The Procurement Bill (the “Bill”) has now progressed through the Committee stage of its review by the House of Lords and has been subject to a number of interesting amendments along the way. This article outlines some of the most important proposed changes.
Preliminary Market Engagement
Preliminary Market Engagement (PME) can be a very valuable tool in helping contracting authorities to better understand how to articulate their requirements and refine the structure of their procurement by leveraging early market insight from potential tenderers. However, PME is not always necessary or possible and is also not without risks – in particular that, having identified some attractive market offerings, the authority may over-specify its requirements in a way which unduly favours a narrower class of potential tenderers than is justifiable (i.e. those who have been involved with PME) or unintentionally excludes different and potentially better solutions.
The Procurement Bill already appears to provide more clarity than its predecessors on the role which PME should play in the procurement process. Rather than a broad reference to contracting authorities having a right to conduct PME with “a view to preparing the procurement and informing economic operators of their procurement plans and requirements” (as in the existing rules), the current draft of Section 15(1) of the Bill proposes a more targeted set of objectives of PME which may provide both authorities and bidders comfort when engaging in PME.
The importance that will be placed on PME going forward is further demonstrated through proposed changes to Section 16 of the Bill during its Committee stage review to require contracting authorities to either (1) issue a PME notice prior to issuing a tender notice or (2) provide reasons in the tender notice for why it elected not to do so. This “comply or explain” type wording is clearly intended to incentivise authorities to conduct PME or (at the very least) make sure they justify why it has been discounted (e.g. due to timing or other constraints).
There has been a recent rise in these kinds of “comply or explain” provisions in a variety of legal and regulatory contexts (from compliance with the UK Corporate Government Code to modern slavery). However, whilst PME has become increasingly common in procurement practice in recent years, particularly following encouragement in the Sourcing Playbook), this proposed requirement creates a further procedural hurdle for authorities, and a further public piece of information which an authority might later find quoted by at them if the procured contract faces difficulties in the future.
Most Advantageous Tender
Contracting authorities will be familiar with the idea of awarding contracts to the “most economically advantageous tender” as identified on the basis of the best price-quality ratio established by award criteria set by the relevant authority. The current procurement regime therefore draws a distinction between the authority’s ultimate objective (i.e. to procure something which best meets its requirements) and the mechanism for achieving it (i.e. assessment against award criteria) in order to determine the highest scoring bidder.
The Committee Stage draft of the Bill proposes to use a similar concept but would require an authority to award the contract not only with regard to which tender scored highest in accordance with the award criteria, but also which tender best meets the authority’s requirements. Whilst this appears to be pursuing a laudable aim – given that the real object of the procurement is to procure the good or service which best fits the authority’s requirements – there is a risk that the objective (i.e. procuring something which meets the authority’s requirements) and the mechanism for doing this (assessment against award criteria) have been conflated, and now have the potential to be at odds with each other. For example. it is not clear what an authority should do if the tender that best meets its requirements, and the tender that scores highest against the award criteria, are not the same tender. This places additional importance on the need for authorities to accurately and comprehensively identify their requirements at the outset of a process and to properly configure the award criteria to align with those requirements.
Debarment
One of the main significant changes proposed by the Bill is the concept of the debarment list. Being on the debarment list will prevent a supplier from being awarded any public contracts until such time as they are removed from the list. A supplier may be placed on the debarment list where a contracting authority excludes them from a procurement on the basis it is:
- an “excluded” supplier (i.e. a supplier to whom a mandatory exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence) or
- an “excludable” supplier (i.e. a supplier to whom a discretionary exclusion ground applies and the contracting authority considers there is a likelihood of reoccurrence)
and, following a referral to the appropriate authority, it is determined that they should be placed on the debarment list.
Section 27 of the Bill has been amended at Committee stage to require contracting authorities to establish whether a tenderer intends to sub-contract any part of the performance of the relevant contract and, if so, to seek to determine whether any of the intended sub-contractors are on the debarment list. Where this is the case, the contracting authority would then be required to allow the tenderer the opportunity to replace the relevant sub-contractor and, if they failed to do so, to exclude that tenderer.
Tenderers often rely on sub-contractors not only to perform the underlying obligations of the contract should their tender be successful, but also to demonstrate knowledge and experience which can be showcased in the tender, in order to demonstrate bid credibility and improve that tenderer’s opportunity to be selected to participate in the process, or put forward a higher quality bid. A particular issue with the proposed change is that it appears to start from a presumption that a list of sub-contractors will be known from the outset (or at least early on in the procurement process), whereas in practice tenderers may involve sub-contractors at any stage of the procurement process (or during the term of the contract).
The proposed drafting is also unclear in relation to when a request should be submitted or how far the contracting authority should take its investigation. It is also unclear what a contracting authority should do in the event that a tenderer has not determined the identity of its sub-contractors at the time of the request. However, more detail on debarment is expected in secondary legislation and guidance , which is being developed in parallel with the IT systems which will be needed to support this new centralised approach. So clarity may yet be provided on these apparent issues.
Changes/modifications
Changes or modification to contracts during their term is another area of the Bill which is likely to be heavily scrutinised due to its practical implications. When the Bill was introduced, it already included a number of enhanced transparency requirements for contract modifications when compared with the current regime. For example, as well as being required to publish a contract change notice in almost all cases (the circumstances for non-publication being very limited), contracting authorities were also required to publish the actual modification (or the contract as modified) where the relevant contract had an estimated value of more than £2 million.
This increase in transparency, whilst again having a laudable objective, seems likely to increase the risk of contracts being challenged during their term, particularly given that the ‘safe harbours’ under which modifications are permitted often contain elements of discretion/subjectivity that may be applied differently by different contracting authorities (and indeed within contracting authorities).
Some amendments have been proposed to help provide clarity in relation to these ‘safe harbours’ (now known as “permitted modifications”). For example, as part of the Committee stage, an amendment has been introduced which has sought to clarify what is meant by a modification “materially” changing the scope of a contract, namely “a reference to provision of goods, services or works of a kind not already provided for in the contract”. Whilst efforts to introduce clarity in this area are worth careful consideration, this drafting could result in further uncertainty regarding whether a modification falls within this safe-harbour. In practice, the question of whether or not goods, services and works are and are not “of the same kind” is not a binary assessment and is likely to give rise to a number of challenges in interpretation.
Some of the amendments proposed to the Bill at Committee stage also add to an apparent increased risk of challenge. For example, the Committee Stage draft of the Bill includes a minimum 8 day standstill period for contract modifications, which – although voluntary – may create practical issues for the contracting authorities administering those contracts.
What next?
These and a number of other proposed amendments are now being taken through to the Report Stage, which is the penultimate stage in the passage of the Bill through the House of Lords. We have established a P.A.T.H (Procurement Act Training and Help) webpage, minoring the passage of the Bill and providing insight and assistance to those preparing for its implementation, presently scheduled for late 2023. This update was authored by Laura Wisdom and Greg Fearn in Burges Salmon’s Procurement Team. For a range of resources and to subscribe to our Procurement Newsletter, please visit Burges Salmon’s P.A.T.H. (Procurement Act Training & Help) website.