Procurement Act comes into force introducing new obligations for firms

Totis Kotsonis, public procurement expert at Pinsent Masons, said: “There’s also greater transparency with an increase in the obligation to publish notices before, during and after a procurement procedure as well as new obligations that relate to contract management.” A large volume of associated guidance also came into force today. 

The Procurement Act consolidates the previous procurement regulations into a single legal framework for the award of public, utility, concession and defence contracts. It also provides for greater flexibility in running a procurement: while the “open” procedure from the previous regulations is retained, the other procedures are replaced by the competitive flexible procedure (CFP) which does not prescribe any particular approach and contracting authorities are not required to meet any specific conditions to use it, subject to ensuring that the procedure complies with certain principles and objectives.

The Act introduces an obligation to publish many more notices, including, amongst others, pipeline notices, transparency notices before making direct awards, contract award notices and contract performance notices. It also broadens the principles and objectives that underlie the procurement regulatory framework by, amongst other things, requiring a contracting authority to “have regard to the importance of” delivering value for money, maximising public benefit, sharing information to help suppliers understand procurement policies and decisions, and acting with integrity.

Small and medium-sized enterprises (SMEs) may find it easier to participate in procurements following the introduction of the Act as it places a general obligation on contracting authorities to have regard to SMEs and to consider whether barriers to participation by SMEs can be removed or reduced in carrying out a procurement. Contracting authorities will also be encouraged to further the government’s policy objectives by requiring authorities to have regard to the NPPS.

The new legislation widens the application of the exclusion grounds in that, for example, both mandatory and discretionary exclusion grounds will be triggered where a relevant offence has been committed by a “connected person”, that is a person that controls or is controlled by the supplier, as well as introducing a debarment list on which “excluded” and “excludable” suppliers may be placed. This will make it more difficult or impossible – where the disqualification relates to a mandatory ground – for a supplier to tender in a regulated public procurement over a certain period.

 It additionally strengthens the ability of contracting authorities to disqualify suppliers from a procurement procedure and terminate contracts on the basis of a supplier’s poor performance, and introduces “open frameworks” under which contracting authorities can appoint suppliers at several points throughout the framework term. Such frameworks have a maximum duration of eight years, or four years if they are single supplier open frameworks.

Kotsonis said: “Whilst the Act was ostensibly intended to simplify the  law, its broader scope, the additional obligations which it creates for contracting authorities, a number of inconsistencies in the Act, as well as between the Act and government guidance, and the lack of clarity in relation to certain important issues, means that it is certainly challenging for contracting authorities to apply the new law correctly.”

Areas that might require particular attention in this context include the decision to reformulate the way in which some procurement concepts are expressed. For example, the definition of a contracting authority in the Act can be interpreted differently from that under the previous legislation. 

“Although the government has indicated that, despite the different wording, there was no intention to change the scope of what constitutes a ‘contracting authority’, the courts might take a different view,” said Elaine McLean, public procurement expert at Pinsent Masons. 

The Act itself does not contain all that is necessary for a contracting authority to carry out a compliant procurement procedure. Instead, contracting authorities will also need to consider secondary legislation, the NPPS, the guidance, and case law.

McLean said: “The new rules on substantial modifications are interesting to say the least, particularly the new rule that appears to suggest that adding ‘more of the same’ to a contract cannot be substantial regardless of the volume of the increase. Again, the government sought by means of guidance to explain that the clear words of the Act should be interpreted in a way which excludes such outcome. Unfortunately, that argument is not without its own issues and also conflicts with the court’s existing case law which, arguably in this particular context, continues to be relevant.”

Similarly, under the new “light touch regime”, the Act sanctions the possibility for substantial contract modifications post signature. “This is despite the fact that the same legislation also requires contracting authorities to comply with principles and objectives which are inconsistent with such possibility,” said Kotsonis. 

Despite the introduction of a new test which the courts must apply in considering interim applications, including in respect of lifting the automatic suspension, many commentators have queried whether this will in fact change the consistent trend of the court deciding such applications in a way which overwhelmingly favours contracting authorities. 

Finally, there are concerns in relation to what the Act has failed to address. More specifically, practitioners, as well as suppliers, have for a long time expressed concerns as to the difficulty that suppliers encounter in seeking an effective remedy for breaches of procurement law due to the cost and timescales of litigating in the High Court, as well as the court’s decision to introduce the concept of a “sufficiently serious” breach, as a separate and additional issue to causation, that must be considered before damages may ever be made available. The Act does not address any of these issues. Indeed, although the possibility of introducing a faster and cheaper specialist tribunal for the consideration of procurement law claims was initially considered by the government, such reform remains for the moment outstanding.

Kotsonis said: “The introduction of the Procurement Act is undoubtedly a seminal moment in the regulation of public procurement in the UK. Whilst a number of aspects in the new law, such as increased flexibility in carrying out procurements, as well as greater transparency by means of the obligation to publish a number of additional notices to the market, are to be welcomed, there are concerns with the overall complexity of the new law, including as a result of inconsistencies and aspects of the legislation which lack clarity. The fact that the remedies regime has not substantially changed means that suppliers, including of course SMEs, will continue to face difficulties when seeking access to an effective remedy for breaches of the law.”