Procurement Act 2023

Policy background

8. At around £300 billion every year, public procurement accounts for a third of all public expenditure. By improving the way public procurement is regulated, the Government can not only save the taxpayer money, but spread opportunity and improve public services, across every region of the country.
9. The procurement of goods, services and works by public bodies and some private utilities is an area of law previously governed by EU Directives. The Procurement Act 2023 repeals the Regulations which implemented this regime and replaces these with a single new public procurement regime with a number of sector specific features.
10. The Government’s policy objectives for these reforms were to speed up and simplify public procurement processes, place value for money at their heart and create greater opportunities for small businesses and social enterprises to innovate public service delivery.
11. The Government believes that the previous regimes for awarding public contracts were too restrictive and complex for buyers and suppliers alike. The Government’s objective is that the new regime is simpler and more flexible, to make it better able to adapt to the fast-moving environment in which businesses operate. Markets and commercial practices are constantly evolving and it is the Government’s aim that the new regulatory framework drives a culture of continuous improvement to support more resilient, diverse and innovative supply chains.
12. The United Kingdom, in its own right following its exit from the EU, joined the World Trade Organisation’s Agreement on Government Procurement (GPA) on 1 January 2021. This guarantees access to £1.3 trillion in overseas public procurement markets providing major export opportunities for British businesses. In designing the new regulatory framework, the Government is committed to compliance with the GPA and its principles of fairness, impartiality, transparency and non-discrimination. The Government will continue to maintain and build on the UK’s existing international relationships and new bilateral trade agreements.
13. The legislation regulates public procurements from inception throughout the duration of the contract - from the point at which a covered public body (contracting authority) is considering how and what to procure, through the process of procurement and contract award, up to the point at which the resulting contract ends. It also provides remedies for breach of statutory duty.
14. In developing the new regime, the Government has engaged with over 500 stakeholders and organisations through many hundreds of hours of discussions and workshops. This has included stakeholders from central and local government, the education and health sectors, small, medium and large businesses, charities, social enterprises, academics and procurement lawyers.

A simpler regulatory framework

15. The legislation repeals over 350 individual regulations derived from EU Directives (contained in the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016, Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011, subject to transitional provisions) and creates a single, uniform framework for public procurement in the UK.

Public contracts

16. The Public Contracts Regulations 2015 are repealed and new rules on procurement are set out in the new regime. Most central government departments, their arms-length bodies and the wider public sector including local government, health authorities and schools have to follow the procedures set out in the legislation in awarding non-exempt contracts with a value above set thresholds, to suppliers.

Utilities contracts

17. The Utilities Contracts Regulations 2016 are repealed and new rules applicable to utilities procurement are set out in the new regime. The single framework for procurement set out in the legislation generally applies to the award of utilities contracts, with some limited differences, for example, in relation to "utilities dynamic markets" and the duration of "closed frameworks". The legislation applies to the award of contracts by utilities operating in the water, energy and transport sectors. Utilities can be: contracting authorities; public undertakings (persons that operate commercially but are subject to public authority oversight); or private utilities (persons that are not public authorities or public undertakings but that are authorised to carry out utility activities, due to being granted "special or exclusive rights" under any statutory, regulatory or administrative provision where that right also substantially prevents other utilities from carrying out those activities).
18. The Government did not wish to regulate where utility activities are exposed to competition. The legislation therefore includes a power, where it is satisfied that this is the case, for an appropriate authority (defined in section 123(1) of the Act) to make regulations exempting a particular utility activity from regulation in the future. The legislation also includes a power to further reduce the regulatory burden for private utilities wherever possible and is consistent with the UK’s international procurement obligations.

Concession contracts

19. The Concession Contracts Regulations 2016 are repealed and the single framework for procurement set out in the legislation will generally apply to the award of concession contracts, with some limited differences. A concession contract is a contract for the supply, for pecuniary interest, of works or services to a contracting authority where at least part of the consideration is the right to exploit the works or services and under which the supplier is exposed to a real operating risk. Examples include the construction and operation of a toll road, or the operation of a car park or a hospital shop. There are specific provisions covering the definition of a concession contract, how a concession contract is to be valued, as well as some specific exemptions from the regime of certain types of concession contracts.

Defence and security contracts

20. The Defence and Security Public Contracts Regulations 2011 ("DSPCR") are repealed and rules on defence and security procurement are set out in the new regime. The separation between defence and security and other procurements has largely disappeared but the legislation provides for particular derogations for defence to deal with the differences in the defence and security sector and to aid the delivery of the Defence and Security Industrial Strategy. These include the duration of "closed frameworks", greater flexibility to amend contracts to take into account updates to technology as well as to ensure there are no gaps in the provision of goods, works or services which would have unacceptable operational impacts. There is greater flexibility to award contracts directly to specific suppliers to allow transportation of the armed forces where procurement timescales cannot be met and to deal with the interaction between the procurement rules on contract modifications and having the ability to enter into new contracts when needed under the Single Source Contract Regulations 2014. Direct award is also possible where necessary to enhance or maintain the operational capability, effectiveness and safety of the armed forces.

Single Source Contract Regulations

21. Part 2 of the Defence Reform Act 2014 (DRA) creates a framework for regulating defence contracts and sub-contracts which have not been competed. These are known as single source contracts (SSCs). Such contracts account for about half of MOD procurement spend, which is equivalent to over £8 billion per year. The Single Source Contract Regulations 2014 (S.I. 2014/3337) (SSCRs), made under the DRA, are engaged when a defence contract is awarded with a value over £5 million without any competition, unless one or more of the specific exclusions set out in the SSCRs apply. These are known as qualifying defence contracts (QDCs) or qualifying sub-contracts (QSCs). There is a general power under section 14(7) of the DRA for the Secretary of State to direct that a particular contract which would otherwise meet the requirements should not be subject to the SSCRs. The DRA does not specify whether a contract should be competed.  Where the DRA and SSCRs are engaged they make provision for the pricing of SSCs. They also make provision for transparency and record-keeping requirements, from the beginning of an SSC to its completion.  The DRA also creates an arm’s length body, the Single Source Contracts Office (the SSRO) which issues guidance on the application of the regime and adjudicates on disputes between the Secretary of State and contractors.
22. The Government set out its broad policy objectives for reform of the regulatory regime in the DRA and SSCRs in a Command Paper published on 4 April 2022 (Defence and Security Industrial Strategy: Reform of the Single Source Contract Regulations). 1 This set out changes centred around three main themes: providing greater choice and flexibility in procurement; speeding-up and simplifying the procurement process and promoting innovation. It also included several technical changes designed to address problems that have been identified during the eight years over which the regime has been operating. Delivery of the reform will require amending the DRA (which is achieved by way of a Schedule to the legislation), amending existing or creating new secondary legislation, and changes to Statutory Guidance issued by the SSRO.

Key components of the legislation

23. Procurement is covered by a number of the UK’s international trade agreements including the GPA. The regime in the legislation is compliant with these obligations and allows a degree of future-proofing through targeted delegated powers to update the regime in the event that new agreements are signed.
24. The legislation embeds a number of key principles (prohibiting discrimination against treaty state suppliers, and treating suppliers the same) and objectives (delivering value for money, maximising public benefit, sharing information and acting with integrity) for public procurement.
25. Reforms have been introduced to support small and medium-sized enterprises (SMEs), including a duty for contracting authorities to have regard to reducing and removing barriers to SME participation in procurement, and removing unnecessary obstacles relating to audited accounts and insurance in the conditions of participation.
26. The legislation requires the evaluation of tenders to be based on criteria that identify the "Most Advantageous Tender" and requires contracting authorities to have regard to delivering value for money and maximising the public benefit from the contract.
27. The legislation sets out new procedures for awarding public contracts which allow for more negotiation with suppliers to deliver innovative solutions in partnership with the public sector.
28. Powers in the legislation allow Regulations to require all contracting authorities to use a single digital platform for supplier registration, ensuring businesses will only have to submit certain types of information to demonstrate their credentials once to be considered for a public sector procurement. There is a duty on a Minister of the Crown to establish and operate such an online system for this purpose and for the purpose of publishing notices, documents and other information.
29. To support prompt payment, 30 day payment terms are passed down through public sector supply chains and private and public sector payment reporting is aligned to allow comparison of how quickly different organisations pay their suppliers.
30. The legislation aims to make it easier for buyers to take account of previous poor performance by suppliers. There are clearer and broader grounds to allow for the exclusion of suppliers who pose unacceptable performance risks. The legislation also includes provision for a centralised debarment list of suppliers which the Government considers must or may be excluded from procurements.
31. The legislation introduces new arrangements for how procurement should be conducted in an emergency such as the Covid-19 pandemic. There is a new power for Ministers to make provision in Regulations allowing the direct award of contracts when necessary to protect life so that contracting authorities can procure at pace.
32. Under the old procurement regime, information on public procurement was published in multiple different locations. The legislation ensures greater transparency of data to make it easier to scrutinise procurement decisions. Notices need to be published at each stage of the commercial lifecycle in an open, accessible format.
33. The legislation integrates the previous "Light Touch Regime" for social, health, education and certain other services into the broader provisions but with a series of exceptions to recognise that "Light Touch Contracts" may require different treatment. 
34. Ministers of the Crown, Welsh Ministers and Northern Ireland Departments have new powers to investigate cases of non-compliance with the legislation and make recommendations to contracting authorities to ensure future compliance.