ByteSize: Procurement Act Update (United Kingdom)

Introduction

On 12 September 2024, the UK Government published a statement confirming that the ‘go live’ date for the Procurement Act 2023 (the “Act”) would be delayed, from 28 October 2024 to 24 February 2025. As set out in our previous article, the Act represents a significant change to the existing procurement regime in the UK. Despite the delay to the commencement date, it remains crucial for all stakeholders in the TMT sector to continue their preparations for the new procurement landscape and to be alive to the key changes that will be brought about by the Act.

As highlighted in our previous article, increased transparency is one of the Act’s key objectives. This will be achieved by a number of means, including by way of the publication of contract KPIs, various notices and the maintenance of a publicly accessible ‘debarment list’. These notices, and the increased transparency resulting from their publication, will bring both opportunities and challenges for stakeholders. Most notably for suppliers, there will be an unprecedented level of publicity and scrutiny regarding performance of the contract over its lifecycle and an increased potential for significant reputational and commercial risk.

Contract Performance Notices

The Act requires that, for contracts with an estimated total value in excess of £5m (and subject to a few limited exceptions), a contracting authority must set at least three KPIs in respect of the contract. The contracting authority must then, at least annually, assess the supplier’s performance against the KPIs (on a prescribed scale of ‘good’ to ‘inadequate’) and publish information relating to that assessment including any particular breaches of contract or instances of poor performance by way of a contract performance notice. This annual review and reporting requirement will not only result in contracting authorities being focussed on a suppliers’ performance both against KPIs and in general, on a perhaps more regular and critical basis than they would have been otherwise, but will also provide the wider market an annual insight into a supplier’s performance under the contract, including publicising details of a supplier’s breaches of contract or failure to perform.

Contract Termination Notices

Continued poor performance and/or breach of contract could lead to early termination of the contract. The Act requires that a contract termination notice be published within 30 days of termination of a contract for any reason, including for a supplier’s breach or failure to perform. Where termination is for breach, the Act contains an extensive list of information that must be included in the contract termination notice, including:

• an explanation of the nature of the breach or failure to perform;
• the impact and duration of the breach or failure to perform;
• the duration of the breach or failure to perform;
• an explanation of any steps taken by the supplier to mitigate the impact or consequences of the breach or failure to perform;
• any steps taken by the contracting authority to notify the supplier of the breach or failure to perform, including any warning notices given to them under the public contract or other proper opportunity to improve performance; and
• what steps, if any, were taken by the supplier to mitigate the impact of the breach and why these were not sufficient.

Plainly, the publication of this information is likely to be unwelcome to a supplier and to have significant reputational impact. It also has potentially wider-reaching consequences in respect of future procurement opportunities, as, under the Act, contracting authorities have the discretion to exclude suppliers for breach or poor performance of contracts within the recent past. The Government guidance in relation to contract performance specifically contemplates this, noting that the publication of such a granular level of detail is specifically intended to be a means of providing contracting authorities with evidence to apply the discretionary exclusion ground.

Debarment

Where a supplier has performed poorly on a public contract such that a discretionary exclusion ground arises, they could also be added to the ‘debarment list’. The debarment list is a new regime introduced by the Act aimed at safeguarding against what the Government deems to be unacceptable supplier-related risks. The debarment list will be managed by the Procurement Review Unit (the Government-established body responsible for overseeing public procurement) and published on gov.uk. As well as the reputational impact of having been ‘named and shamed’, inclusion on the debarment list could, depending on the circumstances, result in a supplier being prohibited from participating in all public procurement processes and/or being awarded public contracts for a specified period of time which could have significant consequences for suppliers.

Impact

Whilst the notices detailed above will enable suppliers to have frequent insight into and monitor competitors’ performance in relation to public contracts, they will conversely place suppliers under additional scrutiny and provide information on their own performance and compliance to those same competitors. They also bring with them not only the potential for significant reputational impact but also, where performance is sufficiently inadequate, the possibility of being added to the debarment list and excluded from future procurement opportunities. Suppliers will therefore need to ensure that, where there are any alleged issues with their performance of relevant contracts, they are on the front foot as regards remedying these issues such that the potential for any contract termination notice on the grounds of breach, together with the consequences that would flow from such a notice, can be eliminated.