The Government’s response to the Transforming Public Procurement consultation: what will change and what will not?

Juli Lau, Colin Ricciardiello, Beth Edwards and Natasha Barlow analyse the Government’s response to the Transforming Public Procurement consultation.

On 6^th December 2021, nearly a year after the Green Paper on public procurement reforms was published, Cabinet Office released its response (the ‘Response’) to the 619 consultation responses it received. Having submitted a detailed response in March, our article earlier this year summarised the key reform proposals and below, members of the Sharpe Pritchard Procurement Working Group outline the development of proposals that Government intends to proceed with, as well as those it has chosen not to pursue.

Chapter 1: Procurement that better meets the UK’s needs

Government intends to press on with a new set of procurement principles to replace the previous EU principles, but these will be divided into ‘principles’ and ‘statutory objectives’. The principles will be transparency, fair treatment of suppliers and non-discrimination, while the statutory objectives will be promoting the importance of fair and open competition, maximising public benefit, value for money and integrity. At this stage, the Response does not expand on how the principles and statutory objectives are to be applied differently in practice.

The Response amends proposals for a unit to oversee public procurement. The new Procurement Review Unit will sit within Cabinet Office and will focus on investigating systemic or institutional breaches of the procurement regulations, and making recommendations for future compliance. It will not have power to intervene in any specific procurement decisions.

Chapter 2: A simpler regulatory framework

Government intends to go ahead with consolidating the various procurement regimes into a single framework, but in response to consultation responses, some flexibilities of the Utilities Contracts Regulations 2016 (UCR) and Defence and Security Public Contracts Regulations 2011 (DSPCR) will be retained for those sectors.

Utilities will be bound by the new legislation in so far as they are carrying out prescribed relevant activities (which will be broadly as currently defined under the UCR). A number of exemptions currently available to utilities will be retained, such as contracts awarded to affiliated undertakings, certain supply of water and energy contracts, the use of qualification systems, and the ability to make modifications without a financial cap.

While the Response does not explicitly refer to the eight years currently available to frameworks under the UCR, it does confirm that utilities will be allowed to award longer “closed” frameworks, to be consistent with their current flexibility and sector-specific regulatory needs.

The Response promises a full suite of national security exemptions for sensitive procurement. It also acknowledges that specific provisions will cover the definition, valuation and duration of concession contracts.

We had raised a number of these sector-specific issues in our response, and we look forward to seeing how these will be addressed in legislation.

Chapter 3: Using the right procurement procedures

A key element of the Green Paper was the replacement of the current procedures with three new ones: the flexible procedure, open procedure and limited tendering procedure. While acknowledging concerns about the complexity and potentially increased burdens for contracting authorities, Government intends to press on with this change.

The Green Paper’s proposal to add ‘crisis’ as a ground for using the limited tendering procedure is being retained as a concept, although the intention is to consider granting a new power to a Government Minister to ‘declare when action is necessary to protect life’, so that limited tendering rules apply.

The paper also proposed the removal of the Light Touch Regime for “social and other services”. Following responses concerned that this would lower the value threshold for key social service contracts, an amended version will now remain in place.

Chapter 4: Awarding the right contract to the right supplier

The majority of the changes proposed in Chapter 4 will be implemented, such as the proposal to amend Most Economically Advantageous Tender to Most Advantageous Tender. While retaining the basic requirement that award criteria should be linked to the subject matter of a contract, Government intends to use secondary legislation to require (or permit) contracting authorities to take into account policy priorities that may not be directly related to the contract subject matter.

Interestingly, Government is proposing to introduce a power to disapply s17 of the Local Government Act 1988 in certain circumstances – this is in response to concerns raised (including by this Firm) that local authorities are required to comply with obligations under such legislation which may not always align with proposals under the new procurement regime, e.g. criteria not linked to subject matter.

The centrally managed debarment list, and changes to the grounds for excluding suppliers from procurements, including the wider grounds on which poor past performance can be taken into account, are intended to be taken forward, with a new exclusion framework to provide clearer guidance on this issue.

Chapter 5 – Using the best commercial purchasing tools

The Response confirms that proposed reforms to the Dynamic Purchasing System will be introduced (albeit renamed “The Dynamic Market”), including making the system available for all types of procurements (rather than just common goods and services), and new suppliers being added at any point.

Government intends to proceed with creating “open frameworks” which can be established with a maximum term of eight years (and multiple joining points). Following consultation, however, the maximum period that an open framework can be kept closed to new joiners will be five years rather than the three originally proposed. This represents a relative increase to the current maximum four years for frameworks under the Public Contracts Regulations 2015 (PCR), which would now apply to “closed frameworks” under the new regime, with exceptions for utilities.

Chapter 6 – Ensuring Open and Transparent Contracting

In response to concerns (mostly from contracting authorities) about the resource intensity of the proposals, as well as issues around commercial sensitivity, Government has made the following amendments to the Green Paper proposals in relation to the publication of procurement data to a central platform using the Open Data Contracting Standard:

• There will be no requirement to disclose tenders submitted due to concerns this could prejudice future competitions.
• Publication of contract documents will initially only be required for those valued above £2 million. These documents can be redacted to address confidentiality.
• The publication of beneficial ownership details will not apply to all bidders, only successful bidders.
• A reduction in the scope and extent of publication of evaluation documents. (See Chapter 7.)

Chapter 7:  Fair and Fast Challenges for procurement decisions

The Green Paper consulted on making procurement challenges quicker and more accessible by a variety of proposed measures.

The Response confirms that the following will not be introduced:

• Independent review by the contracting authority;
• Tribunal to deal with low value claims;
• Primacy of pre-contract remedies over post-contractual damages; and
• Cap on damages.

Some of the proposals in this Chapter are still under review:

• Potential options to replace the American Cyanamid test (used when considering suspension-lifting applications under PCR Regulation 96(1)(a)) are still being considered, but it is envisaged that the new test would be a single limb test centring on the overriding consequences on the interests at stake. That may translate into who is prejudiced the most by lifting/ending the suspension, akin to the balance of convenience test under American Cyanamid.
• The exploration of reforms to improve access and reduce timescales continues, alongside the Ministry of Justice and the Civil Procedure Rules Committee.

The two key proposals that will be implemented are:

• The removal of the automatic suspension in crisis and extreme urgency, but with requirements to publish a contract award notice and subsequently contract details; and
• The removal of mandated debrief letters.

The publication process for contract award decisions would instead be as follows:

• Award Notice stating the intention to award, anticipated value, identity of all bidders and a standstill period;
• Provision of some of the winning bidder’s redacted evaluation documents to all bidders;
• Each bidder to receive its own unredacted evaluation documents to enable comparison against the winning bid; and
• Voluntary individual debrief letters can additionally be provided.

Giving the documents at (ii) and (iii) above moves towards the codification of the Technology and Construction Court’s guidance on pre-action conduct to provide a challenger with the key decision material, which is in turn taken from the decision in Roche Diagnostics v. Mid Yorkshire Hospitals NHS Trust [2013] EWHC 604(TCC).

This may be less of a step change for authorities who are already providing this level of evaluation information with standstill letters, but still places a burden on authorities to ensure compliance with both the publication and redaction requirements.

Chapter 8 – Effective Contract Management

Government has decided to introduce its proposals on contract management reform, with some changes to address concerns raised.

Suppliers deep in the supply chain will have more direct access to contracting authorities when supply chain payment issues occur, but must first evidence their attempts to resolve these issues.

There will be more flexibility to amend contracts in times of crisis, but with new provisions specifically targeting the amendment of complex contracts. The less stringent grounds currently available for changes under the UCR will also be maintained for utilities, and defence and security contracts will be afforded the maximum level of flexibility in recognition of Ministry of Defence requirements.

The new mandatory contract change notices will only need to be published for changes over specified thresholds, and the proposed cap on profits for contract extensions will not be introduced.

Next steps

The earliest that the new regime will come into force is 2023, with a six-month prior notice period, and it is expected that secondary legislation and supporting guidance will be published in similar time frames. Meanwhile, the Cabinet Office intends to deliver a detailed learning and development programme to assist with the transition.

Our Procurement Working Group is keeping a close eye on developments while we await the draft legislation, and through our knowledge-sharing networks we aim to provide regular briefings to clients, in readiness for changes which will affect contracting authorities and utilities, as well as their suppliers and contractors alike.

Juli Lau is a Legal Director, Colin Ricciardiello is a Partner, Beth Edwards is a Paralegal and Natasha Barlow is a Trainee Solicitor at Sharpe Pritchard LLP.

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