The Procurement Bill - new national security provisions

The Procurement Bill will go through its final stages in the House of Commons on Tuesday, 13 June, introducing significant new provisions relating to national security.

In our most recent blog, we noted that the Procurement Bill is scheduled to go through its final stages in the House of Commons on Tuesday, 13 June. During that debate, the House will consider a number of amendments proposed by the Government, backbench MPs and the Labour Party. The main subject matter of those amendments relates to national security and, in particular, the ability of Ministers to debar firms that pose a risk to national security from bidding for public contracts.

By way of background, shortly after the Bill passed its previous stage in the Commons, a cross-party group of bench MPs tabled a series of amendments. The thrust of these was to require the removal from the public sector supply chain surveillance equipment from Chinese companies, require Ministerial approval for the award of contracts to suppliers that posed a risk to national security, and establish a Procurement Security Commissioner to input to that list.

The Government has responded to those amendments by proposing its own changes to address those concerns and to implement the MPs' proposals. The centrepiece of the Government's proposals is the power for Ministers to debar suppliers from certain types of public contract where Ministers consider the supplier or its controllers pose a threat to the national security of the United Kingdom. So, Ministers could debar a supplier from procurements for particular types of goods or service, from particular contracting authorities, or to be performed at particular locations.

Once on the debarment list, the supplier will automatically be excluded from future contracts of that type. They are also liable to have existing contracts terminated. In that case, under the proposed amendments contracting authorities will only be able to terminate those contracts after they have notified Ministers of their intention to do so. That is not a requirement to seek permission, but merely a requirement to give notice centrally.

Alongside those changes, the Government also announced that it would establish a new National Security Unit for Procurement, that will investigate suppliers who may pose a risk to national security, and assess whether companies should be barred from public procurements. The Government stated it would also publish a timeline for the removal of surveillance equipment produced by companies subject to China’s National Intelligence Law from sensitive central government sites.

The Government's approach has been praised by the MPs that brought the original amendments, and we expect that those amendments will be withdrawn before or during the debate.

Outside the national security sphere, the Government has proposed a further series of clarificatory amendments to the Bill. The most significant of these is a new clause requiring contracting authorities to keep records of procurements and material decisions until the earlier of any decision not to award a contract or three years after its award. This includes a requirement to keep a record of any communication with suppliers before the contract is entered into.

These Government amendments are almost certain to pass; less certain are those proposed by the Labour Party. It has suggested a series of amendments on tax transparency, greater scrutiny of outsourcing of public services, human rights, declarations of personal financial interests, workers' rights and sanctions breaches. While those amendments are unlikely to pass, they do give indication of the priorities of any future Labour government in the field of public procurement and could be the subject of future changes.

The Government's latest changes to the Procurement Bill introduce significant new powers in relation to national security. In particular, the Government will have the power to debar suppliers judged to be a national security risk from certain types of contract. This will be supplemented by the creation of a new National Security Unit for Procurement in the Cabinet Office to support that process.

We expect the Bill to be passed by the UK Parliament before its summer recess on 20 July 2023 and enter into force in Autumn 2024. To support public bodies, suppliers and their advisers navigate the Procurement Act, we will shortly launch our procurement reform page. This will bring together expert commentary, insight and tools to help make sense of the changes and how they will impact your organisation.