Procurement reform plans constrained by international obligations

Dr. Totis Kotsonis of Pinsent Masons was commenting after the government outlined its intention to make a series of changes to the Procurement Act 2023, which only came into force in February this year, in its new modern industrial strategy (160-page / 15.6MB PDF).

With its industrial strategy, the government has identified eight sectors of the UK economy that it will provide priority support to, whether through direct public funding or via other measures aimed at, for example, bolstering skills, improving access to finance, removing regulatory burdens, and catalysing private investment. Those sectors are: advanced manufacturing; clean energy; creative industries; defence; digital and technologies; financial services; life sciences; and professional and business services.

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In addition to developing distinct sector plans, the government has published an overarching strategy document. Details of the government’s intentions to reform procurement laws and build on the Procurement Act 2023 are included in that paper.

Among other things, the government said it intends to use powers provided for under the existing legislation to revise the national procurement policy statement that provides strategic instructions to public bodies over how to make use of their buying power. In this regard, it intends to direct public bodies to “consider how they can use procurement to support economic growth and the industrial strategy”.

New measures are also being considered to ensure procurement “strategically supports” the “industrial strategy priorities and creates high quality jobs and skills” in the UK. The government said it will open a consultation shortly to look at how it “can open up the contracts to give more weight to firms that can show they will boost British jobs”.

Specific measures under consideration include requiring public bodies to apply award criteria in major procurements that relates to the quality of the supplier’s contribution to jobs, opportunities or skills, and requiring suppliers to meet social value KPIs that relate to jobs, opportunities and skills.

Kotsonis said: “The UK government has laudable plans to use the power of public procurement to support the aims of its industrial strategy, to support UK-based industry and the creation of British jobs. In that sense, what it is proposing is no different to measures already in place or under consideration in other jurisdictions, such as the US and EU, and they reflect a changing geopolitical context in which industrial and economic strength is being viewed as a pre-requisite for continued national security.”

“How exactly the government proposes to harness the power of public procurement to support UK industry and jobs should become clearer when the consultation paper is published, but there are constraints on what it is able to do,” he said.

“For example, the UK has non-discrimination obligations under the Agreement on Government Procurement, a plurilateral World Trade Organization (WTO) agreement, as well as under bilateral agreements with trade partners – including the EU. While these international obligations do not normally apply to ‘below-threshold’ smaller contracts or to certain types of contracts that are outside the scope of international treaty commitments, such as most defence contracts, in general it would be problematic for the government to allow public contracts awards to be conditional on obligations which, directly or indirectly, discriminate against suppliers who are guaranteed non-discriminatory access to our public procurements under international treaties. This represents a potential barrier to the extent to which the government may amend procurement legislation or guidance so as to promote UK-based businesses and jobs,” he said.