The Procurement Act 2023: Does it have real teeth?

The Procurement Act of 2023 can potentially bring much-needed change to public procurement in the UK. It has, within it, the mechanisms to increase competitiveness, widen the opportunities for businesses to supply government and, in turn, drive innovation, deliver better outcomes and improve transparency.

The revised legislation is undoubtedly the correct direction of travel, with these objectives being both laudable and necessary. However, recent years have damaged the public perception of government procurement. Covid ‘fast-track’ VIP lanes are currently being investigated by the Covid Enquiry, whilst the role of suppliers such as Fujitsu is also being called into question, who have offered apologies regarding the Post Office Horizon IT system, that resulted in hundreds of sub-postmasters losing their reputation, livelihoods, and in some cases their freedom.

Additionally, Fujitsu has informed the Cabinet Office that they will ‘voluntarily’ not be tendering for any further government contracts until the Post Office scandal is resolved, though they reserve the right to reapply for the Horizon contract when it comes up for renewal. 

As a result of these investigations and others, public procurement is popping up in the news cycle more than ever, as questions are asked about how contracts are fairly awarded, and whether public sector buyers have the contractual mechanisms to respond to the poor performance of suppliers and unexpected rising costs. Campaigning organisations such as the Good Law Project are testing several questionable procurements and contract awards in our courts. The general public is increasingly aware that a culture of ‘pork barrel politics’ has infected our legislators and is demanding much closer scrutiny and probity. 

However, the high-profile cases that come to the public’s attention are only a fraction of the thousands of purchases that public sector procurement teams make every day. And the vast majority of these procurements are conducted by procurement professionals who are scrupulously fair, and take considerable pride in delivering equitable, honest and legal procurement. The new Procurement Act should facilitate this further, and empower improved processes and outcomes.

When looking at the Act, it’s helpfully broken up into four key objectives. So does the Act do enough to meet each objective?

Objective one: Creating a simpler and more flexible commercial system that better meets our country’s needs while remaining compliant with our international obligations

The Act promises a new central digital platform for suppliers, which in turn is designed to deliver a simplified bidding process for both suppliers and buyers alike. Whilst laudable, whether these systems deliver to their aims remains to be seen. 

Anyone who works with the current tender platforms and their many idiosyncrasies will attest that this goal would be a welcome and much-needed change. However, solutions that are universally simple to use on the front-end have a habit of spiralling into enormous complexity in the back end. Procurement is complex - especially in the realm of complex digital solutions where the line between product and service is notoriously blurry.  

Simplicity for flexibility and simplicity's sake is arguably useless. We want flexibility and simplicity because it’ll make the system easier to navigate, lessen the resource costs on both the public purse and private companies, and deliver better outcomes for the public. Unless there are measures in place to ascertain whether the system is more flexible and simpler, outside of anecdotal remarks, and this is having the desired impact, then ultimately, we may not benefit from meeting this objective.

Objective two: 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

This objective is, again, on the right track. Smaller businesses can deliver exceptional value, be nimble and embrace newer technologies, which often allows for more innovative solutions to arise. 

Clearly, this is recognised by the government as the Act mandates a new duty be placed on contracting authorities to specifically account for the potential barriers to entry for smaller suppliers. Another provision of the Act is to ensure that 30-day payment terms are available on a broader range of contracts. This opens up the arena for smaller players to enter because, unlike the multinational corporations of the world, smaller players need prompt payment to maintain positive cash flow and keep the lights on. These are positive steps and should help smaller suppliers access the procurement ecosystem. 

Objective three: Taking tougher action on underperforming suppliers and excluding suppliers who pose unacceptable risks

An important part of this legislation is the publishing of KPIs with regard to the contract. The wording here is, unfortunately, left relatively vague, with the KPIs themselves being up to the discretion of the contracting authority. The legislation also allows for no KPIs to be set if it’s deemed that they wouldn’t be an appropriate marker of progress on a particular project. The legislation further mandates the creation of a central debarment list to which companies may be added so they are prevented from applying for public contracts for a period of time, which feels like a positive step. 

However, we don’t have firm details on the infrastructure behind these new processes. Where will these KPIs be published? In what way? In what format? How much discretion is involved in setting KPIs? Is there any oversight on them before the project goes live? Can they be petitioned to be made more stringent or relaxed? Can the value of the contract be clawed back? Is there a mechanism to oblige reporting of poor performance and inclusion on the central disbarment list?

Unfortunately, with regard to KPIs, there will always be some tension between their achievability and the effectiveness of them. No supplier will agree to overly stringent KPIs for fear of falling foul of them, but they must also be suitably challenging to be valuable. While the goal itself and underlying mechanisms are indeed positive developments, they will live and die by their implementation.

Objective four: Embedding transparency throughout the commercial lifecycle so that the spending of taxpayers’ money can be properly scrutinised

Ultimately this objective is married to the previous one; transparency is, after all, intrinsically linked to accountability. You cannot have the latter without the former. Transparency is important because the public need to know where their tax money is going, and whether they are seeing a return on investment for that money. The key fear here is underperformance, which is relative to expectation, and KPIs will set that expectation. The same questions arise, though, what infrastructure is needed to ensure this goal is met? How will this be measured? And what material difference will this make for the public?

In summary, in principle, we should welcome these changes. They are on the right track; they address areas of legislation that desperately need expanding. We all hope that when the Procurement Act 2023 comes into force in October of this year, it will solve these issues, but that will come down to implementation.

As the Cabinet Office continues to work on the secondary legislation to underpin these changes, I hope to see a real focus on implementation, setting clear expectations and air-tight frameworks that help to deliver the quality of service that the UK public deserves.