Transforming Public Procurement: Transformational or tinkering at the edges?

Introduction

Following Brexit and the end of the transition period under the EU-UK Withdrawal Agreement, the UK is no longer required to observe the EU Directives on Public Procurement.   HM Government has been swift to signal its intention to move towards a simpler regime that is more flexible and better able to deliver value for money.

In December 2020, the Government published its Green Paper, “Transforming Public Procurement”, which outlined its proposals for reform of the rules that govern UK public procurement.  It noted that the current rules could be cumbersome for both purchasers and suppliers (particularly SMEs).   It also argued that the £290 billion of public money could be better spent to boost growth, support the recovery from the COVID-19 pandemic and tackle climate change.

The Green Paper initiated a consultation process on the reforms, which closed in March 2021.  In December, the Government released a paper summarising the consultation responses it had received and setting out its position on each of the proposed reforms in light of stakeholder input.

Key areas of reform

Following consultation, the key changes on the cards are as follows:

• Reform to general principles of public procurement The Government will change the “general principles” of public procurement including equal treatment of bidders, non-discrimination, transparency proportionality and good administration. The principles are effectively “hard-edged” and justiciable requirements which guide most aspects of the process. The Government proposes to update these principles to include: the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination.  Proportionality will only be retained for specific legal provisions (e.g. time limits for responding to invitations to tender).
• Consolidation of legal instruments Currently, the procurement rules are spread across a plethora of different statutory instruments, notably the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, Concessions Contracts Regulations 2016 and Defence and Security Procurement Regulations 2011. These will be condensed into a single set of rules, a move welcomed by stakeholders.  In response to input, the Government has indicated that it will retain the flexibility available to utilities (a term which extends to facilities operators such as ports and airports) and add clarity over which entities fall within the definition of utilities.
• Choice of procurement procedure The Green Paper proposed overhauling the often complex and inflexible procurement procedures and replacing them with three modern procedures. A theme will be a greater recourse to negotiation. This change will proceed.  While stakeholders welcome the streamlining of the number of procedures, some concern was expressed around the proposed “flexible competitive procedure” which will require a more tailored process designed by the contracting authority.  The more flexible procedure known as the “Light Touch Regime” will now be retained for the existing in-scope procurements (e.g. clinical, educational and cultural services).
• Procuring in a crisis The Green Paper proposed allowing for tendering to be limited in “crisis” situations. This is because the tests for meeting the existing “extreme urgency” exemption (which will be retained alongside the new “crisis” ground) were considered too onerous during the COVID crisis. Stakeholders were concerned that the term was too wide and may allow authorities too much discretion to dispense with competition.  Taking account of these concerns, it is now proposed to include a limited tendering ground, in the form of a new power for a Minister of the Crown (via statutory instrument) to ‘declare when action is necessary to protect life’ and allow contracting authorities to procure within specific parameters without having to meet all the tests of the current extreme urgency ground.  
• Exclusion grounds There is a lack of clarity over how mandatory and discretionary exclusion grounds are intended to function. For example, it is unclear when an entity within the same group is subject to a conviction which companies within the group may risk exclusion from procurement processes as a result.  The Government intends to delineate this so that a conviction may be relevant where it relates to a beneficial owner, directors or shadow directors of the supplier, parent companies of the supplier, subsidiary companies of the supplier or insolvent companies where the company’s business has been transferred to the supplier and where one or more of the supplier’s directors was a director of the predecessor company when it ceased to trade.
• Procurement Review Unit The new Procurement Review Unit (PRU) will sit within the Cabinet Office and will be made up of a small team of civil servants. It will be charged with monitoring public procurement activities.   Replacing the PPRS, it will have the power to act on supplier complaints about poor practice in procurement.  It will not be able to reverse decisions but will be able to make binding recommendations for improvements in future procedures.
• Pre-award transparency The Government proposes to remove the current obligation for contracting authorities to issue bespoke debrief letters notifying unsuccessful bidders of the outcome of the tender process, the winner and the relative advantages and characteristics of the winning bid. Authorities will need to publish certain pre-award information and release an Award Notice signalling their intention to award a contract, they will additionally provide participants with certain evaluation documents for the winning bidder (redacted for commercial sensitivity).  The Award Notice will also give details of the standstill period.  Losing bidders will be provided with “certain evaluation documents” for the winning bid as well as for their own, enabling them to work out for themselves the relative advantages and characteristics.  There is concern from stakeholders about how this will work in practice and whether the proposals will allow losing bidders sufficient data to allow them to improve future tenders.
• Remedies Following consultation, the Government abandoned plans to cap the level of damages available to 1.5x bid costs. However, it will look for ways for disputes to be resolved at an earlier stage and minimise damages claims once a contract has been signed.  The idea of a specialist procurement tribunal has also been jettisoned.  A number of other changes will go ahead.  For example, the Government will bring in changes to the Civil Procedure Rules designed to expedite procurement claims in line with the current Protocol of the TCC on Public Procurement Disputes (Annex H of the TCC Guide).  The Government will also proceed to introduce a new legal test for whether or not an automatic suspension (also known as a “reverse injunction”, preventing completion of the award) should remain in place while a procurement claim is determined.

Next steps

The Government has not yet presented a Bill with specific drafting to enact these and the many other changes tabled.  The Government has said it is not yet possible to confirm when the new regime will come into force.  It intends to provide six months’ notice of “go-live”, once the legislation has been concluded, in order to support effective implementation. In any event, given the timescales around the legislative process, the new regime is unlikely to come into force until 2023 at the earliest.

In our view, there is merit in many of the proposals, particularly where these simplify the legislative regime.  Others, however, require additional guidance in order for stakeholders to form an informed view.  The devil is in the detail as they say and we look forward to scrutinising the Government’s Bill when tabled.