UK Public Procurement Reform – Key points for suppliers to note

Much has been said about the impact of the Procurement Bill on contracting authorities, however suppliers to these public sector bodies will also feel the impacts of the reforms to the procurement landscape.

This blog post sets out our top 6 points for suppliers to be aware of as the Procurement Bill makes its way through Parliament.

1. Transparency: As noted in our previous blog post, the Procurement Bill introduces a number of new transparency notices with the aim of embedding transparency within the contracting lifecycle. These notices are designed to ensure transparency at each stage of the process, allowing the public and suppliers to understand contracting authorities’ decision making throughout both the procurement process and contract management thereafter. The extent to which these notices will allow suppliers to hold contracting authorities to account remains to be seen as much will depend on the quality of information included within the notices as well as the extent to which contracting authorities comply with the requirements.

One of the key notices for suppliers to be aware of is in relation to the setting of KPIs and the applicable contracting authorities’ annual obligation to publish notices in respect of suppliers’ compliance with the same. Under the Bill, before entering into a public contract with an estimated value over £2,000,000, a contracting authority must set and publish at least three key performance indicators in respect of the contract. Whilst the Bill contains guidance on how KPIs should be measured, it does not offer guidance on what appropriate KPIs look like. Further detail on both the setting of appropriate KPIs and the information to be included within KPI notices remains to be provided through secondary legislation.

Suppliers should also be aware that if they breach a contract and the breach results in termination, the award of damages or a settlement agreement, the contracting authority will be required to publish a notice within 30 days of the breach. This breach notification will also apply if the contracting authority considers that a supplier is not performing the contract to the contracting authority’s satisfaction, the supplier has been given proper opportunity to remedy the breach or improve performance and has failed to do so.

These requirements will provide increased transparency to the market and hold suppliers who fail to perform to a satisfactory standard to account. The publication of a breach notice will also result in a discretionary exclusion ground for the purposes of debarment under the Bill. This is likely to cause some tension between contracting authorities and suppliers given that the publication of a breach notice could have a significant impact on a supplier’s ability to participate in future public sector procurement opportunities/ on its future pipeline of work. It will be interesting to see if contracting authorities are actually willing to use these notices and the discretionary exclusions grounds in practice.

2. Exclusion and Debarment: Linked to the heightened levels of transparency and the ‘breach notice’ is the enhanced regime regarding exclusion and debarment included within the Bill. These rules may result in suppliers being excluded from bidding on contracts and as noted above could be linked to past poor performance. These proposals make it easier to exclude suppliers for past poor performance, as the existing regime only permits exclusion in the event the supplier has shown significant or persistent deficiencies which led to early termination, damages or other comparable sanctions.

Where a supplier has been excluded, contracting authorities will have duties to report this to the Minister. Through the new investigation provisions in the Bill, the Minister can investigate whether a supplier is an excluded or excludable supplier at any time. Following its investigation, the Minister may enter the supplier’s name on the debarment list at his or her discretion. This could have widespread impacts on suppliers who will then be prevented from taking part in future public procurement opportunities. A supplier can apply to have its name removed from the debarment list at any time, however the Minister only has to consider this application if there has been a material change of circumstances since the supplier’s name was added to the list.

3. Feedback: Under the Bill, there are some small amendments to the current regime, with references to ‘standstill letters’, as we know them removed, and replaced with an obligation on contracting authorities to provide each bidder with an ‘assessment summary’ setting out the contracting authority’s assessment of the tender and where applicable, the most advantageous tender submitted. It is not currently clear what level of detail is to be included in the assessment summary (and the extent to which this will differ from standstill letters) and we look forward to further guidance on the level of information to be provided.

4. Challenges: Whilst there is not a huge amount of change to the framework around bringing challenges under the Bill, there are some small changes which may impact suppliers when raising procurement challenges. We have summarised these here, but check out our dedicated blog post relating to the changes to the challenges regime.

The terms of the standstill period are changing. The current regime includes a 10 day period whereas under the Bill the standstill period will be 8 working days from the publication of the contract award notice (being the notice announcing the intention to award a contract – not to be mistaken for the CAN under the existing regime which is now called the contract details notice). This time period will provide suppliers more time to challenge the award during periods that contain a number of bank holidays (such as the Christmas period), which have historically been used as a tactical means in which to reduce the risk of challenge. The fact that the standstill period does not start with the provision of feedback in the assessment summary but with the separate CAN may also mean that suppliers have more time than the 8 working days to consider the feedback if there is a gap between the assessment summary and the CAN.

The provisions regarding automatic suspension remain similar to the existing regime, however notably the Bill states that automatic suspension does not apply if the contracting authority was notified of the commencement of proceedings after the end of the applicable standstill period. The current rules allow for automatic suspension up until the point at which the contract has been signed. This is important to note as in order to seek the automatic suspension of a contract, a supplier would need to bring proceedings within the 8 working day standstill period following the contract award notice. This does not provide very much time and will require suppliers to act quickly when contemplating raising a challenge.

The Bill also proposes that the existing test applied by the court in deciding whether to lift an automatic suspension is replaced with a simple three limb test which has regard to (a) the public interest; (b) the interests of suppliers (including whether damages are an adequate remedy); and (c) any other matter that the court considers appropriate. It remains to be seen how the court will apply this test and the extent to which the courts will take existing case law into account given the change in language within the Bill.

5. Procurement Procedures: The available procurement procedures have been streamlined to consist of three options (1) the open procedure; (2) the ‘such other competitive tendering procedure as the contracting authority considers appropriate for the purpose of awarding the public contract’; and (3) direct awards.

The new ‘other’ competitive tendering procedure is a single flexible procedure which contracting authorities can structure more or less as they wish and replaces four of the existing procurement procedures. Contracting authorities will have flexibility and discretion to structure procurements as they deem appropriate, however the Bill does state that contracting authorities must ensure the procedure is a proportionate means of awarding the public contract, having regard to the nature, complexity and cost of the contract.

The benefit of this procedure is that more sophisticated procurements may be structured to include dialogue with contracting authorities – allowing suppliers to clearly demonstrate the benefits of awarding a contract to them which cannot be detailed from the standard tender response process. However, the potential impact of this benefit remains to be seen in the extent to which contracting authorities are willing to utilise it. Detailed guidance on its use and training for contracting authorities would both be beneficial ways of ensuring everyone is clear on when it would be appropriate to rely on this procedure.

6. Social Value: The Procurement Bill is slightly surprising in that the impact of social value at this stage is fairly limited.

One change of importance to flag is the move away from MEAT (most economically advantageous tender) and its replacement of evaluating tenders based on MAT (most advantageous tender). This does provide contracting authorities with more scope to put social value at the forefront of thinking on evaluations as there is less pressure purely on economics. However, this will all come down to how tenders and evaluation criteria are structured by contracting authorities.

Following on from the second reading of the Bill in the House of Lords, there is pressure to recognise social value more explicitly within the legislation and so we anticipate that this may be accommodated within the next draft of the Bill.

How to prepare for the change in law

Whilst the Bill is unlikely to come into force until early 2023 (following which there will be a 6 month transition period), suppliers should start to familiarise themselves with the terms of the new procurement regime and ensure they have updated procedures in place that reflect the amended timescales and requirements.

Given that a lot of the detailed requirements will be contained in secondary legislation, it would also be sensible to keep up to date with developments and any guidance / draft regulations published by the Cabinet Office.

As the exclusion and debarment regime is more expansive under the Bill and has the potential to impact suppliers’ contract pipelines and contaminate wider arrangements with Government, where possible, suppliers should seek to ensure that grounds for exclusion do not exist prior to the Bill coming into force.

Finally, in light of the potential consequences of a breach notice being published, it would also be prudent to commence a review of existing suites of contracts to assess if there are any poor performing contracts that could potentially impact on a supplier’s reputation going forwards or

provide scope for lessons to be learned. Completing this exercise will allow suppliers to identify potential areas at risk of these notices and assess how large the impact of the same could be.

Our team is also on hand to help navigate the changes and the impact of the reforms as the Bill moves through Parliament.