The new Procurement Act with all its reforms is on the last stretch before it’s finally launched. It recently attained Royal Assessment and its launch date remains steady for some time in October 2024. There’s still plenty of time for contracting authorities to come to grips with the new law and ensure they’re in a position to capitalise on the opportunities provided by the procurement overhaul.
Procurement reform affects public sector buyers and suppliers, but in this article, we’re going to look at the effects it has on buyers and how working with a company that specialises in procurement in the UK helps buyers face government procurement reform with confidence.
Why Was Procurement Overhaul Necessary?
In a nutshell, the Procurement Act simplifies public procurement in the UK. This was necessary for many reasons, but the biggest was perhaps the need to break away from the EU Directives, which included more than 350 individual regulations.
The time saved drastically accelerates the procurement lifecycle and contract awarding process. Buyers can use the extra time to focus more on their core activities, for example, increased engagement and relationship building among suppliers.
This enables contracting authorities to identify candidates that can enter their pool of pre-qualified suppliers for restricted tendering processes.
Transparency
Another motivator that benefits public sector buyers is the focus on transparency throughout the procurement process.
Transparency enables buyers to monitor the process and identify red flags, such as a diminishing capacity for suppliers to meet the terms of the contract (financial instability, shortage of raw materials). Critically, it also identifies unethical business operations down the supply chain, like modern slavery in production processes.
Early risk detection helps buyers adapt their risk assessment to altogether avoid or minimise the impact on their side of the contract.
An open market
A primary motivating factor is opening the public sector to small businesses that have traditionally been kept out of the market due to the size and expense of contracts. The government has emphasised the inclusion of SMEs, which gives buyers a much bigger selection of suppliers, some of which provide niche services for specific projects.
A great example of a niche in the construction industry is power and energy infrastructure.
National security
The market is open to more businesses, which is great for the economy, but also increases the risk that national security will be compromised. The new act has been designed with national security in mind, lessening the risk of various security breaches.
This creates a market for a range of security roles, for example, online data security specialists and investigators who closely examine bidding companies that raise suspicion for fraudulent operations that can impact local communities as well as national security.
Changes In Public Procurement That Affect Buyers And The Contract Awarding Process
One of the biggest changes in the new regulations is buyer flexibility, especially when it comes to contracts with unique requirements. Competitive flexible procedures allow authorities to design a procurement process that matches a particular contract’s needs.
Before we go into more detail about the changes brought about by the procurement overhaul, let’s determine which sectors in government procurement are affected.
New procedures in procurement reform impact five sectors of government procurement.
1) Central government departments and arm’s length bodies
2) The wider public sector, which includes local government departments
3) Utilities companies in water, energy, and transport
4) Concession contracts
5) Lower-value contracts
Now, we can move onto …
Procurement reform and the purchase process
The Act almost redefines procurement procedures by splitting them into single-stage (open procedures) and multi-stage (competitive flexible procedures).
Government buyers use the procedure that they feel best suits their contracts.
Let’s look at the new competitive procurement procedures.
- Competitive procedure with negotiation (CPN)
- Competitive dialogue (CD)
- Innovation partnership (IP) – which is brand new to public procurement
Competitive procedure with negotiation (CPN)
CPN is best used for complex contracts that may need bespoke solutions or contain complex supply chains with many sub-contractors, like the construction industry. They establish stable criteria and weighting and ensure all bidders are informed of alterations in writing.
Competitive dialogue (CD)
CD is also suited to complex contracts, but some specific changes distinguish it from CPN contracts and older procedures. For example, local and central councils can negotiate with their most suitable candidate to confirm various terms in the contract. Winners are selected on a price-quality ratio.
CD also works wll for construction contractors due to the complexity and long-term nature of projects. It’s also essential for contracting authorities to have a very good understanding of the construction industry so that they can set realistic and reasonable contract criteria.
This is particularly important when it comes to supply chains and supply chain risk management to avoid many of the pitfalls associated with long and interconnected lists of contractors and sub-contractors.
Innovation partnership (IP)
Should no tender be up to spec, government councils can use an IP (which is a new addition to public procurement). It’s essentially a collaborative relationship between government departments and suppliers to devise a unique solution for the project.
Councils purchase the solution and often have the option to share profits from the joint venture.
Old stand-by procurement procedures
These two broad processes remain much the same as they’ve always been.
Open procedure
The procedure has one significant change that benefits buyers.
Government councils needn’t completely assess all bids before selecting potential winners. Instead, they can evaluate the heart of the bid, select the winner, and then ensure that all criteria have been satisfactorily met and there are no grounds for exclusion.
It’s a massive time-saver and makes the tender process more efficient.
Restricted procedure
The restricted procedure is largely unchanged.
Framework agreements
Framework agreements are great for construction companies, especially now that procurement reform has introduced open frameworks. Government buyers keep the framework open for up to eight years and must reopen the framework at least once.
Note: Standard frameworks must remain open for up to four years. However, utilities and defence frameworks remain open for eight years.
This benefits construction companies because they have more opportunities to bid on “fresh” frameworks and avoid the frustration – and worry – of waiting for new tenders to become available.
Changes Of Significant Importance
One of the changes resulting from procurement reform is the flexibility government buyers and contractors have when publishing and responding to contracts. We’ve established that government authorities are free to design their contracting procedures (mentioned above).
These custom contracts are well suited to several industries, including the construction industry. They allow construction companies to showcase their innovation in project-specific contexts that deliver optimum results to a degree not available in standard contracts.
Additional changes that contracting authorities must note.
1) Published notices
Contracting authorities have always published contract notices to alert suppliers of their tenders. Now, however, they have to publish a whole new range of notices.
- Planned procurement notices
- Preliminary market engagement notices
- Pipeline notices
- Direct contract awards notices (transparency notices)
- Contract change notices
- Termination notices (completed project)
Pipeline notices are published by contracting authorities that have contracts worth £2 million or more coming up in the following 18 months. This means construction contractors can create a schedule for the projects on the “calendar” of contracts that they know they can deliver.
Furthermore, bidding on several contracts (in a relatively limited time) increases contractors’ visibility and brand awareness, helping them attract buyers’ attention.
2) Supplier exclusion
Changes to the exclusion process include an extension of the grounds for exclusion, with very serious offences added to the list, including murder, theft, bribery, human and drug trafficking, and a selection of tax offences.
They have also given contracting authorities greater power to exclude suppliers for poor performance. For example, buyers can exclude poor-performing suppliers that haven’t taken advantage of opportunities to improve their services.
Furthermore, suppliers can be excluded if anyone in their supply chain fails to perform as expected or is guilty of non-compliance or other offences, including fraud and modern slavery.
This scenario poses a risk to construction companies because of the many contractors, sub-contractors, and suppliers used in projects. Each of these could be guilty of one or more exclusionary offences.
Note: A Minister of the Crown can enter excluded or excludable suppliers on a central debarment list. Suppliers can apply to be removed from the list, but only if they can prove improved performance.
3) Key performance indicators (KPIs)
Contracting authorities must now publish at least three KPIs in the contract. This decreases the number of bid submissions because suppliers know immediately if they can deliver the KPIs.
This means buyers have fewer submissions to evaluate, which speeds up the procurement cycle.
4) Standstill period
The standstill period has been reduced to eight days from the day the contract award notice was published.
5) Early contract termination
Contracts can be terminated early based on the following grounds:
- There’s a breach of contract significant enough to result in successful legal action.
- The supplier is excluded or added to the debarment list.
- The supplier’s sub-contractor is excluded or excludable.
6) Value not price
These days, the bid that provides the most overall value is likely to be awarded the contract.
Value applies to several factors, including value for money, value added to public benefits, and value that underlines integrity.
Public benefits include social value, which has three categories: environmental, economic, and social initiatives.
Construction contractors can add value in several different ways. For example, they can use local, environmentally friendly building materials and methods. They could also offset their carbon footprint using solar energy to power their offices. This can be directed toward the local community, for example, training locals to install solar power systems at schools.
Sail Through The UK’s Procurement Overhaul With Delta eSourcing
Delta eSourcing has been helping public sector buyers and suppliers navigate the sometimes murky waters of government contracts. The procurement overhaul has cleared the water, and now Delta eSourcing is here to help you understand the finer nuances of the public sector market and take advantage of the many opportunities that make tendering simpler and more straightforward.
We provide a cutting-edge eSourcing platform (eTendering portal) that provides a range of solutions that not only streamline your procurement process, but also to identify and capitalise on tendering opportunities, save costs, and boost productivity. All of which makes you more competitive in the market.
Take Delta Market Analytics, for example. The insight gained from data analysis provides buyers with all the information they need to make decisions that strengthen supplier relationships, identify and manage supply chain risks, and give buyers an advantage in the highly competitive public procurement market.
Our eTendering portal, combined with our experience and knowledge of the sector, enable us to easily manage procurement reform, especially when it comes to the added notices that must be published and support for collaborative partnerships that provide greater access to lucrative contracts.
Contact us now and book a free demo to see how our contract management service tracks supplier performance, monitors key activities (or KPIs), and generates reports for advanced analysis and decision making.
