The Procurement Act 2023 (the Act) finally received Royal Assent on 26 October 2023. The general message is that the Act is very much old wine in new bottles. While there are some minor changes that improve specific gripes and processes, the overall nature of the changes create a degree of uncertainty and, therefore, additional risk for contracting authorities.
What are the Changes?
Billed as the most significant change in a generation to the way public sector organisations buy goods and services, for the most part, the content of the procurement rules in the Act will remain familiar. The Government certainly did not take the opportunity to include any consultation on the scope of regulated contracting authorities. This suggests that the legislative intention is that the scope of institutions that are regulated by the procurement rules will remain the same.
How does this affect Further Education Institutions?
In summary, this means that further education institutions that have historically been subject to the procurement rules in the Public Contracts Regulations, will continue to be subject to the procurement rules in the Procurement Act.
And Higher Education Institutions?
The story is a little more nuanced for higher education institutions (HEIs). One of the early objectives and promises of the Higher Education White Paper “Students at the heart of the system” was a change to the regulatory environment to enable greater competition and promote efficiencies, including, among them, a reduction in the regulatory burdens, including on procurement: “For example because in future, most funding will follow students in the form of loans and direct grant funding from the Government will decrease, fewer institutions may be subject to EU public procurement rules”.
There is, it is fair to say, some debate within the procurement-nerd community whether Student Loans Company (SLC) funding — even through loans which are repayable by students — is or is not public funding. What that has meant is that there is a two-tier system. Those HEIs who are already no longer reliant on SLC funding -whether through international student fees, commercial research, endowments, or landholdings–are outside the scope of this regulatory burden. The rest still have to comply with the additional cost, delay and commercial risks of procurement law compliance.
During the passage of the bill, the Conservative peer Lord Lansley attempted to take this opportunity to clarify that the revisions to the definition of the regulated contracting authority would not include universities. Instead, the government response was that the changes to the definition of a contracting authority in the bill were nevertheless intended to capture the same bodies as under the former Public Contracts Regulations.
This is not generally how the law works. If you change the words, the courts will tend to assume that you have intended to change the concept: if you had intended to capture the same bodies, you would have used the same words. Does having a “commercial character” mean the same thing as operating on “a commercial basis”? Who knows? This is the kind of hair-pulling, scream-inducing terminological change for the sake of it that appears right the way throughout the Act. Which leads us to…
Changes to Terminology
There was a raft of changes to terminology which have no material change to the previous concepts but mean that you will have to change all of your precedent documents. A “Contract Notice” is now a “Tender Notice”; Selection” is now “Participation”, “Evaluation” is now “Assessment”; a “Contract Award Notice” is now a “Contract Details Notice”; but don’t worry, an “Award Decision Notice” is now a “Contract Award Notice”. Confused? You will be! The proposed content of the notices is still with the Cabinet Office following a detailed technical consultation. We anticipate that our clients should look to begin the process of amending procurement documents and procurement policies following the publication of the secondary legislation and detailed notice templates, like to be finalised and laid before Parliament in Spring 2024.
The Changes to Procurement Routes
Finally, — in addition to the cosmetic changes, there are several substantive changes to the procurement rules and how education clients need to operate procurement procedures. The most important substantive change is the streamlining of the Procurement Procedures. Instead of a panoply of different procurement processes, the Procurement Act has reduced the number of available procurement routes to three: “open procedure”, “competitive flexible procedure” and “direct award”.
Under the historic procurement rules for tendering under the current Public Contracts Regulations (PCRs), bidders are required to tender on a “one-shot” basis without negotiation and with very limited scope to amend any contract documents. While this works fine for off-the-shelf goods and services, this does not lend itself to customisable goods and services, or where there is scope to take better advantage of what the market has to offer. This process is inflexible and uncommercial, and gives procurement professionals (and lawyers!) an unfair reputation of being rule-bound and process-driven. This has now been replaced with the flexible procedure, which allows the authority a wide latitude in designing the procurement procedure to get the best tenders from the market.
Unlike under the PCRs, this new “competitive flexible procedure”, which is wide enough to describe processes which range from a two-stage, one-shot tender process through to iterative processes analogous to the “competitive dialogue” or “negotiated with advertisement”, will be available to use as of right. Unlike those other processes, which were strictly and restrictively detailed, there are no detailed rules on how to apply the “competitive flexible” procedure. This means that there is a degree of risk in taking full advantage of this flexibility. No authority will want to be the first to depart from historic best practice…
What are the Next Steps?
The Procurement Act will fully come into force in stages. The Government has announced that a range of secondary legislation will be published in early 2024 to bring elements of the Act to effect. This will include, for instance, detail on the new forms of notices which contracting authorities will need to get used to. The regulations will give a minimum of six months’ notice before ‘go-live’, which is anticipated to be October 2024. The Government has published a range of tools: checklists and guidance documents to provide training on the new regime before its implementation. You can find out more on the following websites:
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Udi provides advice on all aspects of commercial law, including procurement and state aid law.
Udi has a wide commercial background, working in-house and for clients in highly regulated sectors.
His experience ranges from advising on PFI/PPP projects, joint ventures and collaboration agreements, through to distribution agreements and consumer contracts.
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As a full-service law firm with a focus on the education sector, we’re able to tailor our service offering to fit your needs. Our track record speaks for itself. We’re proud to have education as one of our firm’s longest standing key sectors, acting for over 100 further and higher education institutions.
In the rapidly-changing world of higher and further education, we know how important it is to have access to experts who fully understand the challenges you are facing and who can support your goals both practically and ideologically.
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