Procurement Act 2023

The Procurement Act 2023 (the Act) will come into force on 28th October 2024. It will be supported by additional Regulations and Cabinet Office guidance/systems but the wording of the Act itself will form the basis of procurement regulation from that date.  In this update, the CPC is providing an overview of the changes for our members and clients of our Consultancy Service and provide you with guidance to allow you to prepare you institution for this new procurement landscape. 

The CPC will continue to support with these changes and further updates can be expected throughout the summer.

We recommend that you consider the contents of this update and consider how the matters discussed may impact on your institution/way of working.

Background information

As an institution, you are currently governed by the Public Contracts Regulations 2015. These regulations imported the EU Procurement Directive into UK law and when we left the EU, those regulations were tweaked to remain in force as a stand-alone fix whilst the Government consulted on and finalised the Act. Key pillars of public procurement promoted through the 2015 regulations -- transparency, equal treatment and proportionality are reflected and amplified in the new Act. 

Alongside the Act sit several 'exemptions', one of which is the Schools Exemption, covering schools, MATs, FE and certain HE establishments.  This exemption means that some of the more onerous reporting regimes in the Act do not apply to our members, but transparency requirements will increase.

A reminder about thresholds

Both the current 2015 Regulations and the new Act set thresholds above and below which procurement / contracting activity is regulated.  These thresholds are updated biannually on 1st January of even dated years. The current thresholds are therefore in place until 31st December 2025 and for non-central Government contracting authorities, are:

Supplies and Services: £214,904 (incl. VAT)

Light Touch Regime: £663,540 (incl. VAT)

Works: £5,372,609 (incl. VAT)

Above these thresholds, full compliance with the current Regulations and the future Act are mandatory and cannot be avoided using an exemption/waiver process.

Added to the above is a much lower threshold of £30,000. Any contract above this much lower threshold requires a more limited compliance regime, including the publication of a contract award notice and (under the new Act) a contract termination notice.

Something which our members often overlook, is the aggregation rules; both the current Regulations and the new Act prevent the disaggregation of spend to avoid the rules. In simple terms, this means that for matters of ongoing spend (i.e. not individual, one-off purchases), institution spend over a minimum four-year period needs to be estimated, and if that spend is above one of the above relevant thresholds, then the procurement process to follow needs to be that which is mandated by the Regulations/the Act.

Procurement Act objectives

The Cabinet Office has set out an agenda for reform of wider public sector expenditure, seeking to achieve better value for money and to maximise the benefit of public sector third party spend to the UK economy. Key to this agenda is a perception that transparency of expenditure will serve to demonstrate the degree of equal treatment and proportionality that removes barriers to tendering for public contracts.  Access to this market by SMEs is key, as is obtaining better value through public sector spend targeting strategic priorities.

The UK's economic strategic priorities are set out in its National Procurement Policy Statement (NPPS), a new version of which was published in mid-May 2024 and unless objected to, will go live on 28th October to complement the Act. This encompasses all aspects of Social Value but whereas the 2012 Social Value Act was not prescriptive in how such value was to be achieved, the NPPS offers clearer guidance on what public sector bodies should be mindful of, when spending public money.

What happens on 28th October 2024?

Any procurement activity commenced up to and including 27th October 2024 (by commenced, essentially think 'invitation to tender issued') will continue to follow the current 2015 Public Contracts Regulations, including post-contract management of those arrangements.  Any call-off contracts from existing framework agreements post 28th October 2024 will equally be governed by the existing 2015 rules.

It is only brand-new procurement activity that will be regulated by the Act. This means that for several years, your institution and procurement colleagues will be governed by two slightly conflicting sets of procurement rules/regulations and thought will need to be given as to how this is reflected in your Finance Regulations and/or Procurement Policies.

What are the key changes?

Routes to Market

There will be only two tender processes, an Open Procedure akin to the current open procedure under the 2015 Regulations and a Competitive Flexible Procedure (CFP), which allows for the design of any non-open tender process. We suggest that this second process will be used infrequently, perhaps to design a process akin to the current restricted procedure, used when an open procedure may be expected to return too many tender submissions.

For all above-threshold requirements, you will continue to be best served by seeking established routes to markets through framework agreements, such as those put in place by the CPC. There are changes to the way in which these framework agreements are established, but that will not concern you, other than to know that there will be a continuation of this provision to make your access to supplies & services as simple and as straightforward as possible.

Demonstrating Value

Evaluation of tenders, whether through an open process or call-off from a framework is currently referred to as MEAT -- most economically advantageous tender. Under the Act, this becomes MAT -- most advantageous tender. Don't be fooled by the deletion of 'economically', tenders will still need to be evaluated based on both price and technical quality, but MAT provides for a broadening of what could be considered as value for money, including emphasis on the objectives of the NPPS mentioned above.

Transparency

This is probably the biggest change from our members' perspective. The Act heralds a new 'Notices' regime which requires publication of notices from initial procurement planning, through active procurement and then throughout the life of active contract management. Alongside the publication of new/different notices, will be a requirement to publish redacted copies of any contract with an award value exceeding £5million. 

Note that this value is VAT-inclusive, as indeed are any values now discussed in terms of the Act.  For any such contract, there will also be a requirement to publish at least annually, compliance with a minimum of three KPIs that will be obliged to be set and reported on (see Contract Management, below). 

Finally, another change comes in the form of publishing a Termination Notice each time one of your contracts comes to an end, even those that end through expiry of time, and which are simply replaced. It is worth noting that the current 2015 Regulations require you as a minimum to publish a contract award notice for any contract with a value exceeding £30,000; each of these contracts will need a subsequent termination notice when they come to a natural end.

Contract Management

The second biggest change that the Act heralds, is the requirement to demonstrate a more active contract management regime. This included mandatory disclosure of all contracts with a value exceeding £5million and a requirement to set a minimum three KPIs for such contracts and then actively report on the management and achievement of those KPIs by your suppliers/contractors. 

For any contract exceeding £30,000 in value, the increase in notices publication and transparency requirements means that most of your third-party expenditure will require an active approach to the management of their delivery. This will place additional burdens on your budget holders / those for whom the contracts have been put in place and those colleagues will need to be afforded the time and expertise to actively manage the requirements. 

This links to achieving Value for Money. It is recognised that active contract management can contribute c.10% in savings either in-life or in feeding into the next iteration of your contract requirements, so investing in contract management can pay dividends.

Centralised Platforms

Currently, there are two reporting platforms -- Contracts Finder (for below-Threshold contracts) and Find a Tender (for above-Threshold contracts). These will merge into a new enhanced Find a Tender platform, which will link into a new Supplier-information Central Digital Platform.  The aim is to create a single repository for all public sector contracts and suppliers. 

No longer will suppliers have to provide the same information on their establishment, finances, and compliance for each individual tender they respond to. Instead, this information will be uploaded to a centralised platform which public sector buyers can then access to assess supplier suitability. The Cabinet Office is also introducing a debarment service which will preclude poor performing suppliers from participating in public sector contracts.

Compliance

A mix of the above will generate more transparent public sector spend, with suppliers and other interested parties being able to quickly access tender and contract information. This is being formalised by the creation of a Procurement Review Unit within the Cabinet Office, which builds on the current mystery shopper service, to have more formal oversight of compliance with the Act and its provisions. One prediction is a rise in the number of Freedom of Information requests linked to procurement and contracting activities as the wider supply market become aware of the increase in transparency and compliance obligations.

Notices

Transparency will be achieved through a new regime of published notices. For members who use the services of the CPC, whether calling off our frameworks or clients using our consultancy services, the systems provided by the CPC facilitate most of the current regulations requirements and we expect that this will be enhanced by improvement to MultiQuote, our in-house eProcurement portal for the new Act.

A reminder, however, that any below-threshold contracts which exceed the lower £30,000 threshold and for all post-contract modifications and terminations, may require direct access to the current Contracts Finder and Find-a-Tender portals, and the new enhanced single portal which is planned to go live at the same time as the Act at the end of October 2024.

In the table below and overleaf is a summary of the new notices' regime, with notes where the CPC considers that requirements for compliance may be more limited for most of our members. The table is divided into the 'thirds' of the procurement lifecycle -- procurement planning, procurement, and contract management. We have flagged where the notice is mandatory or optional for below-Threshold contracts; otherwise, the notices only apply to above-Threshold procurement/contracting activity.

For members based in either Wales or Northern Ireland, certain notices will not be required but will be replaced by a similar internal reporting mechanism to the devolved assemblies and so preparation for the issue of notices is still required in practice.

What does this mean for our members?

Your procurement function will need to be prepared for the changes which come into effect on 28th October 2024 and colleagues given time to make those preparations. The education sector will come under closer scrutiny from both central Government and the wider supply market.  Systems and procedures, rules and regulations will need to be reviewed and those in a procurement role, finance colleagues and budget holders will need to be briefed and trained.

The Cabinet Office has a dedicated webpage -- Transforming Public Procurement -- which contains information and links to resources which will support your institution and colleagues to prepare.  Members who access our framework agreements or use our consultancy services will be supported through this process, but the emphasis must be on ownership from the leadership team down, if you are to successfully transition to the provisions of the new Act.

The key resources available to you now, comprise:

1. Knowledge Drops for senior leadership and heads of service, providing an overview of the new Act.  It includes overviews of the Act for suppliers, so can be shared with your supplier base.

2. Expert Practitioner eLearning comprising a series of ten modules for those on the procurement coalface and which provides more in-depth knowledge of the provisions of the new Act.

3. Guidance which is being drip-fed from the Cabinet Office to support the transition to the new Act.

What will the CPC be doing?

Colleagues within the CPC's Contracting Team are preparing themselves for these changes, to make sure that the Framework Agreements and new Dynamic Markets that we put in place to support Members with compliant, value-for-money and less time-consuming access to the markets are fit for purpose.  Colleagues within the CPC's Consultancy Service (formerly Tenet Education Services) are equally preparing themselves for these changes, to best support our clients with their procurement function.

Guidance notes such as this will be issued as and when there is sufficient further information to share. 

Finally, Crescent Learning is being expanded and updated to provide a one-stop-shop resource for members to access templates and guidance notes for the key areas of the procurement function.

Your next steps -- top tips

We recommend that you begin to prepare for the for the transition to the new Act. You have just over four months until go-live on 28th October.  Some top tips currently are:

1. Get a grip on your contracts with third party suppliers. Spend analysis is the starting point and this will feed your contracts register, which in turn will give you a pipeline of work.

2. Make sure your Finance System is capable of reporting for the new requirements to assist our procurement function in succeeding.

3. Encourage procurement colleagues within your teams to undertake the Expert Practitioner eLearning.

4. Single point register on Contracts Finder and Find a Tender. Your eProcurement portal will handle all your electronic procurement notices, but what about all those RFQs your budget holders are conducting offline?  If they result in contract awards in exceeding £30k, you'll need to manually post notices.

5. Review your Finance Regulations & Procurement Policies and plan for the changes you'll need to introduce in the autumn.

6. Begin to understand how to properly manage your contracts and how to use learning from them to feed into future requirements. If a contract is £5m+, be prepared to publish them and the KPIs that you will need to establish. Consider what software you may need to permanently redact sensitive commercial information prior to their publication.

7. Think about how your institution can incorporate National Procurement Policy Strategy requirements (including wider social value) into your third-party spend and consider creating a NPPS-orientated social value policy.

8. Cascade this briefing note to your budget holders and finance/procurement colleagues and give them time to prepare for the Act going live.