When considering public procurement, the focus is often on getting the best value for money for taxpayers and ensuring that public bodies get what they need to function effectively. For those closer to the field, there is a third consideration; the commercial benefit to suppliers in providing goods and services to the public bodies. Whilst necessary, the public procurement processes place a considerable burden on potential suppliers with multiple rounds of bidding and limited negotiation room.
It is therefore worth considering whether the Procurement Act 2023 (“Procurement Act”) will bring new challenges or new opportunities to suppliers. Supplier benefit should always remain an important element of public procurement and, without a benefit to suppliers, they have no incentive to bid for work, which ultimately means the public contracts are not completed. This article will consider some of the new changes and how the Procurement Act will affect suppliers at either the procurement stage or during the term of the contract.
Below is a summary of the key changes introduced by the Procurement Act and how they could affect potential suppliers. For a further review of changes introduced please see our article from last week entitled ‘Key Changes from the Existing Regime’ and our upcoming article – ‘New Mechanisms Introduced’.
During the Procurement Process
When undertaking a procurement process, the Procurement Act will now oblige the authority to consider the following new set of objectives:
‘(a) delivering value for money;
(b) maximising public benefit;
(c) sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions;
(d) acting, and being seen to act, with integrity.’
Additionally, authorities will need to treat suppliers equally (unless they consider that different treatment is justified), consider barriers to participation that may be facing SMEs and how these barriers to participation can be removed.
Whilst this approach is broadly consistent with the approach that has been taken in the past, it is notable that between the list of new objectives and the specific reference to SMEs, authorities will not be as constrained in their considerations of bids. Suppliers should see this comprehensive list of objectives as an opportunity to build their approach around the needs of authorities. As a supplier, this list could provide the guidelines needed to craft successful bids for any project.
The explicit references to SMEs should also be of particular interest. Although in some matters SMEs may not be suitable, in most procurements smaller suppliers should now be at no obvious disadvantage. Suppliers should seek to make authorities aware of any barriers to entry and probe whether any steps have been taken in the circumstances to remove them.
It is unlikely that the world of procurement will turn on its head as a result of these initial changes, particularly in the short-term, however, they may represent the beginning of a shift in the approach taken by authorities. These objectives should also be of particular consideration for neutral vendor suppliers who, in the course of their contracting with end-suppliers, must apply these objectives throughout. Furthermore, suppliers that create bids with these objectives in mind will put themselves in a more competitive position, whether being considered by a client or a neutral vendor.
Beyond the dotted line
Commercial teams in any field often dedicate a significant amount of resource to negotiate and execute commercial contracts for the provision of goods and/or services. Hours of video calls and revised copies go backwards and forwards to reach a point of agreement, and (all being well) the contracts are eventually signed. Equally as often, those same teams, have a habit of ignoring the set terms of the agreement in practice and only referring back to the contract in the event that things begin to derail. It will come as no great surprise that our suggestion would always be to consistently consider your contractual terms during performance of a contract, however, now the Procurement Act may just force suppliers’ hands on this matter.
The definition of ‘Procurement’ under the Procurement Act has been widened beyond its previous scope. Previously, procurement would cover the procuring of public goods to the point of awarding the contract. The new definition is as follows:
“Procurement means the award, entry into and management of a contract;”
The addition of the management of a contract should be of particular interest to any potential suppliers as, when coupled with the objectives above, it means that the authorities’ obligations now go beyond the point of awarding the contract and will run through to the completion or termination of the contract. Theoretically, if the contract no longer represents value for money or maximises the public benefit, then the authority may have an obligation to terminate. This would not be as a matter of commercial consideration, but a legal obligation on their part.
In addition to the widening definition of procurement authorities will now, in certain situations, have an obligation to register Key Performance Indicators (KPIs) on a centralised system. This could introduce a further level of visibility to the contracts, ensuring that the authority will measure performance in more detail.
A final change is the introduction of a central debarment list. Suppliers that become excluded on either mandatory or discretionary grounds may be referred to ministers for investigation. If the ministers then deem it appropriate, the supplier may be placed on a central debarment list for a period of up to five years. Suppliers will be unable to win public tenders whilst on the central debarment list.
As a result of these changes, authorities will need to more effectively monitor the performance of their contracts, and this monitoring system will be more visible than ever. The aim for suppliers, as ever, remains to perform their obligations under their agreements and ensure that they are not seen to be a consistent issue for authorities. Failure to do so may now hurt their business in the long run or significantly reduce their amount of potential work by being placed on the central debarment list.
Suppliers will need to ensure that their contractual relationship accurately reflects their intentions and abilities. It may no longer be sufficient to say what is necessary to ‘get the contract over the line’ and then deal with the details at a later stage. This is of particular importance for suppliers that will be sub-contracting their obligations (for example neutral vendor suppliers), in these scenarios a short-term solution may result in a long-term problem and a loss of business. Negotiating a firm contractual position that holds up to scrutiny and can be delivered effectively will be the key to succeeding under the Procurement Act.
If you are involved in the provision of goods or services for a public body or are seeking to bid on future work, please feel free to contact the Ellisons’ Commercial team to discuss how we may be able to assist.
