Transforming public sector procurement in UK

Answer

The Procurement Act 2023 (the act) marks a significant shift in the UK’s approach to public sector procurement, bringing in new standards for transparency, competition and innovation. As public procurement accounts for a major portion of the UK’s annual expenditure, the act has the potential to reshape how suppliers and public authorities collaborate on delivering public services. Here’s an in-depth look at what the act entails and what it means for the future of procurement in the UK.

Why was the Procurement Act 2023 introduced?

The act reflects the UK government’s goal to reform previous procurement frameworks inherited from the European Union. By establishing a regulatory structure tailored to national priorities, the act aims to create a more efficient, accountable and socially responsible procurement process. With a focus on innovation, value for money and reducing administrative burdens, the act represents a streamlined, forward-thinking approach to public procurement.

In addition, it aligns with the UK’s emphasis on sustainability, social value, and inclusivity, meeting current public policy goals and addressing issues of ethical and sustainable procurement. For the UK’s public sector, it’s a chance to set a new standard in procurement practices that reflect broader social priorities.

Key changes and provisions of the act

The act introduces a series of reforms designed to make procurement processes more accessible and impactful for both contracting authorities and suppliers. Below are some of its most notable features.

Simplified procurement procedures

Under the new act, procurement processes will be streamlined, with a consolidated and flexible approach that replaces the complex, segmented procedures of the past. This change eliminates much of the previous complexity that was especially challenging for small and medium-sized enterprises (SMEs), making it easier for contracting authorities to manage procurement projects and increasing accessibility for smaller businesses.

Introducing the ‘most advantageous tender’ criteria

The act replaces the old ‘most economically advantageous tender’ standard with the ‘most advantageous tender’ (MAT) criteria, shifting the focus from cost to a broader set of considerations, including innovation, social value and sustainability. By emphasising the broader benefits a supplier can offer, contracting authorities are encouraged to take a more holistic view of tenders, considering not only financial efficiency, but also long-term social and environmental impacts. This shift is expected to benefit suppliers prioritising ethical practices and sustainable innovation.

Emphasis on transparency and accountability

Transparency is central to the act. Contracting authorities are now required to provide more detailed public reports on every stage of the procurement lifecycle, from initial selection to contract completion. This includes publishing key performance metrics and providing a clear rationale for award decisions, which ensures greater visibility and scrutiny.

For suppliers, this heightened transparency means clearer insights into contract expectations and outcomes, allowing them to understand evaluation processes and improve future bids. The act also emphasises accountability with enhanced review processes for unsuccessful bidders, fostering a competitive and fair bidding environment.

The ‘open contracting’ principle

One of the act’s foundational elements is the ‘open contracting’ principle, designed to promote open competition by encouraging public authorities to make as many opportunities as possible accessible to a broader pool of suppliers. While exceptions to this principle exist, it signals a strong shift toward inclusivity, particularly benefiting SMEs that have previously found it challenging to enter public sector markets.

For suppliers, this principle presents an opportunity to compete for contracts that may have previously been limited to larger, more established companies. The emphasis on open competition is expected to foster diversity and introduce fresh perspectives into public sector contracting.

Expanding access for SMEs

The act includes specific provisions aimed at reducing barriers for SMEs, recognising their potential to contribute innovative solutions and foster regional economic growth. With simplified pre-qualification processes and a reduction in compliance costs, SMEs can now engage with the public sector on a more level playing field.

This change supports the UK government’s ambition to increase SME participation in public procurement, reflecting a commitment to a diversified supply base that drives local economic development.

Implications for public authorities and suppliers

The act introduces substantial changes for both public authorities and suppliers:

• For public authorities, compliance with the act will mean integrating MAT criteria and embracing greater transparency in reporting, contract management, and performance evaluation. Authorities will need to balance cost effectiveness with factors like social value, which may require a shift in mindset and procedure.
• For suppliers, the act brings new opportunities and higher standards. Suppliers with a strong focus on sustainability, innovation and social responsibility stand to benefit, as these qualities align closely with the new MAT criteria. However, suppliers will also face increased scrutiny, requiring them to demonstrate robust compliance and an ability to deliver value beyond simple cost efficiency.

Challenges and considerations

While the act has been welcomed for its progressive aims, there are some anticipated challenges:

• Implementation complexity: the transition to the new standards may be challenging for some public authorities, as adapting to new reporting and evaluation criteria will likely require training and restructuring of processes.
• Balancing cost with broader objectives: the MAT criteria provides flexibility, but balancing innovation, social value and cost will require careful evaluation. Contracting authorities may face difficult decisions when assessing bids that are high in social or environmental value but also higher in cost.
• Compliance requirements for suppliers: The increased emphasis on transparency and accountability means suppliers, especially SMEs, will need to be diligent in meeting compliance standards. Some businesses may face additional reporting burdens, although the act does aim to minimise these requirements where possible.

Commercial insights and takeaways

For businesses looking to enter or expand in the public sector, the act provides a roadmap for strategic positioning:

• Opportunities for SMEs and innovative companies: with the increased focus on open competition and MAT criteria, SMEs and businesses with strong sustainability or innovation credentials are well positioned. Now is an ideal time for these businesses to develop expertise in the public procurement process.
• Strategic bidding is key: suppliers can benefit from adopting a more strategic approach to bidding, emphasising both cost effectiveness and broader benefits such as social impact and environmental stewardship.
• Compliance is non-negotiable: as the act prioritises transparency and accountability, suppliers must be prepared for thorough evaluations and public scrutiny. Adapting compliance practices to meet these new standards will be essential.

Conclusion

The Procurement Act 2023 is a major step forward in modernising the UK’s public procurement landscape. For suppliers, the act’s focus on transparency, competition and social value presents a unique opportunity to stand out by aligning with these priorities. The new criteria and open competition standards signal a public procurement environment where sustainability, innovation and accountability will be rewarded.

In this era of procurement, suppliers that adapt quickly to the new rules will be positioned to thrive. By aligning with the act’s focus on long-term value and positive societal impact, businesses can secure a competitive edge in a more transparent, fair and socially conscious public procurement market.

Gabriella Rasiah is a trainee solicitor at DWF Law LLP.