UK: Procurement Act 2023 Changing Landscape, Issue 5: The New Routes To Market

This is the latest bulletin in our changing landscape series where we look at the changes soon to be made to the public procurement regime in England, Wales and Northern Ireland by the Procurement Act 2023 (the Act).

One of the most significant changes introduced by the Act is a reduction in the number of routes to market. In particular, the number of competitive procedures will be reduced to just two. In this bulletin we take a closer look at the procedures that may be used to award contracts under the Act.

Note that we do not examine the sector-specific provisions that apply to special regime contracts (i.e., concession contracts, defence and security contracts, light touch contracts, and utilities contracts) in this bulletin.

The five routes to procurement

Where a potential contract meets the relevant value threshold¹ (and it is not an exempted contract²), then contracting authorities will need to follow one of the procurement procedures detailed in the Act. There are five procurement procedures under the Act and we will examine each in turn.

Although the Act retains a special regime for "light touch contracts" (despite the initial proposal in the Green Paper to remove it), there will be no specific procurement procedure as such for light touch contracts. Instead, certain rules in the Act will be more flexible for these contracts.³ We will discuss the exemptions, derogations, and flexibilities applicable to light touch contracts in a future bulletin.

The key themes running through the new procedures are flexibility and innovation. One of the main criticisms of the current regulations is that the procedures are too complex. The Act therefore seeks to streamline the rules and empower contracting authorities to mould the process to fit their specific needs and deliver the best outcomes.

1. Open procedure

The Act retains the open procedure – a single-stage procedure with one submission from interested tenderers and no negotiation.⁴ It broadly operates in the same way as it does under the existing regulations.

Any organisation can respond to the tender notice and the contracting authority must evaluate all submissions (unless the suppliers are excluded or excludable⁵) in line with the tender documents to identify the most advantageous tender.

This will be particularly useful for uncomplicated procurements where tenders are straightforward to evaluate.

2. ompetitive flexible procedure

The competitive flexible procedure is a new multi-stage procedure.⁶ The clue is in the name. As part of the general ambition of introducing a simpler and less bureaucratic regime, the competitive flexible procedure is not prescriptive and permits contracting authorities to design their own competitive procurement process so long as it meets the broader requirements in the Act.

The main limitation is that the process must be proportionate, and contracting authorities must consider the nature, complexity and cost of the contract.⁷ Contracting authorities also need to observe the overarching procurement principles.

Subject to the above, the procedure can include whatever phases or components will allow the contracting authority to get the best from the market, e.g., supplier presentations, site visits, R&D, down-selection, negotiation, dialogue etc. There is nothing in the Act establishing a fixed menu of options (although more guidance is expected). Contracting authorities are generally being encouraged to engage and collaborate with suppliers to develop their understanding of what is available and thereby reach the best solution. It is even possible to refine award criteria as the procurement progresses.⁸

This will be particularly useful for more complex, high tech, or innovative requirements. One of the examples given by the Government is a cyber-security company working with cutting edge technology – being able to offer a variant bid would allow it to demonstrate additional innovation.⁹

3. Direct award

Direct award is the new negotiated procedure without publication. This type of award without competition is only allowable in specific circumstances. Many of these are similar to those found in the existing regulations.

First, a contracting authority is able to directly award a contract if one of the justifications¹⁰ applies (e.g., the supplier owns exclusive IP rights) and the intended supplier has not been excluded (unless there is an overriding public interest as defined in the Act).¹¹ Many of the justifications are very similar to the current grounds, but there are also new ones like contracts concerning the production of prototypes.

Second, it is possible to switch to a direct award if no suitable tenders were received in response to a competitive tendering procedure (i.e., an open procedure or competitive flexible procedure).¹² As is currently the case, there is a test for what constitutes a suitable tender.

Third, there is a new power for a Minister of the Crown to publish regulations allowing specified contracts to be directly awarded where this is necessary to protect human, animal or plant life or health, or protect public order or safety.¹³ This picks up on the clear learnings from the COVID-19 pandemic, where questions were sometimes raised as to whether the derogations in the current procurement rules allowed for particular direct awards or not.

Where a contracting authority directly awards a contract under one of the first two routes described above, it must publish a mandatory transparency notice to highlight its intention of undertaking a direct award.

4. Dynamic markets

Dynamic markets are similar to the existing dynamic purchasing systems, except they can be applied to any types of purchase.¹⁴ Any contracting authority will be able to establish a dynamic market provided it complies with the notice requirements in the Act.

A dynamic market is, in effect, a moving list of qualified suppliers eligible to participate in future procurements. There is no limit on the number of members, and the dynamic market always remains open to new entrants. Conditions of membership must be a proportionate means of ensuring suppliers have legal and financial capacity and technical ability.

One difference from existing dynamic purchasing systems is the opportunity for contracting authorities to charge a fee at the point of contract award.¹⁵ This should help cover the costs of establishing and running the dynamic market.

There will be a central register of dynamic markets to bring greater transparency and reduce duplication.

5. Frameworks

The conventional concept of a framework as it exists now has been retained, but the Act also introduces a new "open" framework. The general principle of both is the same: to allow contracting authorities to set up an arrangement which sets out the basis on which future awards will be made.

The fundamental difference between conventional and open frameworks is the ability to add new suppliers.

Conventional frameworks will operate in much the same way as they do currently.¹⁶ They will be closed to new entrants during their term. The maximum term of a conventional closed framework will be four years, although the Act retains the possibility of a longer term if this is justified.¹⁷

Conversely, the new open frameworks give contracting authorities the opportunity to refresh the supplier base. Open frameworks are in effect a scheme of successive frameworks running for up to eight years in total.¹⁸

The contracting authority must decide at the outset how many times it will award new frameworks under the umbrella of the open framework (and each time one framework ends, the next will begin immediately). The Act sets a minimum timeline for this but the contracting authority could choose to do this more frequently.¹⁹ New suppliers can be added each time a framework is let under the open framework system. These are fixed points in time, so this is different to a dynamic market where new suppliers can be added at any time.

The Act clarifies that the award of frameworks under an open framework must be capable of being made by reference to the same tender or transparency notice without substantial modification.²⁰ Therefore, this will be particularly useful where a contracting authority is effectively reiterating its requirement. It will not work if a contracting authority wishes to change pricing or other terms.

Note that, similarly to the position with dynamic markets, contracting authorities can charge fees at a fixed percentage of the estimated value of any contract awarded under a framework.²¹ And, there will be a central register of frameworks.

Time limits

Much like the current regime, the contracting authority must have regard to certain factors set out in the Act (including the nature and complexity of the contract as well as the need for site visits or other practical steps) when setting time limits for different stages of a procedure.²²

Despite the greater flexibility under the Act, the Act does still mandate certain minimum time limits for key stages of the various procedures. We have summarised these time limits (as they apply to standard contracts) in the table below. Many are shorter than current equivalents.

Footnotes

1. Value thresholds will continue to apply to public procurement under the Act, just as they do currently. See the first bulletin in our Changing Landscape series, which you can find here, for the thresholds that apply since 1 January 2024.

2. Exempted contracts are set out in Schedule 2 of the Act. These include vertical and horizontal arrangements (in-house contracts and collaboration agreements), and contracts for the acquisition of land, buildings or any other complete work.

3. For example, there is no maximum term specified for a framework that is a light touch contract (section 47(5)(c) of the Act). It is also possible to undertake a direct award on the basis of user choice (paragraph 15 of Schedule 5 to the Act).

4. See section 20(2)(a) of the Act.

5. This is the new terminology. "Excluded" means excluded on a mandatory ground set out in Schedule 6. "Excludable" means excludable on a discretionary ground set out in Schedule 7.

6. See section 20(2)(b) of the Act.

7. See section 20(3) of the Act.

8. See section 24 of the Act.

9. See the document "Benefits for Prospective Suppliers to the Public Sector" available on the Transforming Public Procurement page.

10. The direct award justifications are set out in Schedule 5 of the Act.

11. See section 41 of the Act.

12. See section 43 of the Act.

13. See section 42 of the Act.

14. See section 35 of the Act. There is no reference to "commonly used purchases".

15. See section 38 of the Act. The fee must be set as a fixed percentage to be applied to the estimated value of the awarded contract.

16. See section 45 of the Act.

17. See section 47 of the Act. Note that the Act uses softer language than is the case under current regulations, which refer to "exceptional circumstances".

18. See section 49 of the Act.

19. As a minimum, the open framework must be re-opened at least once during the first three years after the award of the first framework, and at least once every five years after the award of the second framework.

20. See section 49(9) of the Act.

21. See section 45(7) of the Act. There is no similar express right under current regulations.

22. See section 54(1) of the Act.

23. See section 54(3) of the Act.

24. See section 54(4) of the Act.

25. See section 51 of the Act.

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