How the Procurement Act can deliver distinctive value for the public purse
On 28th October 2024, the Procurement Act 2023 is set to go live. The Act has been designed to renew approaches to public procurement and consolidate over 350 different procurement regulations into a single regime.
Streamlining the public procurement policy rule book to catalyse and commercialise procurement processes – and the establishment of a new, central digital procurement platform created with usability as a central consideration – will offer a more effective route to supply chain sourcing.
While this is good news in its own right, the greater benefits on offer for contracting authorities preparing for the changes being introduced by the Act will be the opportunities to improve value for money from an estimated £300bn of public procurement expenditure per year. The Act aims to enable more flexible, innovative and transparent procurement - and to support growth through a more expansive approach to supply chain diversity.
Increasing choice and control
Under the Act, a broader range of procurement models can be developed, underpinned by a system of up to 25 notices that, delivered digitally through the new central platform, will increase the market visibility of every process stage, from advert to contract management and termination where applicable.
Procurement strategies can be made more innovative and bespoke in their design; and be more readily adapted, refreshed and adjusted should requirements evolve or shift, or the client’s position change. Given recent history, where disruption in global and domestic economies has destabilised projects, programmes, contracting authorities, their contractors and supply chains, more malleable regulations may also bring a more proactive pathway to developing resilience.
A more dynamic approach to public procurement transparency will mean that all key criteria, performance indicators (a minimum of three for contracts over £5m), and decisions will need careful consideration. Doing this will ensure that the objectives of the Act are met, that they are fair, and clearly evidenced as being the right decision for the project, programme, or portfolio.
The introduction of the Competitive Flexible Procedure, Open Frameworks, and Dynamic Markets (replacing Dynamic Purchasing Systems) as well as a new approach to post-award contract modification means that, whilst there may be more documentation to navigate for the contracting authority (even with greater digital assistance and rationalised regulations), there is also opportunity for greater control and choice.
Increased control points may sound like an administrative burden that goes against the overall grain of the Act, but it should also mitigate the risk of challenges and disputes, and provide a foundation for greater transparency.
Sweeping MEAT under the MAT
Under the current procurement rules, contracting authorities have appointed goods, works and services on the basis of ‘Most Economically Advantageous Tender’ (or MEAT). Whilst the intention for this approach was to squeeze out the greatest possible return from every pound spent, its unintended consequence has been, in many cases, to create a race to the bottom. This can often result in lower quality tenderers out-scoring higher quality competition through aggressive pricing strategies.
The Act will mitigate this, placing a wider focus on other areas more reflective of contracting authorities’ requirements. Through a change in the requirement to determine the successful bidder of public procurement exercises with the use of MAT, or ‘Most Advantageous Tender’, the Act intends to offer authorities greater scope over award criteria too (as well as opportunity to develop them further – possibly as a result of early market engagement, which is also supported by the Act). These measures will enable a shift in emphasis geared towards better-balanced, higher quality outcomes and public benefit.
New frameworks, clear commitments
The introduction of Open Frameworks allows for the framework term in the public sector to be a maximum of eight years, an increase from the current four year maximum (Utilities, Defence and Security are exempt). However, during this eight-year term, the framework must be opened at least twice to allow the introduction of new suppliers. This gives contracting authorities greater flexibility and will foster increased competition as incumbents seek to retain their position on the framework, and new suppliers look to join it.
Under the current regulations, there is a lack of transparency around contract awards, specifically Direct Awards. This will change under the Act as part of the push towards greater information sharing, with the contracting authority having to publish a contract award notice after it has taken its award decision, but before making a call-off under the framework. This will be required for both framework call-offs and direct awards – meaning that from a procurement planning perspective, this should be built into project timelines.
Platforming small and medium businesses and social enterprises
Diversification of the supplier mix is actively encouraged by the Act, which sets out a new requirement for procurement processes to look to remove barriers to entry for new market entrants, particularly SMEs and VCSEs (Voluntary, Community and Social Enterprises).
This takes a far more rigorous approach to inclusive procurement when it comes to the range of supplier and contractor types to be considered, opening the door for new entrants with the right capability and capacity to deliver and incentivising those yet to reach that stage in their journey.
In the long-term, this nurturing approach to business development also means that SMEs and VCSE’s won’t just stand to gain from the obvious income-related upsides of work winning, but will also enjoy exposure to a broader range of public sector partners and collaborations which could help them learn, develop and grow.
In readiness for the Act’s commencement, contracting authorities seeking to deliver distinctive value for public projects and programmes should be preparing now. Now is the time to review existing processes and to support a transition to delivery under the Act. We now have a chance to redefine our approaches to public procurement, and leverage insights to realise positive and lasting outcomes from the opportunities this new Act presents.
