A second outing for the Procurement Bill

When it comes into force (likely to be later in 2023), the Procurement Act 2022 will be the biggest change in procurement law in a decade.

The first draft of the Bill was published on 11 May 2022 when the Bill began its legislative journey in the House of Lords. Throughout the summer and into the autumn, the Bill worked through the “committee stage” – in which MPs debated and agreed certain amendments to the first draft.

A second draft of the Bill has now been published and the Bill has begun a further stage – the “report stage” – following which the Bill will move to be considered by the House of Commons.

If you are interested the detail of the Bill, please have a look at our comprehensive briefing paper which is presently being updated to reflect the latest changes published in the second draft.

We have reviewed the second draft – while there are some amendments and developments, it is fair to say that these are tweaks rather than a sea-change. We have picked out some selected highlights of the second draft below.

Pre-market engagement

The first draft stated that an authority "may" publish a new type of notice known as a "preliminary market engagement notice". There is a shift of emphasis in the second draft, and now an authority "must" do so, unless it explains its reasons for choosing to do otherwise.

Dynamic Markets and Frameworks

The first draft brought in a requirement that “conditions of participation” – which we currently know as “selection criteria” – may only be used if they are a proportionate means to ensure suppliers appointed to the Dynamic Market/Framework have the necessary capacities. The policy goal here is to ensure that the supplier pool is not restricted unnecessarily by strict selection criteria. The second draft further refines the concept of proportionality in this context, by stating that, when setting conditions of participation for these kinds of arrangements, proportionality should be assessed with regard to the nature and complexity of the contract.

Section 34(1) has a new emphasis in the second draft, to make it clear that a dynamic market as conceived of in the Bill is an arrangement, established by a contracting authority, for the purposes of a contracting authority awarding public contracts. This emphasis makes it clear that dynamic markets are intended to have contracting authorities as customers and is perhaps aimed at preventing structures where a private sector body acts as customer and then "sells on" to a contracting authority.

There is a new confirmation at section 44(5)(c) that the four year maximum term for frameworks does not apply where the services being procured are light touch services.

Further, there is a helpful flexibility provided at section 45(3) that, where a framework agreement expires while a call-off contract under it is still being procured, the authority may still proceed with that call-off contract award.

Modification of Contracts

Section 69(1) in the first draft provided a three part test for when a modification is “substantial” . The second of situations is where a modification materially "changes the scope" of the contract.

New section 69(5) in the second draft expands on what “changing the scope” means in this context - it means a modification providing for the supply of goods, services or works which was not already provided for in the contract. This raises questions around how closely a product or service needs to be linked to what was originally procured to avoid “changing the scope”.  This is likely to become one of those areas in procurement law where a judgment call has to be made.

Contract Change Notices and voluntary standstill periods

Section 70 requires a contract change notice to be published in relation to a modification, unless the change is below the de minimis thresholds of less than 10% (goods or services) /15% (works) change in term or value of the contract.

However, the second draft introduces new wording which means that a contract change notice will always be required, even below those de minimis thresholds, where the type of modification concerned is a novation or assignment following the restructuring or insolvency of the original contractor. This highlights the policy aim to ensure market transparency about successor providers in these kinds of situations.

Section 71 introduces the concept of a voluntary standstill period that may be held before the modification takes effect, and the second draft of the Bill confirms that this period must be not less than eight working days from the date of the contract change notice in which the intention to hold the voluntary standstill period was set out.

Updated drafting

In some areas, the second draft has refined and improved the drafting of the first draft where it was convoluted. Particular examples are in relation to section 98 (time limits on claims) and schedule 2 - which sets out the exemption for what we currently tend to refer to as “in-house” or “Teckal” contracts (and what is known under the Bill as the “vertical test”). 

Eagle eyed readers might also have spotted a potential source of confusion in the second draft. Section 43 sets out the rules for establishing frameworks but new section 43(16) then goes on to state that “this section does not apply in relation to the award of a framework” - which is circular.

Our hunch is that the intention was to refer to section 43(15), which provides for the possibility of charging fees to suppliers who are awarded a call-off under a framework, and to confirm that such fees may not be charged for the award of a place on the framework itself. We await the next draft to see if this is addressed.

You can keep up to speed with the progress of the Bill and find all our materials on procurement law reform at www.procurementportal.com/reform.