Detailed scrutiny needed to make the Procurement Bill deliver against its ambitions

The Procurement Bill introduced to Parliament in May goes to Committee Stage in the House of Lords this week. The political ambition behind the proposed legislation has been clearly voiced, but does not appear to have been matched in the detail of the draft legislation. A detailed line-by-line review by the Lords will be the first opportunity to try and improve this important piece of legislation.

Political ambitions for a quicker, simpler, more transparent regime

In terms of the political ambitions for the Bill, these were expressed by Lord True when introducing the Bill to Parliament in May: ‘Since the British people voted to leave the European Union, and we finally got it done, this country is being freed from many bureaucratic and process-driven regulations that stifled our country and businesses for many years’.

As we have heard before, we are told the Bill will, ‘reform the UK’s public procurement regime, making it quicker, simpler, more transparent and better able to meet the UK’s needs, while remaining compliant with our international obligations. It will introduce a new regime that is based on value for money, competition and objective criteria in decision-making. It will create a simpler and more flexible commercial system that better meets our country’s needs, and it will more effectively open up public procurement to new entrants such as small businesses and social enterprises, so that they can compete for and win more public contracts.’

Timing

The Cabinet Office currently expects the Bill to receive Royal Assent in mid-2023, with secondary legislation then to be adopted ahead of the regime taking effect after a six-month transition period by the end of 2023. The legislation is to be supplemented by both statutory and non-statutory guidance, meaning that the “rule book” that practitioners have to apply may end up being significantly smaller or simpler. The Bill alone is 118 pages long, with 11 Schedules.

The new legislation will apply to all public procurement in England, Wales and Northern Ireland. At this stage, it remains unclear what approach the Scottish Government will take in relation to procurement that is devolved (not including defence), and now with a possible independence referendum taking place in October 2023.

We summarise below some of the aspects of the Bill that are likely to be heavily debated.

Single uniform set of rules

The Bill provides for a single post-Brexit set of rules governing procurement in England, Wales and NI, including utility sector and defence sector procurement (both of which are currently subject to their own sets of rules). Much has been made of this single uniform set of rules, notwithstanding that the EU Directives governing public procurement in most EU jurisdictions are implemented and transposed into their own respective administrative codes as a single framework of rules. It will be critical to the success of this new legislative regime that the Bill does provide a single coherent framework of rules.

Healthcare

As provided for in the recently adopted Health and Care Act 2022, the commissioning of healthcare services is now excluded from the Public Contract Regulations 2015 (the PCR) and from any successor legislation. This was on the basis that the requirement to advertise all contracts for healthcare services under the current (and to be retained) ‘light touch regime’ has resulted in unnecessary bureaucracy affecting the integration of care services and collaborations between local authorities and the NHS (both in terms of joint commissioning and integrated provision across health, public health and social care). In England therefore, the procurement of these services will be regulated by the new Provider Selection Regime. It is planned that this will take effect over the next few months and ahead of the Procurement Bill. It will be important that there is coherence and consistency as regards healthcare procurement, ideally across the UK.

Utilities

While an amendment has been tabled to remove private sector utilities from the Bill entirely, the provisions of the WTO Agreement on Government Procurement (the GPA) and the UK-EU Trade and Cooperation Agreement mean that any new UK regime would have to apply equally to utilities as before. Accordingly, the provisions on ‘utility activities’ set out in Schedule 4 of the Bill broadly mirror those that currently apply now under the Utilities Contracts Regulations 2016.

The one major qualification to this is that the Bill includes a provision (Clause 109) providing that, ‘an appropriate authority may by regulations amend this Act for the purpose of reducing the regulation of private utilities under this Act’. We understand the intention here is for Cabinet Office to produce a named list of all the private utilities that would otherwise be subject to the new rules but which can be identified as exempt. Whilst not explained in the Bill itself, our understanding is that this would operate as a form of exemption as provided for in the current EU Utilities Directive, under which either individual utilities or utility activities (sectors) can be exempted from the rules on the basis that they are directly exposed to competition.

There has long been a concern, particularly for private sector utilities, as to when the rules apply. While the detail may be left to secondary legislation, the relevant tests for exempting private sector utilities needs to be more clearly set out in the Bill.

Defence and security

The Bill retains the current exemptions for certain defence and security contracts and a broad exemption where any contracting authority believes a contract should not be subject to the rules in the interests of national security (Schedule 2). The Bill also makes specific provisions for the amendment of the provisions governing single source contracts (Schedule 10). These reforms are intended to ensure the Single Source Regulations 2014 support the delivery of the UK Government’s Defence and Security Industrial Strategy published in 2021, specifically by supporting a more strategic relationship between Government and the defence and security industries. With defence being an increasingly important area of procurement, it will be important to work through how the proposed simplification and flexibility of the rules applies to defence procurement.

Principles and objectives

One aspect of the Bill that has received extensive commentary is the reframing of the general principles that authorities need to comply with when conducting procurement activity. Under the current rules, those duties expressly include the requirement, ‘to treat economic operators equally and without discrimination and [to] act in a transparent and proportionate manner’ (Regulation 18 of the Public Contracts Regulations 2015). In the Bill the principles appear to be reframed as ‘objectives’.

Clause 11 of the Bill provides that:

‘In carrying out a procurement, a contracting authority must have regard to the
importance of—

(a) delivering value for money;

(b) maximising public benefit;

(c) sharing information for the purpose of allowing suppliers and others to
understand the authority’s procurement policies and decisions;

(d) acting, and being seen to act, with integrity.

(2) In carrying out a procurement, a contracting authority must treat suppliers the
same unless a difference between the suppliers justifies different treatment.

(3) If a contracting authority considers that different treatment is justified in a
particular case, the authority must take all reasonable steps to ensure it does
not put a supplier at an unfair advantage or disadvantage.’

The significance of this reframing exercise is unclear, but suggests an attempt to depart from the general principles as actionable duties under the current rules. Transparency and proportionality, for example, no longer have status as overarching principles in procurement. They are only mentioned in specific provisions, for example Clause 19(3) where the competitive tendering procedure needs to be a ‘proportionate’ means of awarding a public contract. Transparency appears now to have a more procedural quality to it, for example in the form of the publication of notices including seven new types of notice.

Debriefing and remedies

As regards debriefing, Clause 48 of the Bill provides that - before entering into a public contract – an authority must publish a ‘contract award notice’. Confusingly, this is what most practitioners would understand as the issuing (rather than publication) of an award decision letter for the purposes Regulation 86 of the Public Contracts Regulations 2015. For any competitively tendered contract, before publishing this notice, the authority is required to provide an ‘assessment summary’ to each supplier (including it would appear the successful supplier).

On standstill, Clause 49 provides that the authority may not enter into the contract for a period of eight working days from the date of the publication of the notice (or any later period as provided for in the notice).

On remedies, Part 9 of the Bill provides for a similar remedies regime to the one we have now, with pre- and post- contractual remedies, including a form of post-contractual set aside remedy similar to what we have now as ineffectiveness. As expected, the Bill does not make provision for a cap on damages or the introduction of a specialised procurement tribunal despite alluding to these changes in the Green Paper. The Bill does however introduce some amendments to the automatic suspension rule, including a newly-worded test to be applied by courts when deciding whether to lift the automatic suspension.