Procurement Bill 2022: six key changes
June 2022Introduction
We have written previously about the Government’s initiative of “Transforming Public Procurement” after the publication of its Green Paper on this topic. The eagerly awaited Bill presenting the actual legislation was released on 11 May before its first reading in the House of Lords. Running to 118 pages (including 11 Schedules), there is plenty of detail for stakeholders to get their heads around. We have picked out below six key areas for business where we consider the changes to be significant.
- Equal treatment?
Buyers must conduct public procurement in accordance with certain “general principles”. These include the duties to treat all bidders equally and to act transparently. Procurement disputes will often focus on possible violations of these principles.
Although the requirement to treat all bidders equally has been retained, in our view it has been watered down. Nothing is said about indirect discrimination which can arise where tender requirements favour some bidders over others. For example, an unrealistically high requirement for insurance cover would benefit larger providers. This would not appear to be a problem under Clause 11(2) provided the same requirement had been set equally for all bidders.
The Bill proposes three new general principles. Contracting authorities must now have regard to “delivering value for money” and “maximising public benefit”. Many may be surprised that securing VFM was not previously a self-standing duty under the procurement rules. However, these tended to focus more on maximising cross-border competition and free movement across the EU single market.
The Bill will also require public bodies to “act, and be seen to act, with integrity”. “Being seen to act with integrity” arose recently in R (Good Law Project) v Minister for the Cabinet Office [2022] EWCA Civ 21, where concerns were expressed (though not upheld by the Court) about the personal relationship between a senior Government advisor and officers of a successful tenderer. This may be a useful provision for claimants alleging unlawful bias in a procurement.
- Proportionality: how far is too far?
The Bill does not restate the current general requirement for public buyers to act proportionately. Certain identified aspects of procurement (e.g. setting award criteria) must follow the principle, others do not.
For example, when setting conditions for participation in a competition, the contracting authority must only itself be satisfied that those conditions are proportionate. That could mean the imposition of insurance or minimum turnover requirements which were out of kilter with the value of the contract. Provided that consideration has been given to the principle, the authority appears to have fulfilled its duty.
- Debarment and exclusion
Under the current law, suppliers may face disqualification from a tender contest where it is shown that a ground of exclusion is applicable to them. Grounds of exclusion are listed at Regulation 57 of the Public Contracts Regulations and are split into two lists: mandatory grounds and discretionary grounds.
Mandatory grounds are more serious breaches of the rules (e.g. convictions under certain criminal laws committed by a supplier or its executives) which lead to compulsory expulsion unless the supplier can show it has reformed itself with effective “self-cleaning” measures.
Discretionary grounds allow an authority to remove a bidder but do not require it to do so. The list includes “gross professional misconduct” (which could include a range of breaches of criminal or civil laws). Any decision to exclude must be proportionate to the bidder’s previous conduct.
The Bill contains innovative powers for public bodies to conduct investigations into whether supplier has been culpable of previous misdemeanours making it liable to exclusion. The investigating authority would have the power to require suppliers to produce evidence relevant to the investigation.
It also makes provision for the creation of a new “debarment list”. Where a Government Minister is satisfied that a ground of exclusion applies to a particular supplier, (s)he will investigate and prepare a report. The supplier’s name will be added to the list of “excluded” or “excludable” suppliers if the Minister is satisfied this is an appropriate step.
The list will be used as a point of reference for all contracting authorities conducting a procurement. These buyers may feel on a surer footing to remove bidders who find themselves listed. Inclusion on the list will also be an implied ground of termination of live contracts any public body has with that supplier. Although a procedure is included for bidders to appeal against such a move, significant damage could be done.
All of this will clearly be a concern for bidders, as will the fact that the Government has proposed a longer list of mandatory exclusion (including for example breaches of the Competition Act 1998, which is a civil law statute). If companies don’t already have a competition compliance program, this will serve as an incentive to put one in place!
The loss of proportionality as a general requirement could lead to unfairness around bidder exclusions. The principle is an important protection against debarment for misconduct which is relatively trivial or out of character.
- Modifying contracts
The rules closely regulate the extent to which a contract can be modified without triggering a requirement for it to be re-tendered. Distortions in competition could arise if, for example, public bodies substantially increased the scope of an awarded contract or changed the nature of a contract (e.g. from works to services). Competitors of the successful bidder may argue that they would have won the competition had the new scope or contract formed the basis of the original tender.
Permitted modifications are listed at Schedule 8 of the Bill. In our view, this would give greater scope for parties to rely on “contract change” clauses. Until now the law has only allowed these clauses to be used where the clause is “clear, precise and unconditional” about the modifications that will be made under the clause. From now on, the clause must simply be “unambiguous” which we consider a lower (and more permissive standard). It may allow for greater use of the wider contract change clauses such as those in the NEC.
Modification will still be highly regulated and mirror the current provisions. However, there will be a broader range of grounds to change live contracts. That may be good from the perspective of flexibility, some suppliers may fear a reduction of new contract opportunities as a result.
- Information provided about tender procedures
There are various changes proposed to regulations dealing with the provision of information to tenderers about the tender process and the award. Some of the changes are summarised below:
- Where a contracting authority considers it will pay more than £100 million in public contracts in the following year, it must publish a “pipeline notice” giving advance notice of the projects it intends to undertake. This will have the advantage of allowing bidders more time to prepare for these opportunities (e.g. by forming suitable consortia);
- There will be an enhanced duty on public buyers to publish notices about changes made to existing public contracts;
- Public buyers must currently issue debrief letters to bidders once they select a preferred bidder. These notices must inform them of the scores, giving a breakdown across the different areas of the evaluation and reasons for scores. It is unclear from the draft Bill whether as much detail will be provided in debrief notices going forward. That seriously risks clouding tenderers’ visibility over whether a procurement process has been carried out lawfully.
Regarding the third of these changes, it is expected that Regulations will be laid down setting out the exact information that will be required in assessment summaries sent to losing bidders.
- Contracting authorities – which bodies are covered?
Principally, the public procurement rules are addressed towards contracting authorities and utilities.
Currently, a public body is considered to be a “contracting authority” where two main criteria are fulfilled. The first is that it is either subject to control, management supervision by public bodies or is mainly funded from public sources. The second is that the body in question has been “set up for needs in the general interest” and is not “of a commercial or industrial character”.
This change could see entities caught by the procurement rules which were previously excluded. For example, this might now extend to public private partnerships (including LLPs), which had been run for commercial purposes. That could ultimately result in more contract opportunities for bidders. On the other hand, it may cause more red tape for companies who participate in PPPs and wish to direct sub-contracts in favour of affiliates or consortium members.
Conclusions
Our take on all of the above is that the Bill presents a “mixed bag” of helpful and less helpful changes for tenderers. Some commentators have expressed disappointment that the Bill did not go further. Indeed, some of the more radical initial proposals included in the Government’s Green Paper (for example imposing a cap on available damages for procurement challenges) have fallen by the wayside. There was also an expectation that the new law would make it easier to take into account social and environmental factors at award stage. In our view, that has not been delivered in the proposed text.
The Bill will now be subject to Parliamentary scrutiny and it is expected that MPs will table amendments to the proposed law. The Government aims to have the new rules on the statute book by the end of this calendar year. Whether such a lofty ambition can be realised in this volatile political environment remains to be seen. Whatever happens, we will be keeping a close eye on progress through the legislative process.
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