UK Government publishes long-awaited Green Paper on transforming public procurement

The post below was first published on our Public Law blog

The UK Government has published a Green Paper proposing fundamental reforms of the public procurement rules governing the purchase of goods, works and services by the public sector and certain utilities. Those rules are currently set out in a series of UK regulations that are based very closely on EU directives. Following Brexit, the Government wishes move away from the EU blueprint and to introduce new legislation which it claims will be more effective, flexible and transparent.

Public procurement legislation in the UK is currently dictated by EU law. As from 1 January 2021, the UK is no longer bound to follow EU law. Although the UK will still be obliged to respect the procurement rules laid down by the international Agreement on Government Procurement (GPA), these are much less detailed and prescriptive than the EU procurement directives. The Government therefore believes that Brexit has given it an historic opportunity to overhaul the current public procurement regime, which it sees as outdated and overly restrictive.

Some of the main ideas and proposals put forward in the Green Paper are briefly outlined below.

Consolidating the current regulations

The UK procurement rules are currently spread across four separate measures: the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011.

The Government proposes to replace these parallel regulations with a single, uniform set of rules for all contract awards.  This consolidated instrument will be supplemented by sector-specific sections where different rules are required for effective operation or to protect the UK national interest, for example in relation to defence or utilities.

Changes to procurement procedures

The current regulations provide for at least seven different types of award procedure, including competitive dialogue, competitive procedure with negotiation and innovation partnerships.  The Government proposes replacing this range with just three procedures:

• a new competitive, flexible procedure, with minimal detailed rules, which will give buyers maximum freedom to negotiate and innovate;
• the open procedure, which buyers can use for simple, ‘off-the-shelf’ requirements, as at present; and
• the limited tendering procedure (equivalent to the current negotiated procedure without prior publication), where a reduced competition is justified by urgency, crisis or other exceptional circumstances. Purchasers would be obliged to publish a prior transparency notice whenever they have recourse to this procedure.

The Green Paper also proposes numerous changes within these procedures, including:

• Establishing a single digital platform for supplier registration that ensures they only have to submit their data once to qualify for any public sector procurement.
• Widening the grounds on which suppliers may be excluded for poor past performance of public contracts, and adding a new mandatory exclusion ground relating to the non-disclosure of beneficial ownership.  The Government will also explore the option of setting up a centrally-managed list of debarred suppliers.
• Basing evaluation of bids on the most advantageous tender (MAT), instead of the current basis of most economically advantageous tender (MEAT): the Government believes that this change will encourage purchasers to place more emphasis on non-economic factors, including social values.
• Allowing purchasers, in certain circumstances, to apply evaluation criteria that are not related to the subject-matter of the contract, such as criteria assessing a supplier's record on prompt payment of sub-contractors or its plans for achieving environmental targets across its operations.
• Allowing framework agreements to last longer than the current maximum of 4 years, provided they are re-opened to allow new suppliers to join at certain pre-defined points.
• Removal of the mandated requirement to provide an individual debrief letter to each bidder at the end of a procurement process.  However, purchasers would still be required to publish some "basic" information, including the basis of the award decision, before initiating contract award and respecting a standstill period.
• Greater flexibility to amend existing public contracts in times of crisis, but also a new requirement to publish notices describing any amendments to existing contracts

Reforming the regime for challenging procurement decisions

The current regulations allow aggrieved parties to seek remedies in the High Court for alleged breaches of the procurement rules.  The Green Paper proposes certain fundamental reforms to the current system, including:

• The introduction of a tailored expedited process, to speed up the review system and make it more accessible.
• Possible introduction of a specialised tribunal to determine low-value claims and issues on ongoing procurements
• Introducing a new test for assessing whether the automatic suspension of a contact award procedure should be lifted by the Court
• Removing automatic suspension on the award of contracts let competitively in situations of crisis or extreme urgency.
• Capping the level of damages available to aggrieved bidders to legal fees and 1.5 times their bid costs, and excluding damages for loss of chance or loss of profit, in order to reduce the attractiveness of speculative claims.  However, this cap would not apply where the supplier had no opportunity to challenge the procurement before award, as in the case of illegal direct awards or unlawful contract amendments.

Conclusions and next steps

The Green Paper paves the way for the most significant reform of UK procurement law for a generation.  In doing so, it provides a very concrete example of the possibilities for change afforded by Brexit.  The proposals are bound to generate widespread interest and debate among all parties interested in this substantial sector of the economy.  We intend to provide further analysis and commentary on the proposed reforms in the New Year.

Interested parties are invited to respond, by 10 March 2021, to various questions posed at the end of each chapter of the Green Paper.  It will then take some months for the Government to digest the responses and to reflect them in proposed new legislation, which may then become law in late 2021 or during 2022.