Public Sector Procurement – A Guide To The New Procurement Bill
Article by Public Sector Divisional Director, Mike Tuzzio
After attending Procurex National, the UK’s leading public procurement event, we were inspired to share our expertise on the upcoming Procurement Bill, which gov.uk says will introduce “the most significant changes to the way public sector organisations buy goods and services for a generation.”
Introduced in the House of Lords, the Bill is approaching the final stages of being passed by the House of Commons; it is expected to come into effect in 2024. Though it’s worth noting businesses shouldn’t panic quite yet – there will be a six-month advance preparation period before any changes are made.
With £300 billion of public money spent on procurement each year – roughly a third of total public expenditure – it’s a piece of legislation sure to have far-reaching effects.
And while changes to legislation are rarely met with open arms, the Procurement Bill is something of a boon to companies, particularly SMBs. We take a look at the new Bill and how it might impact businesses.
WHAT ARE THE AIMS OF THE PROCUREMENT BILL?
Slated to come into effect in 2024, the Bill is designed to simplify and modernise what is seen to be an unnecessarily complex and outdated system. Removing some of the layers of bureaucracy and adding transparency to the procurement process – if working as intended – should greatly benefit all involved in public sector procurement.
Consolidating four framework agreements into one
As it currently stands, there are four sets of regulations covering different types of procurement for public sector organisations; standard public contracts, defence contracts, concession contracts (for example, toll roads and hospital shops) and public contracts covering private utilities.
Each set of regulations comes with its own list of boxes to tick – and systems to register on. This makes things especially complicated for businesses that are involved in procurement across different sectors. When discussing the number of systems a supplier might have to register on when tendering for central government contracts at present, Ed Green, Deputy Director of Commercial Policy – International and Reform at the Cabinet Office, said they “stopped counting at 71.”
This makes access to public contract opportunities difficult for smaller private companies and new entrants; particularly when the government itself admits there is a “tendency to use established lists of suppliers or networks.”
By consolidating regulations into a single framework and one centralised platform for registering, it becomes easier for new entrants into public procurement to find a foothold in the industry, and makes monitoring and reporting straightforward.
Focusing on social value: from MEAT to MAT
A significant and exciting change is that the new Bill will require procurers to base their bids on the “most advantageous tenders” (MAT) rather than the “most economically advantageous tender” (MEAT) as it was previously. Spot the difference? The government has said goodbye to the word “economically” as a way to reassure contracting authorities that they can assess tenders for value for money with a broader view of the ‘social value’ attached.
The existing guidance clearly states that tenders under MEAT can be assessed using the best price to quality ratio, taking into account environmental or social aspects. But the proposed change brings these factors to the fore, which may hearten some local authorities who are still hesitant to award contracts based on non-commercial elements.
It will be interesting to see how social value is measured; there are various ways of comparing offerings within the supply chain, so uniformity may be difficult to achieve. This could add another dimension and layer of complexity to the procurement process and will depend on suppliers providing detailed information about the ethical and social impacts of their goods and company operations. But it’s certainly a welcomed shift for those of us that want to see positive change in our communities on a local and national level.
Government procedures often trickle down to all sectors of the economy. This Bill will likely be no exception, setting a benchmark for the procurement industry. Therefore we can expect a bigger focus on social responsibility and how businesses can do more good.
Opportunities for SMBs
Public sector procurement has historically been a challenging market for SMBs to enter – in no small part due to the complex framework agreements mentioned above.
If securing a public sector contract is seen as overly complex due to the current legal framework, SMBs may decide, due to a lack of resources if nothing else, to avoid working in public and private sectors, and stay within private procurement. The current system is also difficult for central government departments and public sector buyers, as they are limited to certain larger organisations, and may find it tricky to switch suppliers even if they’re performing poorly.
Proposed changes to public procurement policy aims to promote free and open competition in the market, meaning government tenders won’t be off-limits to all but the largest businesses that dominate public sector supply chains. This Bill aims to make access to the market simple, in a move that will benefit both private companies and public bodies alike.
Another aim of the Bill is to increase transparency; a change that benefits businesses both in the public and private sectors that engage in public procurement.
For businesses in private sectors looking to make a step into public procurement, the Bill makes it easier to compete for tenders. An increase in competition is one of the key differences outlined in the new legislation, as SMBs will have more opportunities to win government contracts; the centralised platform and increased room for negotiation in the Bill makes public procurement procedures more flexible. With everything centred in one place, and more information due to be published throughout the procurement process, a once complex and confusing procedure will be straightforward.
From the perspective of a public sector organisation, an increase in transparency makes it easier to control spending – and see what is good value for the organisation and what is underperforming. The increase in information published mentioned previously will give a public sector body much better insight into the performance of suppliers.
One of the main aims of the Bill is to increase ‘value for money.’ Transparency in public procurement makes it easy to receive more information on what is actually needed, and after purchase, how it is actually performing.
Procedures will be more flexible and commercial after the Bill is introduced – they’re currently quite prescriptive about when you have to use which procedure – and give those working in public sector procurement room to negotiate. It will move slightly closer to private sector procurement in this regard; public bodies will be able to better design procurements to fit with what they’re buying.
Clearer requirements on the identification and management of conflicts of interest are also part of the Bill.
Strengthen the exclusion grounds
Transparency wouldn’t count for a great deal if it was still exceptionally difficult to move on from suppliers who aren’t performing well. The new Bill makes it much simpler for the government to disqualify poorly performing suppliers.
This is one of the most interesting additions from a public sector organisation perspective, as the strengthening of exclusion grounds gives them much greater control over procurement.
A new exclusions framework will be put in place, and so the Bill will also create a ‘debarment register’, which will list suppliers who should be excluded from future contracts; this register will be available to all public sector organisations. There’s also an ethical aspect to these new exclusion grounds, as it strengthens the government’s ability to “exclude suppliers from bidding for work if there’s evidence of modern slavery in their supply chain, both in the UK or overseas.”
Ultimately, the Bill will oversee an increase in accountability; public money will be used more efficiently, and suppliers who have performed poorly, relying on the status quo, will be phased out.
CHANGES TO EMERGENCY PROCUREMENT
A key aim after the COVID pandemic is to make procurement more transparent and effective during times of emergency, when vital goods need to be sourced quickly.
During the pandemic, the UK relied on direct awards to source vital supplies of a high standard, including PPE, quickly and efficiently.
With the introduction of the Bill, there will be more competition in the emergency procurement process. While the normal tendering process takes a minimum of 30 days, in an emergency situation this is not ideal: there will be faster competition processes in place to reduce this significantly. Instead of relying on direct awards, the government will be able to source supplies quickly, and at better value.
In certain circumstances, a competitive tender will be impractical; under the new Bill, public organisations will still be able to award a contract when necessary, whether a matter of urgency or otherwise.
WHY IS IT HAPPENING NOW AND WHO WILL
THE BILL APPLY TO?
Calls for a change in public sector procurement legislation began soon after leaving the European Union; it was felt that there was an opportunity to change the rules to meet the specific needs of the UK, and remove any unnecessary bureaucracy.
The new Bill is designed to meet the UK’s needs with “value for money” at its heart; private sector procurement, after all, has a purchasing power and ability to negotiate that a public sector organisation simply cannot match.
The Government first introduced the proposed reforms in the green paper ‘Transforming Public Procurement’, which was published in December 2020. This was followed by a public consultation that ran until March 2021, which the Government then responded to in December of that year. As of mid-2023, the Bill has been passed by the House of Lords and is moving through the final stages in the House of Commons.
As procurement is devolved, the Bill will apply to England, but not Scotland at this stage. It will also apply to Wales and Northern Ireland, with certain differences.
HOW WILL THE PUBLIC PROCUREMENT BILL
Despite a third of Government expenditure being spent on public sector procurement, only one fifth of that spend was awarded to small and medium businesses in 2021, a report from the British Chambers of Commerce (BCC) has found.
As discussed, a significant ambition for this Bill is opening doors to SMBs, increasing competition in the sector and spreading funds to a wider network of businesses.
These are some of the key benefits to SMBs.
Centralised platform for finding work
Where a company may once have needed to register on several platforms, an unnecessarily time-consuming process, a single website makes finding and bidding for work straightforward.
The centralised platform will give greater visibility of upcoming work, showing future work in each area; for example, a new tech business in Kent will be able to search for relevant upcoming opportunities in their region. This will give SMBs more time to gear up for tendering and help them find work they may otherwise be unaware of.
It will be a streamlined system: once a public organisation is ready to go to market with their tenders (above a certain threshold), a tender notice will be published on the centralised platform, including key information required for a potential supplier to bid. Businesses will be able to set up email search notifications to be immediately informed on new opportunities in their area.
Reduced insurance costs
Insurance costs will be reduced: no longer incurring expenses before a supplier has even bid for a contract.
Competitive Flexible Procedure
Changes to the procurement process will encourage innovative solutions to bids; the Competitive Flexible Procedure will help contractors and smaller businesses compete with more established companies.
The Bill will strengthen prompt payment; businesses throughout the public sector supply chain will receive payment within 30 days.
Lower thresholds for contracts
There will be new rules and procedures for central government departments and the wider public sector when selecting suppliers. As well as changes to rules for contracts above the threshold, there will be more provisions for smaller, below-threshold contracts in the new Bill.
A CHANGE FOR THE BETTER
Overall, the Procurement Bill is expected to simplify processes, increase transparency, promote social value, and create more opportunities for SMBs in public sector procurement. The bill sets a benchmark for the industry and aims to ensure that public money is used efficiently, while holding suppliers accountable for their performance.
Stronger exclusion grounds will enable the government to disqualify poorly performing suppliers and address ethical considerations, such as modern slavery in supply chains – a welcomed development.
Lyreco, as a leading provider of office supplies and workplace solutions, is set to support procurement teams and it’s suppliers through this transition by providing expertise in navigating the new procurement landscape.
We place social, environmental and cultural responsibilities at the centre of everything we do. Our aim is to embed social value and sustainable development throughout our working practices – we call this ‘Lyreco Goodness’. Importantly, we have the hard evidence to prove our positive impact, making it easier for public sector procurement teams to do their jobs.
Hopefully, the new Bill will show just how important social and environmental considerations are and encourage more suppliers to improve their practices.