear that proportionality is in fact a relevant consideration when determining issues such as whether to exclude suppliers or set time limits in a procurement.

Finally, as to the new requirements for contracting authorities to have regard to delivering value for money and maximising public benefit, as well as the separate obligation to have regard to the national procurement policy statement – and, where relevant, the Wales procurement policy statement – their likely effect is for the moment unclear. Arguably, such additional requirements should not make a substantive difference to the way in which procurements are designed and conducted.

At the same time, these changes do speak to the way in which designing and carrying out procurements under the new law could become an even more complex affair, with the need for contracting authorities to ensure that an increasing set of principles, objectives and statements – which might sometimes also seem conflicting – as well as the detailed set of obligations under the Procurement Act and related secondary legislation are taken fully into account.

Indeed, there has already been some anecdotal evidence to the effect that certain contracting authorities have misconstrued the requirement to have regard to the importance of maximising public benefit when carrying out a procurement as allowing them to incorporate requirements that discriminate against third country suppliers. Perhaps these are isolated examples or merely teething problems that will be dealt with in time by means of statutory guidance and familiarisation with the new law. Nevertheless, the government should seek to monitor the situation and take appropriate action to address possible misperceptions and concerns as to the complexity of applying the new law.

The need for an effective review system

In some respects, there are clear advantages to the new law, specifically as regards the greater procedural flexibilities that the Procurement Act provides. At the same time, greater procedural flexibility is but one aspect of the new regulatory framework.

There is another factor that complicates any attempt to form a view on whether the new law might constitute an overall improvement over current legislation: the fact that a key concern with the existing procurement regulatory framework has little to do with the rules that we have inherited from the EU, but instead with the way in which review procedures operate in the UK. Under current legislation, there is no specialist tribunal to deal expeditiously with claims for breach of procurement law obligations.

Instead, a claimant must bring a challenge against a contracting authority’s decision in the courts, a process which is time-consuming and invariably expensive. These factors can result in meritorious claims never being made. At the same time, when claims are made, these can often lead to disruption and uncertainty for the contracting authority, as a claim can take between nine and 12 months, and sometimes longer, before it is heard in court.

Although the government had previously indicated its intention to address these concerns in the context of its transformation of the post-Brexit procurement regulatory framework, including by means of court procedural reform, no concrete proposals are anticipated for the moment. Ultimately, this creates the risk that any specific improvements that the new law might introduce could be overshadowed, not only by potential concerns over the overall complexity of applying compliantly the new legislation, but also by the continued lack of an effective review system.

This article is based on an article first published on Lexology GTDT.

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