Introduction of the Procurement Bill: What This Means for Public Sector Tendering

What is the Procurement Bill?

As one in every three pounds of public money (£200 billion per year) is spent on public procurement annually, the government has proposed to ‘reform the UK’s public procurement regime following its exit from the European Union (EU), to create a simpler and more transparent system not based on transposed EU Directives’.

In summary, the overarching aims of the Bill include:

• Delivering value for money
• Maximising public benefit
• Opening up public procurement to new entrants such as smaller businesses
• Sharing information for the purpose of ‘allowing suppliers and others to understand the authority’s procurement policies and decisions’
• Making the bidding process quicker, simpler and more transparent
• Acting, and being seen to act, ‘with integrity’.

What are the key changes and their possible implications?

Whilst the Bill’s changes to and implications on public procurement in practice remain largely unknown at this stage, the Bill makes some wholesale changes in a legal sense to a number of areas. For the purpose of this blog, we have chosen to focus on three of these key areas:

Competitive award

Where contracting authorities have been previously mandated to award contracts to the ‘most economically advantageous tender’, regulation 18 of the Bill allows contracting authorities to reward the ‘most advantageous tenders’ going forward. Subsequently, the contracting authorities have been afforded more power to (a) set their own awarding criteria, and (b) the right to place emphasis on other factors beyond price.

This could be advantageous to different SMEs who had previously struggled to submit competitive bids. For example, companies with an overt focus on providing an innovative or environmentally sustainable/responsible service delivery at a greater cost can now, in theory, compete with those who provide a less innovative but more economically attractive tender proposition.

Direct award

Whilst the above change brings cause for optimism on the competitive tendering front, Regulation 40–42 of the Bill generates a degree of caution/concern. Like regulation 18, the wording within regulation 40–41 is rather ambiguous, open to interpretation, and gives greater freedom/power to contracting authorities. Specifically, regulation 40 allows for direct award to trump a competitive bidding process, and sideline/exclude interested suppliers, should there be an overriding ‘public interest’ in doing so. Whilst the regulation outlines five justifications for this public interest direct award, such as maintaining national infrastructure, this measure – designed to generate efficiencies – may invertedly prevent newcomers from submitting competitive tenders. For example, whilst abuse of regulation 40–41 may be unlikely, it creates scope for contract authorities to disguise anti-competitive behaviour as ‘needs must’. This will be an important area to watch develop over the coming months as more and more detail becomes apparent.

However, one undoubtedly positive measure towards greater efficiency can be found within Regulation 42: this allows contracting authorities to switch from a competitive tendering procedure to the direct award of a contract should no suitable tenders be received in a competitive procedure. Here, rather importantly, ‘suitability’ is clarified not to include price-related exclusions on the grounds of them being ‘unaffordable’, but instead relating more to material breaches of procedural requirements or failing to satisfy the award criteria. The absence of a publicly stated price cap means suppliers do not have to adhere to a certain price in order to avoid exclusion, and direct awards will only be done on the basis of other factors.

Preliminary market engagement

Regulations 15 and 16 have made substantial reinforcements to the existing concept of pre-market engagement activities, introducing a new focus on publishing public notices for procurement opportunities. As defined in 15(1), market engagement with suppliers could include collaboratively developing specifications and collaboratively agreeing conditions of participation, for example.

In keeping with EU legislation, the Bill places emphasis on contracting authorities taking steps to ensure that suppliers participating in tender submissions are (a) not put at an unfair advantage and that (b) competition in relation to the award of the contract is not distorted. Yet, the Bill now actively encourages pre-engagement to be preceded by the publishment of a ‘notice’ setting out:

1. That the contracting authority intends to conduct preliminary market engagement
2. Any other information specified in regulations under section 86, such as the documents to be published and provided to prospective suppliers.

In turn, these changes could increase the reach of tendering opportunities to prospective suppliers, helping to capture the interest of more SMEs – who may typically be less actively engaged in looking for such openings. However, there is a feeling that the Bill could have gone even further. Whilst encouragement is good, there remains no duty for contracting authorities to consider preliminary market engagement notices. Going forward, this could be an area for the Bill to consider and develop upon further amidst future amendments.

At Executive Compass, we are following updates and news regarding the Procurement Bill closely to assess how this Act will affect future tenders. For more information on how we can support you with your tender needs contact us free on 0800 612 5563 or email info@executivecompass.co.uk.