Procurement Digest: New UK procurement rules commence 28 October, and other updates

The countdown is on. The UK Government has announced it is working towards a 'go-live' date for the Procurement Act 2023 (the "Act") of 28 October 2024. New guidance continues to be published regularly, with the most recent guidance documents released on 2 July.

The announcement follows the Act's receipt of Royal Assent in October 2023. Since then there has been a flurry of statutory instruments and guidance, and user-friendly training modules have been published as the UK Government continues to take steps towards its post-Brexit overhaul of the law of public procurement. We have summarised the key developments below.

Procurement Regulations 2024

On 22 March, the UK Government published its response to the second of two consultations in relation to two sets of draft regulations: the draft Procurement (Transparency) Regulations and the draft Procurement Act 2023 (Miscellaneous Provisions) Regulations 2024.

The two were subsequently combined as the Procurement Regulations 2024 (the "2024 Regulations") which were made on 22 May 2024 and will come into force at the same time as the Act. The 2024 Regulations make provision, in particular, in relation to the extensive list of information on public contracts and opportunities which must be published on the new central digital platform that will replace the current "Find a Tender" service.

Some matters (such as exemptions for contract awards to controlled entities) have been held over for later draft regulations, which have been delayed by the 2024 general election but will hopefully be on the incoming government's to-do list. Otherwise, the only substantive changes to the earlier drafts are to limit the requirement to name unsuccessful bidders in a contract award notice to procurements which are over £5 million, to simplify the information that must be included in an assessment summary, and to require tender notices to indicate the suitability of the procurement for SMEs and voluntary, community and social enterprises.

Guidance documents

In a number of releases since 22 March, the UK Government has published several pieces of guidance on the Act which cover (among other things):

The definitions of a "contracting authority" and "covered procurements" under the Act;
Valuation of contracts;
Mixed procurement involving a combination of different types of contract, such as works and goods, or concessions and utilities;
Exempted contracts that do not need to be procured under the Act;
Thresholds – which, in line with the UK's treaty commitments, are broadly the same as under existing rules;
Pipeline and planned procurement notices – including when contracting authorities are required to publish pipeline notices (with the first required to be published by 26 May 2025), and best practice for both;
Preliminary market engagement;
Direct awards;
The procurement procedures;
Modifying procurements;
Time periods for procurement exercises; and
Assessing tenders.

Transitional implementation

The Procurement Act 2023 (Commencement No. 3 and Transitional and Saving Provisions) Regulations 2024 confirms that any procurements commenced on or after 28 October 2024 (i.e. where the relevant notice is published or the contract is advertised on or after that date, or where a direct award is made on or after that date) will be regulated by the Act alone.

The existing procurement regulations will therefore continue to apply to procurements commenced before that date, and to contracts awarded pursuant to those procurements until they expire – including, presumably, with respect to modifications to those awarded contracts. It therefore appears that the old public procurement regulations will continue to be relevant for several years yet.

Further clarity on devolved Scottish procurements

The 2024 Regulations will amend the Act to add a new s.115A, which will make it clear that where a Scottish devolved authority makes use of a "reserved procurement arrangement" (which is to say a framework, dynamic market, or joint purchasing arrangement, that is not awarded by a devolved authority) the Act will apply to that procedure and to any contract awarded under it. For joint purchasing with non-devolved authorities the Act will apply in its entirety, whilst for frameworks and dynamic markets it will apply subject to a number of caveats and modifications.

This will clearly be of particular relevance to devolved contracting authorities that intend to make use of UK-wide frameworks and similar arrangements.

Knowledge Drops launched

In December 2023, the UK Government launched three training modules – or "Knowledge Drops" – on the new regime, tailored to procurement practitioners in contracting authorities and suppliers (including voluntary, community and social enterprise suppliers). These modules can be found here. The modules were accompanied by fact sheets which explain variations in how the new rules will apply in Wales and Northern Ireland, as well as in relation to utilities, light touch contracts, defence and security contracts, concessions and schools.

Still to come

The remainder of the guidance on the Act had been expected to be available by June 2024, to allow contracting authorities to continue their preparations in advance of full commencement on 28 October. That has been delayed by the 2024 general election and a number of pieces of guidance are still to be published, including on key topics like exclusion, debarment and contract award.

With the making of the 2024 Regulations, and the expected publication of further draft regulations on the "in-house" (or "Teckal") and other exemptions, authorities and suppliers ought soon to have the full picture of how UK public procurement will work going forward.

Other procurement updates

In other news:

On 25 March the UK Government issued a new Procurement Policy Note on the use of Artificial Intelligence in procurement processes, including optional questions requiring bidders to disclose where AI has been used in preparing their bid to control for potential "hallucinations" where generative AI invents facts – clearly a risk both to the reliability of tender submissions and to the fairness of procurement processes (although it is difficult to see how that differs from human bid writers inventing facts to strengthen a bid!).
On 26 March the European Commission dropped its investigation of a Chinese business under the Foreign Subsidies Regulation, the first such investigation under the FSR into whether a tenderer was in receipt of foreign subsidies that might distort the fairness of the procurement procedure, after the business withdrew from a public procurement by the Bulgarian Ministry of Transport and Communications for electric trains.
On 27 March the UK Government issued another new PPN setting out changes to the standard Selection Questionnaire (the changes are primarily of relevance to central government bodies but also provide some further clarity in respect of Russian and Belarusian tenders).
On 28 March 2024 the Scottish Government published its procurement strategy for 2024 to 2028, setting out how it plans to carry out its own regulated procurements during that period (and not particularly hinting that reform to procurement legislation north of the border is imminent).
On 5 April the High Court held in Working on Wellbeing (t/a Optima Health) v Secretary of State that the Department for Work and Pensions had acted lawfully by excluding a tenderer who submitted a pricing schedule that breached the contracting authority's stated maximum prices, in circumstances where their exclusion (as a non-compliant bid) left only one tenderer in the running – Mr Justice Freedman held that the DWP could not have afforded the excluded bidder any more of an opportunity than it did to clarify its prices without breaching the principles of transparency and equal treatment. Exceeding the maximum prices by £600 therefore cost the unsuccessful tenderer a £3m per annum contract.
On 12 April the Advocate General to the European Court of Justice in NFS v Ministry of Education and Sport of the Slovak Republic issued a preliminary ruling (which is not binding on the Court but is likely to be followed) clarifying that a public works contract is not created merely where the "contractor" will forfeit a benefit (such as a grant) if it does not carry out works and requires the presence of a right to specific performance, nor where the specification is limited to the usual requirements of a tenant but does not significantly constrain the architectural design, nor where the benefit to the contracting authority is not a direct economic benefit (i.e. ownership of the asset). At time of writing the court's own judgment is still awaited.
On 28 June the Court of Session handed down its judgment in Amey OW Limited v North Lanarkshire Council, which provides some more clarity on the approach the Scottish courts will take to lifting (or not lifting) the automatic suspension and how this may slightly differ from the approach in the English courts. It remains the case that it is easier to get the suspension lifted in Scotland than elsewhere in the UK.
On the same day the Court of Appeal handed down its judgment in Lancashire County Council v Brookhouse Group Limited, which clarifies that the 6 month limitation period for bringing an ineffectiveness challenge against a contract awarded without a competitive process, cannot be limited by informing an affected economic operator directly, only by publishing a contract award notice to the world at large.

If you would like to discuss anything in this update or how it affects your organisation, please contact Jamie Dunne, Charles Livingstone, or your usual Brodies contact.