UK Government sets out proposed changes to public procurement rules, and other procurement news

The UK Government has published its revised proposals for reforms to public procurement rules, following a consultation on earlier proposals which we discussed in more detail here.

The proposed reforms

We covered the key proposed reforms in our previous blog, but there have been some changes following the consultation:

• The proposal to consolidate all procurement legislation into a single set of "simple, modern procedures" will be subject to the retention of some of the existing flexibilities within the utilities rules and to the creation of exemptions for certain defence and security contracts;
• The 'Light Touch Regime' will be retained, with some modifications;
• There will be a new "exclusions framework" to provide a simpler and more focused regime for the exclusion of suppliers who are guilty of fraud, corruption, misconduct or poor performance – this will replace the current rules, which impose a significant degree of responsibility on contracting authorities to consider and apply exclusion rules on a case-by-case basis;
• By contrast, transparency requirements will become subject to more case-by-case proportionality assessments, rather than general transparency rules that apply across the board;
• The proposal to cap the level of damages available to successful challengers of procurement processes has been dropped; and
• There will be a new duty on contracting authorities to implement recommendations made by a new "Procurement Review Unit" within the Cabinet Office where it has identified non-compliance with procurement law.

The overarching themes – making public procurement more streamlined, through fewer and less complex procedural rules, greater use of digital platforms and more transparency – all remain, as do proposals to allow greater use of economic, social and environmental criteria through an objective of "maximising public benefit".

The response paper indicates that a new regime is unlikely to be in force before 2023 at the earliest.

The proposed reforms will apply primarily to public bodies (and utilities) in England, but the UK Government is also in discussions with the Welsh Government and Northern Ireland Executive about the rules extending to those jurisdictions (which are currently covered by the same Regulations as England). There are no plans for the rules to extend to Scotland, though the new regime will apply to procurements in Scotland currently covered by the UK Regulations – i.e. by authorities with reserved functions, such as the Ministry of Defence.

Meanwhile, in Scotland

As we noted in our previous blog, public procurement is a devolved matter and there is no suggestion from the Scottish Government that it will sign on to the reforms the UK Government is proposing, nor indeed that it will make its own.

That does not mean that procurement rules in Scotland are standing still. In October the Scottish Government announced that "wherever relevant and proportionate, companies bidding to win Scottish Government contracts will have to pay the real Living Wage in performance of the contract". This inclusion of the real Living Wage in public contracts is being promoted to other contracting authorities in Scotland. The media coverage would give the impression that payment of the real Living Wage will now be a mandatory condition of all Scottish public sector contracts. However, the reality is a good deal more complicated than that.

The UK's departure from the EU means that freedom of movement rules no longer apply, and that removes some of the previous barriers to mandating wage levels in public contracts, but it does not remove all of them. The retained public procurement rules still contain a prohibition on non-discrimination between bidders, and also require that obligations imposed on suppliers have a clear link to the subject matter of the contract. These restrictions embody EU law principles, and so might be more likely to stay in place in Scotland than in England, given the Scottish Government's stated policy of 'keeping pace' with EU law. In any event, these principles (to the extent bidders in other countries might be interested in a contract) also reflect the equal access rules to which the UK is bound under the UK-EU Trade and Cooperation Agreement and the WTO's Agreement on Government Procurement ("GPA"). In combination, these restrictions mean that a policy of requiring contractors to pay the real Living Wage will still have to involve a case-by-case assessment if it is to be implemented lawfully. The words "relevant and proportionate" in the quote above therefore contain a multitude of potential pitfalls.

Intra-UK divergence

The greater ability of governments north and south of the border to adopt new post-Brexit approaches to procurement appears likely to result in divergence between the Scottish and "rUK" procurement regimes, if not a new divergence among the English, Welsh and Northern Irish positions.

Further complication will result where this divergence means procurements in Scotland having to follow very different approaches depending on whether it is a devolved body or a UK Government body procuring the goods, services or works (and the UK Government has stated an intention to spend more money directly in Scotland). Scottish suppliers in particular may therefore find themselves increasingly having to deal with two different procurement regimes.

New year, new thresholds

A pre-Christmas update on procurement law would be remiss if it failed to mention the incoming changes to procurement thresholds.

From 1 January 2022 the thresholds (under both the Scottish and RUK regulations) will be:

Because the thresholds are now inclusive of VAT (in order to implement the UK's obligations under the GPA), the practical effect in most cases will actually be to lower the thresholds so more contracts will be caught rather than fewer, even before taking into account the recent inflation headlines.

There will be a of changes lot for suppliers and authorities alike to adapt to in 2022. Please don't hesitate to get in touch if we can assist with any procurement matters.