What is The Procurement Act?
The Procurement Act is new legislation governing public sector procurement and is going to affect their supply chain. Organisations need to prepare
Every year, the UK public sector invests £300 billion to procure goods and services – and in February 2025, new legislation governing this spending will come into force. This legislation will also have implications beyond the public sector, affecting the private sector and taxpayers, who will be able to see what public organisations are spending public money on, and shaping the technology used in procurement.
Here we explore the likely effects of The Procurement Act, when it will come into force and what businesses wanting to secure public contracts can do to prepare. First, why is the law changing?
Post-Brexit transformation The Procurement Act 2023 is part of a raft of statutory changes introduced in the wake of the UK’s departure from the European Union (EU). Existing legislation was created by the EU and civil servants have been working on the new regulations since Brexit.
One of the goals is to simplify the legal landscape. “The UK’s public procurement legislation currently consists of more than 350 regulations spread across different areas relating to public contracts, defence contracts, utilities contracts and concessions contracts,” reports professional body the Chartered Institute of Procurement and Supply (CIPS). Under the new Act, “these will be consolidated into a single regime.”
The Act’s measures do more, however, than simply amalgamate current regulations. The need to update the laws offered an opportunity for more widespread changes to public procurement. It was the perfect chance to introduce a transformational programme of reform.
In a summary of the Act’s provisions, the government clearly states what it believes these reforms will achieve. “They will shake up our outdated procurement system, so that every pound goes further for our communities and public services,” reads the introduction.
“They will place value for money, public benefit, transparency and integrity at the heart of our procurement system; they will modernise and unify our systems and processes; and they will get tough on the poor performers and fraudsters.”
Simpler, especially for SMEs What difference will The Procurement Act make to suppliers? “On balance the proposals are expected to be a net positive for businesses,” states the government’s impact assessment – but how?
For a start, the Act aims to make the tendering process simpler and easier by trying to address some of the biggest challenges that procurement professionals and suppliers face when working with existing processes.
Companies will, for example, only need to enter their core credentials once using a new digital platform rather than each time they bid for opportunity. Contracting authorities such as local councils, government departments and other public bodies will also be obliged to publish procurement pipelines, making it easier for businesses to identify potential opportunities and plan for them.
In its own outline of how business will benefit from the new legislation, the government emphasises the positive impact on Small and Medium Enterprises (SMEs) and Voluntary, Community and Social Enterprises (VCSEs), “both of which have historically faced barriers in working with central government and the wider public sector.”
Contracting authorities will, for instance, have a duty to reflect upon obstacles facing SMEs in terms of procurement and ways to tackle these. “This applies throughout the procurement lifecycle,” says the Benefits for Prospective Suppliers to the Public Sector guidance, meaning they will have to consider:
- Whether the requirements they are asking for are proportionate to the contract
- Whether the bidding times are realistic, including for businesses that do not have dedicated bidding teams
- Whether there is a diverse representation of businesses in pre-market engagement to make sure a contracting authority is reaching a wide range of suppliers
More transparent The legislation also aims to increase transparency within public procurement. The Cabinet Office, for instance, issued a policy paper discussing “our transparency agenda” and frames the Procurement Act as part of this, stating “While there is already a high level of transparency of UK public procurement, our existing rules and systems have room for improvement.”
The purpose of greater transparency? To facilitate closer scrutiny of how public money is being spent. However, transparency-related measures such as a duty to follow objective criteria in decision-making bring potential benefits for businesses in terms of greater competitiveness, access to insights and opportunities for learning – if they wish to analyse the information that will be shared.
As the impact analysis of the legislation puts it, “Extended transparency requirements and a single digital platform on which procurement data will be published will mean that decisions and processes can be monitored by anybody that wishes to do so.”
Emphasis on ESG The government claims that provisions within the Act mean suppliers who have “previously underperformed” can be disqualified from future contracts, as can those found guilty of tax avoidance. “Misconduct in relation to tax” is one of the mandatory grounds for exclusion included in the legislation, while the discretionary grounds for exclusion include “breach of contract and poor performance” and “acting improperly.” The latter incorporates suppliers who put themselves “at an unfair advantage in relation to the award of a public contract.”
These examples highlight the place of ESG (environmental, social and corporate governance) provisions within The Procurement Act. Grounds for exclusion from public contracts cover other aspects of corporate governance too, with insolvency, bankruptcy, potential competition infringement, professional misconduct and more explicitly mentioned.
Suppliers who aren’t already taking the environmental and social aspects of their ESG responsibilities seriously will certainly need to do so once the legislation comes into effect. The Act mandates that suppliers convicted of labour market, slavery and human trafficking offences are to be excluded from public contracts. Furthermore, contracting authorities will have discretion to exclude companies involved in misconduct in these areas as well. The same applies to environmental offences and environmental misconduct, whether in the UK or elsewhere.
Timeline for change When can we expect the new regulations to come into force?
While it was due to go live on 28 October 2024, the new Labour government announced in September 2024 “a short delay to the commencement of the Act” in order to create a new National Procurement Policy Statement for contracting authorities. Parliamentary Secretary to the Cabinet Office, Georgia Gould, told the House of Commons that “The government intends to make regulations to set a new date for the commencement of the Procurement Act 2023 of 24 February 2025.”
Until then, “Existing legislation will apply…and will also continue to apply to procurements started under the old rules,” says the Transforming Public Procurement page.
Preparing for reforms Guidance about how to prepare for the changes is now available. The government have created different “Knowledge Drops” providing an overview of the legislation for contracting authorities, suppliers and SMEs/VCSEs. You can also stay informed by following the official Transforming Public Procurement page, signing up to receive news and via the dedicated CIPS hub.
At a corporate level, create a procurement reform team. “Identify who in the organisation are going to be your ‘go-to-people’ to monitor developments, collate information as it is released, and manage effective implementation of the change,” advises CIPS in recommendations to contracting authorities that are relevant to suppliers too. “Give them the responsibility to be the central point of coordination, planning and distribution of information.”
Finally, be proactive now. If your organisation already has contact with the procurement team at a contracting authority, start having conversations about the forthcoming changes. Nurture an environment where it’s safe to ask questions and nothing is considered a stupid comment. Prepare yourself and your team for the new provisions before they come into force.
To get the latest news on The Procurement Act and its introduction into law, subscribe to updates via the official gov.uk policy page
