Procurement Act 2023 – where are we now? Part 1

We are very much into the countdown of the Procurement Act 2023 coming into force, which the Government has announced will “go live” on 28 October 2024. Various guidance documents have been released by the Government and we expect to have a full set by the end of June, with more e-learning modules becoming available.  The Government has been clear that the Procurement Act is designed to make a simpler and more flexible commercial system and provide greater transparency, but what does the guidance released so far tell us? Between now and October we will be running a series of bulletins and articles to run through the key changes that the Procurement Act 2023 will bring to the procurement landscape. In our first article we look at the new National Procurement Policy Statement, who and what will be caught by the Procurement Act and the guidance around the valuation of contracts.

Procurement – National Procurement Policy Statement – practical impact

A new feature of the Procurement Act 2023 (PA23) is that a Contracting Authority (subject to exceptions including private utilities and contracts awarded under a framework or dynamic market) must “have regard” to the policy objectives contained within the National Procurement Policy Statement (NPPS) that is current at the time a procurement is being carried out (s13 of the PA23).  This places a statutory requirement upon a Contracting Authority to have regard to how procurements can contribute to achieving wider government policy objectives. However, whilst a Contracting Authority is obliged to consider whether and how to address the policies of the NPPS in a manner that is appropriate, proportionate, and relevant, there is no obligation to address the policies. A Contracting Authority should consider its record keeping obligations under section 98 of the PA23 where the NPPS impacts a “material decision made for the purpose of awarding or entering into a public contract”. It is also good practice for a Contracting Authority to document its decision-making process to demonstrate compliance with its duties under the PC23, including the regard that it has had to the NPPS. A breach of the duty to have regard to the NPPS is not enforceable through civil proceedings under the specific provisions in Part 9 of the PA23, but non-compliance could be considered either through the judicial review process or could trigger an investigation by an appropriate authority under Part 10 of the PA23.

Procurement – “Contracting Authorities “and “Covered Procurements” – who and what will be caught?

The Government has indicated that the features of a Contracting Authority caught by public procurement rules, are intended to remain the same under the Procurement Act 2023 (PA23) i.e. the same entities that were subject to Public Contract Regulations 2015 (PCR) will subject to the PA23. In the case of public authority companies (or other corporate bodies incorporated by an authority) the test to determine whether it will be a Public Authority and as such a Contracting Authority for the purposes of the PA23 includes familiar concepts from the former definition of a “body governed by public law”, although the test has been somewhat simplified. A Public Authority under PA23 includes a legal person that does not operate on a commercial basis and is:

(a) wholly or mainly funded out of public funds; or

(b) subject to public authority oversight.

We are provided with examples of factors to be taken into account in determining whether a legal person operates on a commercial basis and these reflect the familiar factors currently considered following EU caselaw in identifying a “body governed by public law”, namely: financial independence; whether contracts are entered into by the legal person are on more favourable terms because of its association with a public authority; and whether the person operates on a market that is subject to fair and effective competition. There is no repetition of the PCR requirement for a legal person to be “established in the general interest” and whilst the list of factors is not exhaustive, going forward the emphasis will likely be on the operations of a legal person day to day, rather than the original intention for it on establishment.

There is generally little practical difference between the types of procurement covered by the existing regime and PA23.

Procurement Act 2023 guidance – valuation of contracts

Whilst the definitions and concepts on valuation in the Procurement Act 2023 (PA23) are largely familiar and can be found in the existing procurement regime, there are a few modifications and differences. Section 4 of the PA23 requires Contacting Authorities to estimate the value of a contract in accordance with the methodology set out in schedule 3. The Contracting Authority must not exercise a discretion in connection with estimating the value of a contract with a view to securing that any requirement of the PA23 does not apply to the contract. Under Schedule 3:

• As a general rule, a Contracting Authority must estimate the value of a contract as the maximum amount it could expect to pay under the contract (including, where applicable, amounts already paid).A Contracting Authority must take into account all of the facts which are material to the estimate and available to the authority at the time it makes the estimate. :
• Schedule 3 sets out examples of amounts that the Contracting Authority could expect to pay which include, the value of a supply made other than for payment, and payment under options in the contract including extensions and renewals. There are separate examples for concession contracts.
• There are further anti-avoidance provisions in Schedule 3 which require a Contracting Authority to value all contracts together where the supplies under each contract could reasonably be supplied under a single contract.
• Where estimation of a contract value is not possible, the contract is deemed to be above threshold (Schedule 3 para 5).
• The value of a framework must be estimated as the sum of the estimated values of all contracts that have or may be awarded in accordance with that framework.