The likely impact of the Procurement Act 2023 in practice

The Procurement Act 2023 (the ‘Act’) came into force on 24 February 2025 with the stated intention of streamlining public procurement processes. Before the implementation of the Act, procurement processes were governed by the Public Contracts Regulations 2015 (the ‘PCR 2015’), Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 or the Defence and Security Public Contracts Regulations 2011, depending on the type of public contract being procured. The Act now consolidates the procurement regime in respect of the types of public contract previously covered by these different sets of regulations. The Act is supplemented by the Procurement Regulations 2024 (the ‘2024 Regulations’) and the National Procurement Policy Statement (NPPS). 

Following the coming into force of the Act, we look at some of the key changes to the public procurement regime that have been introduced by the Act, the 2024 Regulations and the NPPS and assess their likely impact on contracting authorities and suppliers throughout the procurement process. 

Broader value considerations 

The Act has replaced the use of ‘Most Economically Advantageous Tender’ (MEAT) award criteria with simply the ‘Most Advantageous Tender’ (MAT). Under the new criteria, contracting authorities will have greater freedom to account for a wider range of benchmarks, and suppliers bidding for a public contract will therefore need to adapt their responses accordingly. We expect that contracting authorities may wish to increase the focus on local job creation, environmental, social and governance (ESG) goals and other social value outcomes. Social, environmental and innovative considerations were already part of the previous procurement regime (S67 of the PCR 2015), and the NHS already balance the quality (including social value) with price when awarding contracts, but the removal of the focus on finances from the award criteria may result in these aspects becoming more commonplace during the award of public contracts. 

The inclusion of these new value considerations suggests a greater emphasis on maximising public benefit. Therefore, this may create opportunities for SMEs to better compete against large corporations by utilising their niche offerings. However, it will be important going forward to ensure that the MAT approach doesn’t focus too heavily on non-monetary considerations, which could introduce new and difficult-to-overcome barriers to competition, i.e., larger companies are likely to have existing infrastructure/the ability to create infrastructure and even use artificial intelligence (AI) to refine their environmental and social offerings. 

The introduction of key performance indicators

Under the Act, contracting authorities must set and publish at least three key performance indicators (KPIs) for contracts with an estimated value of over £5m, unless the contract is one of the following: 

1. a framework (although the requirement does apply to call off contracts under frameworks where such contracts are valued at over £5m);
2. a utilities contract awarded by a private utility;
3. a concession contract;
4. a light touch contract.

There is also the possibility of avoiding this obligation to set and publish at least three KPIs if the contracting authority considers that the supplier’s performance could not appropriately be assessed by way of reference to KPIs, but we expect this requirement will apply to most public contracts valued at over £5m. In the event that the contracting authority sets more than three KPIs, all must be published using a Contract Details Notice within 30 days of entering the contract. Where KPIs have been set, the contracting authority will be required to assess, at least once every twelve months during the term of the contract and on termination, the supplier’s performance and publish information relating to that assessment, including providing ratings against each KPI, in a Contract Performance Notice, although it is worth noting that section 71, which contains this requirement, is not yet in force.

The expectation is that the increased transparency as a result of the new KPI requirements will make it easier for contracting authorities to hold suppliers accountable for the delivery of their public contracts. It is therefore anticipated that suppliers will need to exercise greater caution when operating public contracts, particularly when they must also consider the impact of previous poor performance on the prospects of winning future public contracts in the context of the exclusion regime and new debarment powers under the Act.

Debarment list

Under the Act, there will be a new centrally managed ‘debarment list’ of suppliers. Suppliers can be put on this list for a maximum of 5 years, and the list will be publicly available. The list will show those suppliers who are excluded on mandatory grounds and those excluded on discretionary grounds and indicates those suppliers who are underperforming or who pose significant risks.

Those suppliers who have been added to the debarment list based on mandatory grounds will be unable to win public contracts whilst on the list. Those on the list based on discretionary grounds may still be able to win public contracts, although given the list is available to all contracting authorities, it will not reflect well on a supplier who appears on the debarment list when bidding for public contracts.  Although there is a process central government will have to follow including a notice requirement and there is an appeals process available to suppliers, given the potential adverse consequences of appearing on the debarment list, it is highly recommended that suppliers should take steps to identify any risks of their meeting a mandatory or discretionary ground for exclusion and remedy any issues as soon as possible. 

Increased flexibility of procurement procedures

Under the PCR 2015, there were a number of procurement routes, including the open, restricted and competitive dialogue procedures, as well as the competitive procedure with negotiation, via which contracting authorities could procure public contracts for works, services and supplies. The Act is less prescriptive in terms of the processes that can be followed to reflect the ethos behind the Act: to create a more flexible procurement system. Contracting authorities now have three options: 

1. A competitive tendering procedure;
2. A direct award;
3. An award under an existing framework.

The competitive tendering procedure can be a single stage procedure or such other competitive tendering procedure as the contracting authority considers appropriate for awarding the public contract which will be known as the competitive flexible procedure. This competitive flexible procedure will provide contracting authorities with more freedom in how they carry out the competitive tendering procedure. However, the approach that they take must be fully planned out before going to the market, as the Act and associated regulations require tender notices to be published at the start of the process in which details of the procedure must be included. In practice, we expect that most contracting authorities may be less inclined to test the potential flexibility the competitive flexible procedure offers in favour of their existing procedures, which they know are appropriate and successful for their purpose, and will instead wait to see others design their procedures.

Remedies

The Act provides materially the same remedies as under the PCR 2015, although it is notable that the mandatory standstill period has been reduced from 10 days to 8 working days, and this period is now triggered when the contract award notice is published in respect of the contract (this notice has a different function to the one with the same name in the previous procurement regime). Under the Act, although the timescales remain tight, potential challengers may now have an extra few days (as weekends and bank holidays will not count towards the new standstill period of 8 working days) to assess the award of the contract in question and formulate a challenge with their legal teams, which we expect will prove significant in certain instances in terms of the robustness of the challenge ultimately presented.

The Act also introduces an important change to when the automatic suspension is triggered. Under the Act, the automatic suspension is triggered only if proceedings are commenced, and the contracting authority is notified of this fact, before the conclusion of the standstill period.

Implied payment terms

The Act mandates that all public contracts include a 30-day payment term. This extends to any subcontracts that are ‘wholly or substantially meant to contribute to the performance of a public contract’. The implied 30-day payment term extends down the supply chain and any contract provisions seeking to override or vary the payment terms implied by the Act will not be effective, so it will be pertinent for both the contracting authorities and suppliers to ensure that their contracts do not conflict with the Act.

The contracting authority must also issue a Payments Compliance Notice every 6 months, which should include information regarding compliance with the 30-day payment term. We anticipate increased scrutiny of the extent to which payment terms are being complied with and this will be more visible due to the publication of Payments Compliance Notices. We would therefore recommend that contracting authorities and suppliers review their average payment terms and if these terms do not fall within the mandated 30-day period, to update their processes to ensure compliance with the Act.

NPPS

The Act requires contracting authorities to ‘have regard’ to the policy objectives contained within the NPPS that is in place at the time of carrying out a procurement (although the NPPS does not apply to private utilities or when contracts are being awarded in regard to a framework or dynamic market). Whilst there is no absolute obligation for contracting authorities to address the NPPS, systemic breaches could be grounds for a procurement investigation under the Act and so should certainly be a consideration for contracting authorities throughout the procurement process. 

An NPPS was published in May 2024 under the previous government and was due to come into effect on 28 October 2024. However, following the 2024 general election, in line with the current government’s priorities in relation to public procurement, the statement was withdrawn. The main stated aim in the new NPPS, published on 13 February 2025, is to have regard to the importance of delivering value for money. The explanatory memorandum to the NPPS explains that the new NPPS ensures that public money spent on public procurement supports the delivery of the government’s missions, delivers economic growth, supports small businesses, champions innovation and creates good jobs and opportunities across the country.   

The current NPPS prioritises the following: 

1. Driving economic growth and strengthening supply chains by giving SMEs and voluntary, community and social enterprises (VCSEs) a fair chance at public contracts, creating high quality jobs and championing innovation: the idea is that small businesses and social enterprises are more likely to generate diverse economies by creating jobs and thus driving economic growth. Contracting authorities should consider more favourably those suppliers who can provide high quality jobs, safe working conditions and provide fair pay and progression for workers. Under the NPPS, government bodies and their arm’s length bodies should set 3-year targets in respect of direct spend with SMEs and VCSEs, and publish their progress annually. The publicisation of government spending in relation to SMEs and VCSEs could encourage public bodies to use opportunities provided by smaller businesses, thus driving the economy.
2. Delivering social and economic value that supports the government’s missions, including by working in partnership across organisational boundaries: contracting authorities should ensure their suppliers are actively working to tackle bribery, corruption, fraud and human rights violations, amongst others, and ensure their suppliers work with integrity, maintain ethical standards and practice environmental sustainability. This directly aligns with the MAT award criteria under the Act. The Act appears to allow a shift in focus from predominantly economic considerations, to the delivery of measurable social, economic and environmental benefits. The harmonisation of the Act and this priority in the NPPS is designed to achieve these wider objectives set by the government, although only time will tell the extent to which this is a successful tool for driving positive change.
3. Ensuring the right commercial capability and standards are in place to procure and manage contracts effectively and to collaborate with other contracting authorities to deliver the best value: value for money will be derived from effective and efficient policies in relation to sustainable, long-term outcomes, fair and open competition, and those undertaking procurement to have the skills and expertise to make informed decisions. Contracting authorities should optimise the use of public funds to ensure value for money and maximise the benefit to the public. In doing so, all of the priorities under the NPPS will likely be met. 

Procurement Regulations 2024

The 2024 Regulations provide additional details to, and understanding of, the processes of public procurement, under the Act. The 2024 Regulations include information on when and how to publish documents on the Central Digital Platform and introduces new notices required to be published by contracting authorities throughout the procurement process. The notices required under the 2024 Regulations include, amongst others: 

1. pipeline notices;
2. planned procurement notices;
3. preliminary market engagement notices;
4. contract details notices;
5. contract termination notices;
6. contract performance notices;
7. transparency notices; and
8. dynamic market notices.

The 2024 Regulations also provide the form of notice required and details to be contained in the notice in each case.

The 2024 Regulations introduce the need for core supplier information to be entered into the Central Digital Platform, which includes basic information, such as the supplier’s name, unique identifier, contact details and registered address, economic and financial standing information, connected person information and exclusion grounds information. Suppliers must ensure this information is disclosed during the early stages of procurement to avoid delay.

It’s worth noting that the 2024 Regulations disapply the Act in relation to regulated health procurement.

Conclusion 

The provisions introduced under the Act, the 2024 Regulations and the NPPS certainly have the potential to simplify and streamline the procurement process, and include commendable aims, such as seeking to provide more opportunity for smaller businesses to enter into the public procurement market. As with most new legislation we are very much in the ‘watch this space’ territory in terms of the extent to which the Act will achieve its stated aims. However, contracting authorities will straight away be able to decide on how their procurement procedures will look, and there are still some practical steps that suppliers can take, such as reviewing their supply chains and payment terms, whilst we wait to see exactly how public procurement is undertaken and managed in practice.

Jennifer Clarke is a Legal Director in Shoosmiths’ Commercial team, with over 15 years of experience in advising clients in both the public and private sectors on major commercial and infrastructure and energy projects. Jennifer leads the firm’s non-contentious public procurement team, working closely with specialists in contentious public procurement to support clients with all aspects of public procurement law. The public procurement team at Shoosmiths are the current contributing editor of the Legal 500’s Country Comparative Guide on Public Procurement in the UK.