Procurement Act 2023

As of 24 February 2025, significant changes came into force which will transform the legal framework for procurement of construction projects in the UK under the long anticipated Procurement Act 2023 (Act). This article looks at some of the key changes that the industry needs to be aware of.

(1) Streamlined Procurement: New procedures under the Procurement Act

The procurement procedures originally established by the Public Contract Regulations 2015 (PCR) are simplified quite considerably by the new Act, which removes the prescriptive rules on how procurement should be conducted and simply replaces them with three broad approaches, namely:

• an open procedure, where there is a single stage procedure without restriction on the number of tenderers;

• the competitive flexible procedure, where a contracting authority is now permitted to design a form of procedure that works best for its objectives in line with the procurement principles; and

• direct award, which is available in a number of specifically permitted instances.

The open procedure is the only “legislative procedure” i.e. it is the only one with a prescribed form; this single stage procedure bears the greatest resemblance to the open procedure we are familiar with under the current PCR.

In contrast, the competitive flexible procedure is perhaps the most notable shift away from the previous position. Introduced to allow contracting authorities to design processes which best suit their needs, the procedure is evidence of the policy desire to shift away from standardised procedures which may not always best achieve a contracting authority’s aims. 

For the construction industry, this means that we could see those contracting authorities who are brave enough to depart from the old-style procedures to adopt procurement strategies better tailored to their specific projects, and which better fit their needs.

However, the trade off with this kind of flexibility is that it places a burden on contracting authorities to ensure that whatever process they do design, they are complying with the procurement objectives (see section 12 of the new Act). Notably this includes ensuring that procedures are designed in such a way that they are proportional, and consistent with the contracting authority’s duties to act with integrity and in a way which treats suppliers the same (unless a difference in treatment is justified). So, whilst flexibility is available, the burdens associated with departing from the established ways of working may mean that that we see the changes to procurement procedures being adopted gradually and in a risk averse way.

Additionally, with the increased transparency requirements of the new regime, contracting authorities will still have to comply with all of the “procedural” requirements, and decision making will still be subject to robust scrutiny, notwithstanding the greater flexibilities reserved to them. Confidence to develop new ways of working will be needed to ensure that contracting authorities are not tempted to simply replicate the procedures under the old PCR rules, which will be especially tempting in competitive markets within the construction industry where there is a significant risk of challenge. 

Key actions arising for procurement teams in the construction industry are:

• participate fully in any pre-market engagement activities a contracting authority may undertake to help shape processes for future projects; and

• look out for new procurement procedures introduced under the rules and make sure that procurement documents (such as ITTs) are reviewed early in the process so that bids are compliant with the adopted procedure;

(2) Frameworks & dynamic markets: Expanding opportunities for suppliers

Frameworks are an integral part of the procurement landscape in construction and are used with increasing frequency for the award of public contracts. 

They are popular with contracting authorities because they establish an ongoing relationship with suppliers through a single tendering process, can be used to deliver multiple projects or works packages and can also deliver economies of scale.

However, there are some notable draw backs which the new Act aims to address. These include:

• competition for call-off contracts is limited to those suppliers on the framework, limiting the market for individual opportunities and presenting a barrier to new entrants.

• the rules governing the award and form of call-off contracts under dynamic purchasing systems and frameworks have not always been well understood or applied;

• direct award procedures under frameworks may be used inappropriately and narrow competition, and

• there are limited transparency requirements for the award of call-off contracts under the PCR i.e. the existing regime.

The biggest change is that the new Act in relation to frameworks introduced a new concept of “open frameworks” which address the issue of markets being closed. For the first time, the rules permit contracting authorities to appoint new suppliers to a framework during its life by allowing it to open it up at least twice during its term. Although the maximum duration of a framework remains 4 years (unless justified for a longer term), the maximum term for an open framework is 8 years. 

Whereas frameworks are set up with a single formal procurement procedure to admit a limited number of suppliers on a competed basis and are then static (unless they are now open frameworks), applications for membership of a dynamic market are open throughout their term and there is no limit to the number of suppliers. Conditions for membership must be a proportionate means of ensuring that members have the legal and financial capability to perform contracts awarded by reference to membership of the market and have the technical ability to perform such contracts.

To award contracts to dynamic markets, contracting authorities then run a competitive flexible procedure. Contracting authorities can limit participation in that procedure to members of the market (who are essentially pre-qualified by their membership of the market) but crucially they do have to publish a tender notice to the market at large so that other suppliers in the marketplace can decide whether they want to apply for membership. 

These changes create exciting new opportunities for suppliers seeking market entry, either where they are looking to get access to existing frameworks if they missed out during the original procurement or by allowing them an opportunity to seek membership of a dynamic market where a relevant opportunity is advertised. 

The transparency rules about the award of contracts under frameworks and dynamic markets have also changed substantially to address the lack of information published under the current regime. The post tender requirements for call-offs and contracts awarded via dynamic markets has been brought into line with normal contracts, so contract award notices must be published before the contract is entered into, and once it is entered into, a contract details notice also has to be published. These reforms are aimed at increasing transparency to stop the overuse or abuse of frameworks and bad practice, but will increase the administrative burden on authorities. 

Key actions arising for procurement teams in the construction industry are:

• take advantage of the enhanced transparency rules to understand what contracts are being awarded and via what methods to identify target market opportunities where membership can deliver opportunities, and

• develop and maintain good market awareness of markets and frameworks to ensure they are best placed to capitalise on the advertising of new opportunities or the opening up of established frameworks.

(3) Poor performance, exclusions and the new debarment list

The debarment list is a new concept under the new Act, which is a list kept by a Minister of excluded and excludable suppliers. Once a supplier has been added to the list following an appropriate investigation, the Minister can either:

• if a mandatory exclusion ground applies, exclude a particular supplier from all future procurements automatically for a specified period of time; or

• if a discretionary ground applies, mandate that authorities should be exercising their discretion as to whether to exclude a particular supplier in all future procurements.

The debarment list is part of the drive within the new Act to hold suppliers to account for poor performance of public contracts once the procurement process is ended. It goes hand in hand with changes made to the exclusion grounds themselves, with perhaps the most impactful relating to changes made to the discretionary ground relating to poor performance of suppliers.

Poor supplier performance has often been discussed as a ground for exclusion but whereas the old regime applied a relatively high threshold before poor performance could be grounds for excluding a tenderer’s bid (such as having a contract terminated or some equivalent serious sanction), the new Act makes it clear that the right to exclude can be engaged merely where the supplier,

"has not performed to the authority’s satisfaction, was given proper opportunity to improve performance and failed to do so.” 

This has potentially serious ramifications because no actual breach of contract (serious or otherwise) needs to be established so the threshold needed to exclude a supplier under this ground is much lower. As a result of these obligations, suppliers are likely to resist fiercely allegations of poor performance in current contracts to avoid the consequences of this ground being applied in future procurements. 

Because of the new transparency requirements about provider performance, poor performance by a supplier is also much more likely to be in the public domain, for example, contracting authorities are now required to publish KPIs and to review a supplier’s performance at least every 12 months during a contract, and on its termination, and publish that information. Additionally, if there is a breach of a publicly procured contract, or again the authority considers that the supplier has not performed to its satisfaction and has failed to improve having been given an opportunity to do so, the same section requires a contracting authority to publish that information.

All of these measures together are intended to enhance the accountability of suppliers to the public sector, including those in the construction industry. Whilst proper performance of contracts is always a high priority, these rules could result in particularly draconian ramifications from a failure to perform an individual contract. 

Key actions arising for procurement teams in the construction industry are:

• place renewed emphasis on contract management and delivery of KPIs; and

• ensure that if things go wrong, be proactive in addressing poor performance with contracting authorities and undertake a lessons learned process to demonstrate that problems are properly addressed and unlikely to recur

(4) Tender assessments & feedback: Understanding the new rules

The gamut of remedies to an aggrieved supplier under the new Act remains much the same as under the PCR, with pre and post contractual remedies including pre-contract orders of the court to set aside a decision, damages and the “set aside” remedy (previously known as “ineffectiveness”) available in certain circumstances where the contract has been entered into. 

The (in)famous 30 day limitation period also remains, with time starting to run from the point at which the supplier knew or ought to have known about the circumstances giving rise to the claim, and the automatic suspension operates in much the same way.

Arguably the greater transparency requirements under the new regime give greater opportunity for suppliers to seek remedy pre-contract award since more information is in the public domain.

This move towards greater transparency finds expression in the adjusted rules around “assessment summaries” which are broadly comparable to the PCR standstill letters. Section 50 of the Act simply refers to providing “information” about the assessment of the tender and also the most advantageous tender, however, the more detailed requirements are set out in the secondary legislation – the Procurement Regulations 2024. These confirm that authorities must include, among other things:

the award criteria set out in full or a summary of these, 

• a summary of the assessment methodology,

• detailed reasons, with reference to all relevant information set out in the tender, for— 

  • the score against each award criterion (“A”), 

  • the reasons why the tender was not given the score immediately above A for that criterion (except where the tender was given the highest score), and 

  • in a case where a criterion is arranged into different strands for assessment, a explanation of how the tender was assessed against each of those different strands,

• the total score, and any sub-total scores, for the tender against all of the award criteria, and

• if it is an unsuccessful tender, the same information in respect of the Most Advantageous Tender. 

The full breakdown of both sets of scores is a development of the case law about disclosure but should also put to bed the disputes about pre-action disclosure seen so often in procurement cases. 

These changes should allow construction suppliers to better understand their performance in procurement exercises undertaken and to learn from feedback. The remedies regime remains an effective tool for challenge where exercises have not been undertaken properly and suppliers can be reassured that the remedies available have not been watered down.

Key action arising for procurement teams in the construction industry are:

• scrutinize the information provided and learn from feedback. Use this to create ongoing improvement.

(5) Transparency & notices: What construction suppliers need to know

Increased transparency is a key tenant of the new Act.

Suppliers should particularly familiarise themselves with new notices and publication requirements to access new opportunities. Many of the key notices we are familiar with under the PCR are replicated under the new Act, albeit adopting different language, however, the number of notices has certainly increased. Of particular interest to planning for construction projects is the new pipeline notice.

Key actions arising for procurement teams in the construction industry are:

• review the new requirements; and

• ensure that alerts are set up and appropriately tailored so that when relevant notices are published, these are seen and responded to.

Opportunities & challenges: Navigating the new procurement landscape

The new Act clearly brings opportunities for the construction industry.

This is an entirely new regulatory environment that suppliers to the public sector need to navigate and suppliers will need to invest into learning to realise the benefits of increased flexibility and transparency.