The UK’s Procurement Bill – what does it mean, will it reduce ‘Red Tape’, and will SMEs benefit?

A press release from the Cabinet Office caught my eye, promising two things close my heart – a reduction in ‘Red Tape’ and a bigger slice of the Government Procurement pie for Small & Medium Enterprises (‘SMEs’).  I thought I’d take a deep-dive into the Procurement Bill, so you don’t have to….

I’ve been in business long enough to have heard Governments of all colours and persuasions promise to “slash red tape”, usually while going on to do the opposite. It’s a promise much loved by politicians because it’s easy to say, instinctively agreed with by almost everyone, yet difficult to measure or be held accountable to.

Spending more with SMEs also isn’t a new idea, but it is at least measured. Direct UK Government spending with SMEs edged up to an aggregate 14.2% of budgets in FY20/21, having hovered around 10.5-12% for many years.

So what’s promised, and what does the Bill actually say?

The press releases tell us that the new Procurement Bill will replace 350 EU rules with a single simpler, more flexible and transparent procurement regime for “everything from paperclips to tanks”. At time of writing, the Bill is only at a preliminary stage and will be subject to amendment as it passes through Parliament and is expected to become law next year.

However not all of the carrots dangled in the Cabinet Office press releases are actually specified in the current text of the Bill itself.

As currently written, the Bill runs to 122 pages and will apply to all contracts over a threshold value let by public authorities or organisations mostly spending public money, with the exception of the devolved Scottish Government, the Security Services, and the Advanced Research & Invention Agency.

How does the Bill help SMEs?

The itself doesn’t actually mention SMEs at all. However the Briefing that accompanies the Bill claims the following benefits:

• “a single digital platform for suppliers to register their details that can be used for all bids, while a single central transparency platform will allow suppliers to see all opportunities in one place”, that will in turn help with prompt payment on a wider range of contracts. The Bill goes beyond the current Prompt Payment Policy guidance and makes 30 day maximum payment terms mandatory, including for subcontracts.
• Certain contracts below threshold values to be reserved for SMEs or UK suppliers where it can be justified by “job creation potential, improving supplier resilience or tackling climate change”.
• A duty to consider whether the requirements could be broken up into smaller lots to make them more manageable for SME suppliers.

Does the Bill allow public authorities to discriminate in favour of UK suppliers?

No, at least not for contracts above the threshold values mentioned above, or from a long list of countries. The Bill states specifically that supplies for “Treaty State Suppliers” must not be discriminated against when compared to UK suppliers. The list of Treaty States in extensive, including European Union countries, the United States, Canada, Korea, Israel and many others.

Does the Bill change procurement priorities?

Not really. The press release states “While value for money will be the highest priority in procurement, the Bill will require buyers to take account of national strategic priorities such as job creation potential, improving supplier resilience and tackling climate change”.

The Bill itself doesn’t actually mention job creation or tackling climate change, it only requires contracting authorities to consider ‘delivering value for money’ and ‘maximising public benefit’. It does however require assessment criteria to be stated clearly, including how they are weighted and assessed.

Do all procurements have to be via competitive tender?

No. There is a presumption that competitive tenders are preferred, but there is a specific list of criteria under which “Direct” (i.e. sole-source) procurements can be used. These criteria include:

• Procurement of prototypes or “novel goods and services” such as research, development and testing.
• Where there is no reasonable alternative, for instance due to intellectual property rights or an absence of competition for technical reasons, or the purchase of works of art.
• Purchase of additional or repeat goods where a change of supplier would result in differences or incompatibilities.
• Where there is extreme and unavoidable urgency, or the need to protect life.
• Contracts relating to the provision of air or maritime transport services for the deployment of the armed forces or security services outside of the UK.
• A Defence or Security contract that is being placed on largely the same terms as an existing contract.

What about single source defence contracts?

The Bill introduces some tweaks to the Defence Reform Act 2014 to allow the pricing regulations to be applied to a more granular level for components and subcontracts within the main contract, but there is no material change to the applicability of the Single Source Contracting Regulations.

Disappointingly, the Bill does not provide any relief from, or flexibility in, the application of the regulations for lower contract values placed with SMEs.

Can suppliers be excluded?

Yes, there is an extensive list of mandatory exclusion grounds including conviction within the preceding 5 years of any of the following offences, and treating convictions for these offences in other countries as grounds for exclusion if they would also have been offences under UK law:

• Corporate manslaughter or homicide.
• Terrorism.
• Fraud, theft or bribery.
• Labour market, slavery and human trafficking offences.
• Organised crime.
• Tax offences.
• Competition law infringements.

I find this quite interesting as there have been occasions when major international defence contractors have been convicted of bribery offences in various jurisdictions, including some that supply the UK.

What about under-performing suppliers?

The press release states “The Bill will put in place a new exclusions framework that will make it easier to exclude suppliers who have underperformed on other contracts” which caught my attention, as there seems to be an endless stream of Government procurements that are late, over-budget and/or failing to deliver the promised capability. Does this mean the end of ‘too big to fail’?

The Bill requires at least 3 Key Performance Indicators (KPIs) to be set and published for contracts valued at over £2m. This applies unless the contracting authority considers that performance cannot be assessed by reference to KPIs, although I’m not sure what sort of contract cannot have any relevant KPIs at all…

A key provision is a process for “Discretionary” exclusion of a supplier, which can be for a variety of reasons including labour market, professional or environmental misconduct, bankruptcy or insolvency of a “connected person”, or national security concerns, but also breach of contract and poor performance.

The ‘breach of contract’ grounds for discretionary exclusion require a “serious breach” resulting in termination, award of damages or a settlement agreement. The ‘poor performance’ grounds require that the supplier fails to perform to the contracting authority's satisfaction, is given the opportunity to remedy the situation, and then fails to do so.

You might imagine that there are quite a few Government suppliers who could be excluded for the above reasons, but the application of ‘discretionary exclusion’ as currently laid out in the Bill appears very subjective and open to challenge. It requires firstly that one of the above reasons applies, and secondly that the contracting authority considers that the reasons are likely to occur again. A supplier facing discretionary exclusion is (rightly) allowed the opportunity to make representations to the contracting authority to challenge the exclusion, but there is also provision for suppliers to have exclusions investigated and appeal all the way up to a Minister of the Crown, introducing a political element.

My personal opinion is that I may never live to see one of the large Government contractors with a well-resourced legal department and lobbyists at their disposal ever actually suffer exclusion on these grounds...

Oh goody - a new ‘single digital platform’ !

This is another promise by the Cabinet Office in the press release which isn’t actually mentioned in the Bill itself. It is certainly true that the UK has a mish mash of online procurement portals that is confusing for suppliers. The Government uses different ones to local authorities, the MOD and NHS have their own independent ones, others are used for niche contracts like research.

A single platform sounds great in theory, but very difficult in practice. I would bet money that this either never happens, or goes ahead with a much reduced scope so that we end up with fewer rather than just one platform.

Conclusions?

The Bill leaves me decidedly underwhelmed. While there is some good stuff in there, it’s difficult to see how costs will truly be “slashed”, and in practice there isn’t much in it for SMEs.

The Bill doesn’t provide any relief for SMEs from the various regulations that are desirable and appropriate when applied to big companies but are a disproportionate burden when flowed down to smaller companies.

Perhaps more importantly it does little to challenge the culture in Government procurement that both favours big suppliers and fails to manage risk effectively. Will the perception remain that if a big, well known supplier fails then the supplier will get most of the blame, whereas if a small, unknown supplier supplier fails then the procurement officer will be held responsible?