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The Procurement Act 2023 (the Act) marks a significant overhaul in the UK’s procurement landscape, revoking and consolidating four key pieces of legislation into a single piece of legislation:
- the Public Contracts Regulations 2015;
- Utilities Contracts Regulations 2016;
- Concession Contracts Regulations 2016; and
- Defence and Security Public Contracts Regulations 2011.
What are the key changes to the Procurement Act 2023?
New reporting obligations
Unlike the existing regulations, which primarily focused on the procurement of contracts, the act introduces procurement as a concept that covers the entire lifecycle of a procurement. This end-to-end process encompasses everything from pre-market engagement to contract termination, with a new focus on contract management. Contracting authorities will now have monitoring and reporting obligations throughout the process, requiring them to publish significantly more notices and information.
Flexible procurement procedures
Under the act, there are fewer procurement procedures, and these are less prescriptive than before. Contracting authorities will have three options to choose from:
- Direct award
- Competitive tendering procedure (either an open procedure or a competitive flexible procedure), or:
- An award under an existing framework.
The competitive flexible procedure allows contracting authorities to design their procurement processes to suit their requirements. The range of remedies available to suppliers remains largely the same, however, the mandatory standstill period is reduced to just eight days.
An overview of the changes can be found in one of our previous blogs here.
Procurement Act 2023 – Guidance for utilities
The Act has introduced new rules governing utilities procurement in the UK, replacing the repealed Utilities Contracts Regulations 2016 (UCR). It is essential for utilities to familiarise themselves with the entire Act, and its provisions, with only some sector- specific differences, apply equally to utilities and utility contracts as they do to other contracting authorities.
What is a utility?
Under the Act, the definition of utilities remains consistent with the UCR. A utility is defined as a public authority, public undertaking carrying out a utility activity, or a private utility (Section 35(4)).
Utilities must determine whether they qualify as a public authority, public undertaking, or private utility, as defined in Section 2(2) of the Act. Utilities can include a wide range of entities, from private companies operating electricity transmission networks to local authorities managing district heating networks.
Utility activity
Utility activities are defined in Section 6(2) of the Act, with Schedule 4 outlining the scope of these activities in two parts:
Part 1 details the activities considered utility activities and thus covered by the Act, while Part 2 lists activities that are not considered utility activities and are therefore excluded from the Act’s provisions.
In summary, utility activities include:
- The provision or operation of gas, heat, electricity, and water networks, and the supply to these networks.
- The provision or operation of public transport networks, ports, and airports.
- The extraction of oil and gas, and the exploration for or extraction of coal or other solid fuels.
- For private utilities, activities carried out pursuant to a special or exclusive right.
However, in certain circumstances specified in this section the supply of gas or heat, electricity, and drinking water may not be considered utility activity.
Exempted contracts
The Act retains the exemptions previously available under the UCRs, while simplifying their framework and ensuring the terminology is more suitable for domestic law.
Schedule 2 of the Act outlines the types of contracts (‘exempted contracts’) that are not subject to the rules. Provided the relevant conditions are met, these exemptions can be utilised by utilities unless specified otherwise. The exemptions specific to utilities are detailed in paragraphs 31-34, as follows:
- Paragraph 31: Contracts awarded for the purpose of further sale or lease to third parties of the goods, works, or services supplied under those contracts (except where the utility is a centralised purchasing authority).
- Paragraphs 32 and 33: Contracts for the purchase of water or energy, or fuel for the production of energy, by utilities carrying out a relevant utility activity.
- Paragraph 34: Contracts for activities listed in Part 2 of Schedule 4, which are exempt from the Act as they are subject to competitive forces in an unrestricted market.
When does the Procurement Act 2023 come into force?
On 12 September 2024 the UK government announced that the act will come into force on 24 February 2025. This is a change from the previous 28 October 2024 date.
The additional time allows both contracting authorities and suppliers to transition more smoothly to the new regulatory framework, thereby reducing the risk of non-compliance and operational disruptions.
The act represents a significant shift in how contracting authorities, particularly conduct their procurement activities. By consolidating and simplifying the rules, the act aims to create a more efficient and transparent procurement process, benefiting both contracting authorities and suppliers.
Implications of the delay
Contracting authorities that were preparing to procure under the new act will need to adjust their plans. They may have to continue using the current regulations until the new act comes into force. Procurement documents and processes that have been updated to comply with the new act will need to be revised to align with the current regulations.
Contracting authorities may choose to delay their procurements to wait for the new act. This may potentially impact the supply of their goods, works or services.
We’re here to help
The delay offers more time for training and familiarisation with the new act, updating documents and policies and procedures, ensuring that contracting authorities and suppliers alike are well prepared when it finally comes into force on 24 February 2025. Our team of specialist energy lawyers can support you with any queries you may have.
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Bhikhu is a Legal Director in the Energy team and has built up considerable experience advising clients in the private and public sector on commercial contracts, IT, data protection and procurement law. He advises on the process by which major works, services and supplies contracts are awarded, including liaising with stakeholders, advising on procurement processes, drafting contracts and procurement documents.
His recent focus has been on the regulated English water sector and he is familiar with procurement, environmental and regulatory constraints that apply to projects in these areas.
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