The Procurement Act has received Royal Assent

The Procurement Act received Royal Assent on Thursday, 26 October 2023, marking a significant milestone in the Government's procurement reforms. We comment on three areas of the Act where:

• there is a significant shift from the current approach (exclusions and debarment);
• reforms were introduced comparatively late in the legislative process (national security); and
• the position has not changed significantly (procurement challenges).

We will discuss exclusions and debarment and procurement challenges at our webinar on Wednesday, 15 November.

 

Exclusions and debarment

In its initial proposals on procurement law reform, the Government stated it wanted to:

• give buyers the tools to properly consider bidders' past performance and exclude them if they do not have the capability to deliver; and
• explore introducing a centrally managed debarment list.

In feedback on the proposals, suppliers raised concerns. They noted that exclusion for poor performance might deter them from taking on complex or risky contracts. Similarly, they thought that inclusion on the debarment list had the potential to bankrupt suppliers.

The approach to exclusion and debarment in the Act suggests that the Government did not give much weight to suppliers' concerns. The Act includes a plausible pathway for a supplier's poor performance under one contract to see it potentially excluded from further opportunities and risk having its existing contracts terminated. In that context, poor performance does not mean breaching the contract or not meeting agreed service levels. Rather, it simply means not performing the contract to the contracting authority's satisfaction and not fixing this when given the chance to do so.

Where that happens, the contracting authority must publish a notice alerting all other contracting authorities (and competitors) to the fact. The publication of a notice becomes a ground for excluding the supplier from any future procurement where the circumstances are continuing or likely to arise again. Similarly, the notice also becomes a justification for terminating the supplier's existing contracts, again where the circumstances leading to the initial notice are continuing or likely to arise again. In addition, the publication of a notice may also trigger an investigation by the Minister for the Cabinet Office to see whether the supplier should be added to the debarment list.

The practical effects of this tough new approach will not be seen for some time. Depending on how contracting authorities approach these new provisions, we may see suppliers taking an increasingly risk averse approach to contracting with UK public bodies.

 

National security

This concept was not mentioned in the Government’s proposal. However, the Procurement Bill included provisions that allowed contracting authorities to exclude suppliers, disregard tenders or terminate contracts on national security grounds.

The House of Commons strengthened these provisions. The changes allowed the Minister for the Cabinet Office to add suppliers to the debarment list if the supplier (or a connected person) is a risk to national security for a certain class of contracts. Once a on the list, the supplier is excluded from public contracts of that class.

Suppliers on the debarment list for national security grounds are also liable to have existing public contracts terminated. In addition, they face a formidable legal hurdle in seeking a court order for their removal from the list. Any challenger must show that the Minister made a material mistake in law when entering the supplier on the list.

To support this approach, the Government has committed to Parliament to establish a new National Security Unit for Procurement. This will keep under review suppliers who may pose a risk to national security, and assess whether companies should be barred from public procurements.

 

Remedies

 The Green Paper proposed some significant changes to procurement challenges, including:

• reforming court processes;
• investigating a tribunal system or independent contracting authority review;
• focusing remedies on pre-contractual measures; and
• capping the level of damages.

None of these proposals survived the initial consultation stage. The Government took forward only the proposal to change the test for lifting the automatic suspensions of contract awards in the case of challenges.

The Act now states that in considering whether to lift the automatic suspension, the court must consider:

• the public interest in, among other things:
  • the award of public contracts according to law; and
  • avoiding delay in the provision of goods, works or services in the challenged contract award;
• the interests of suppliers, including whether damages are an adequate remedy for the claimant; and
• any other matter that the court considers appropriate.

It remains to be seen whether the re-cast test will lead to the automatic suspension being retained in circumstances where it would have been lifted under the current test, or vice versa. Our view is that the new test is unlikely to make much difference compared to the current approach. Recent case law noted that damages will be an adequate remedy for the claimant in most cases, and that consideration is still a key part of the new test. We do not consider that the new test will see any reduction in contested applications to lift the automatic suspension. A contracting authority will normally want to enter into the new contract, especially if confident of its position.