Procurement Bill 2022: Key changes in relation to transparencyMarch 2023
Background to the Procurement Bill
The pre-Brexit procurement process in the UK was derived from EU law and was focussed on facilitating the concept of a single market i.e. maximising cross-border competition and free movement.
The UK Government’s first step to simplifying the overly complex EU public procurement process was the publication of its Green Paper “Transforming Public Procurement” in December 2020 (the “Green Paper”). In its Green Paper, it proposed repealing the current regulations and consolidating them into a single set of regulations covering all public contracts. This new simplified approach would instead focus on boosting growth and productivity in the UK, maximising value for money and social value, promoting efficiency, innovation, and transparency. A consultation on the Green Paper took place between December 2020 and March 2021 and invited responses from over 500 stakeholders and organisations.
The Procurement Bill (the “Bill”) was born out of the Green Paper. The Bill was released and had its first reading in the House of Lords on 11 May 2022 and, as of January 2023, is now in the Committee Stage in the House of Commons. This is where detailed examination of the Bill, and any proposed amendments, takes place. The final sitting will be on 23 February 2023, and we will report further on any material changes announced following conclusion of the Committee Stage.
The Procurement Bill introduces a number of significant reforms including, amongst others, changes to (i) the general principles of procurement, (ii) the public procurement procedures and exemptions, (iii) the rules regarding debarment and exclusion (iv) the remedies and (v) the modification of contracts. For the purposes of this article, we will focus on two key changes in relation to the obligation to de-brief and key performance indicators (“KPIs”).
Obligation to de-brief
Under the Public Contracts Regulations 2015 (“PCRs”), there are specific and detailed obligations on contracting authorities to inform tenderers of decisions reached concerning an award of contract. Suppliers are entitled to be debriefed (i) at any time upon request (reg 55(2) of the PCRs) and (ii) during the standstill period before contract award (reg 86 of the PCRs).
Reg 86 of the PCRs sets out in detail the requirements for a contract award notice, also known as a de-brief letter. This includes (emphasis added):
- The criteria for the award of the contract;
- The reasons for the decision, including the characteristics and relative advantages of the successful tender, the score (if any) obtained by—
- (i) the tenderer which is to receive the notice; and
- (ii) the tenderer—
- to be awarded the contract, or
- to become a party to the framework agreement, and anything required by paragraph (3);
- the name of the tenderer—
- (i) to be awarded the contract, or
- (ii) to become a party to the framework agreement; and
- a precise statement of either—
- (i) when, in accordance with regulation 87, the standstill period is expected to end and, if relevant, how the timing of its ending might be affected by any and, if so what, contingencies, or
- (ii) the date before which the contracting authority will not, in conformity with regulation 87 enter into the contract or conclude the framework agreement.
The purpose of this level of detail (particularly the characteristics and relative advantages requirement) is to provide sufficient information to allow suppliers to judge the fairness (or not) of a procurement decision, as well as to improve future tenders.
Under the Bill, the detailed requirements set out above have been replaced with a requirement for an assessment summary. An assessment summary means “in relation to an assessed tender, information about the contracting authority’s assessment of the tender and, if different, the most advantageous tender submitted in respect of the contract” (clause 50 of the Bill). There is a clear lack of detail around what this assessment summary must contain. Ministers are able to make provision about the information required to be provided (clause 93 of the Bill) but no detail has yet been given about what this will involve. There is concern that, without further clarity or guidance on this point, suppliers will find it more difficult to determine whether a procurement process has been conducted fairly and spot illegality in awards.
As the Bill progresses through Committee Stage, it will be interesting to see whether any clarity is given to the content of the assessment summaries.
Key Performance Indicators
Clause 52 of the Bill requires contracting authorities to set and publish at least three KPIs for every contract with an estimated value of more than £5 million. This rule does not apply if the contracting authority considers that the supplier’s performance under the contract could not appropriately be assessed by reference to key performance indicators or in relation to certain public contracts (for example, a framework, a utilities contract, a concession contract or a light touch contract).
Along with the inclusion of KPIs, a contracting authority must, at least once every 12 months during the lifecycle of the contract and on termination of the contract, assess and publish information in relation to the assessment against the set KPIs (clause 70 of the Bill). For example, it must publish certain information if the supplier has breached a contract which results in full or partial termination of the contract, award of damages or settlement agreement or where the contracting authority considers that the supplier is not performing a public contract to the authority’s satisfaction despite being given the opportunity to improve performance (i.e. if it is performing poorly against the KPIs).
The contracting authority can exclude a supplier when the supplier has committed a “sufficiently serious” breach (Schedule 7, paragraph 12 of the Bill). This includes where, as referenced above, the supplier has not performed a relevant contract to the authority’s satisfaction, was given proper opportunity to improve performance and failed to do so. This means that poor performance against KPIs could lead to a supplier being excluded from future procurement processes.
Related to this, the Bill introduces a new public debarment list as a way of avoiding contracts being awarded to incompetent suppliers. Under clause 59, the contracting authority is required to notify the relevant minister when a supplier is being excluded. The minister will carry on investigations and consider whether the supplier should be added to the debarment list.
An entry on the debarment list must state which of the relevant exclusion grounds the Minister has decided to apply to the supplier, and indicate, in respect of each ground, whether it is a mandatory or discretionary ground and when the Minister expects the ground to cease to apply (clause 62(4) of the Bill). Clause 63 of the Bill sets out the process for application for removal from the debarment list but, in reality, we do not yet know how straightforward it will be for suppliers to be removed from the debarment list. This is a key risk for suppliers.
As a result of the ongoing assessment and publication requirement, the ability to exclude suppliers for poor performance which does not result in termination and the risk of being entered onto a debarment list, it is no longer possible for suppliers to ring fence performance risk on contracts.
It will be interesting to see how these new requirements (to the extent that they remain as the Bill progresses through Parliament) work in practice. However, for the time being, we would suggest that suppliers take care to review proposed KPIs to ensure that they are clearly defined, achievable and appropriate for the given project.
The introduction of the Bill was intended to make the procurement process quicker, simpler, and more transparent but clearly it brings along with it a few downsides for the suppliers as well as the contracting authority. Suppliers that had a higher risk profile may now be more risk averse given that poor performance on one contract could further prevent them from bidding for any other projects. On the other hand, contracting authorities will have to spend on additional resources to monitor and report KPI compliance.
As the Bill will soon become law, we would be happy to assist clients in preparing for these changes.Download PDF