Procurement Bill – First draft now published

Jacob Rees-Mogg, the Minister for Brexit Opportunities and Government Efficiency, reinforced this ambition recently with the proposed introduction of a “five year expiry date“ for 1,500 pieces of EU legislation in the forthcoming Brexit Freedoms Bill (published in The Times, 30 May 2022).

For procurement legislation this process has already begun and the first draft of the new Procurement bill is now available for review. The bill is currently in the committee stage and has a long way to go before Royal assent, but it is anticipated that if normal timescales are maintained we can expect the new legislation to take effect towards the summer of 2023.

The objectives of the bill¹ are stated as:-

• Creating a simpler and more flexible, commercial system that better meets our country’s needs while remaining compliant with our international obligations.
• Opening up public procurement to new entrants such as small businesses and social enterprises so that they can compete for and win more public contracts.
• Embedding transparency throughout the commercial lifecycle so that the spending of taxpayers’ money can be properly scrutinised.

In its current iteration the bill lives up to this ambition with the points of interest from an insurance perspective being outlined below.

1. In Scope organisation: Greater clarity is given regarding in scope contracts. Interestingly as written there is a possibility that more publically funded contracts may be subject to procurement rules. Will this impact the insurance spend on larger construction contracts?
2. Transparency: Principles of Transparency, Equal treatment, Non-discrimination and Proportionality have been removed as overriding principles and replaced with “Objectives”. These are Value for Money, Maximising Public Benefit, Sharing Information, Integrity and Treating Suppliers the same (the latter appears to be equal treatment re-badged). A more commercial language with a desire for procurement to support community wellbeing. However, the requirement to be transparent remains key with the requirement to publish more documentation and reasoning for the decisions that contracting authorities make.
3. Number of Procedures: The anticipated amalgamation of the existing legislation into 1 bill along with a reduction of procedures under that bill has been delivered. Provision is made to accommodate some of the nuanced requirements of certain sectors (utilities. Light touch, defence etc.) at points under three procedures. The procedures are:-
   • Open Procedure: This remains largely unchanged
   • Other Competitive Tendering Procedure: very open to interpretation (lots of guidance will follow we are sure). However, the major benefit of this procedure is to allow Contracting Authorities to develop a methodology which fits its market place. As long as no market is given an advantage this is perhaps a more commercial approach which those procuring insurance have longed for.
   • Direct Award: As anticipated these would only apply in exceptional circumstance and will ordinarily not be in play. One of the grounds for direct award may be invoked by a government minister to protect life or health, public order or safety. No doubt the government of the day will let Contracting Authorities know when this route becomes legitimate.
4. Thresholds. These remain roughly the same as they are at present.
5. Electronic Tendering: Rules on use of electronic engagement during the procurement process unchanged. Good news for those who have invested in procurement portals.
6. Focus on Trading Partners: UK suppliers and those from countries covered by a trade agreement including the World Trade Organisation Government Agreement² are acceptable suppliers. Anyone else can legitimately be excluded from a procurement.
7. Award criteria: These must now relate to the subject matter of the contract, be clear, measurable and specific, and be proportionate to the nature, complexity and cost of the contract. The requirement to include relevant criteria and the principle of proportionality has in reality been present for a while, but the reference to criteria being measurable will require such things as added value and social value to be articulate in a way which can then be measured.
8. Refinement : Award criteria can be “Refined” during a competitive tendering procedure as long as tenders have not yet been submitted and that refinement would not have resulted in a different outcome for a bidder who may have been excluded earlier in the competition. Possible an area for significant challenge if not managed appropriately.
9. Frameworks: Frameworks and Dynamic Markets (previously DPS) remain options for clients. There will be two types of frameworks; open and closed. Closed frameworks mirror the current rules with a maximum term of 4 years (8 years for utilities and defence). Open frameworks can be reopened periodically (at least once during the first 3 years and every 5 years thereafter) up to a maximum of 8 years as long as there is more than one supplier appointed. Given the need to open the framework 3 years into its term, the value of an open framework in comparison to a closed framework is not clear. The terms of a dynamic market remains open ended and we are likely to see lots more of these.
10. Contract Notices: All Contract notices are still required although some now have different names. Notifiable below threshold contracts do not have to be published for anything below £30k (£12k for Central Government) unless bidders are preselected.
11. 11) Stages of a procedure: The Order that things must be done post evaluation has changed.
    • Evaluation
    • Assessment Summary (new debrief requirement)
    • Contract Award Notice
    • Standstill Period (minimum 8 working days from publication of Contract Award Notice)
    • Sign Contract
    We believe the changes are designed to bring efficiency to the award process by resolving issues before the award is made.
12. Timescales: Minimum timescales remain largely unchanged
13. Mandatory KPI’s: Before awarding a contract of more than £2m at least 3 KPI’s must be agreed and published. The caveat being that the KPI’s may not be needed if they cannot be measured and/or would not be of relevance to the contract. For larger organisation this may have real relevance due to the aggregate cost of insurance of the contract period.
14. Changes during the Contract: Permitted modifications largely reflect current rules and must generally be notified through a “contract change “notice. Exceptions to the notice publication requirement include contract changes that increase or decrease the value or term of an insurance contract by 10% or less. A voluntary standstill period may follow before the change is made. This has relevance at renewal time when insurers need to make rate correction. Would if stem the rise in premium we are seeing at present?
15. Debarring Suppliers: Suppliers can be debarred from bidding. However the process to debar a supplier is not easy. Suppliers will take some comfort from this due to the implications of 1 badly running contract impacting on their ability to trade with Public entities
16. Visibility of contracts: All payment over £30k must be published by a contracting authority.
17. Pipeline Publication: Not all contracting authority will find them duty bound to publish a list of upcoming tenders but many will.

Gallagher will continue to keep you up to date with the development of the bill and will be working with clients throughout to ensure they achieve best outcomes in the market as and when the new rules are implemented.