The Procurement Act 2023 and the subordinate legislation of the Procurement Regulation 2024 have ushered in a new era for public procurement. The changes are transformative. Put simply, the Act reduces prescriptive procedures and third-party administration, introduces greater oversight and transparency and encourages more competition and innovation with, improved supplier diversity.
The recent economic climate of increasing supply chain risks, arising from geopolitical instability, high inflation and rising costs, combined with the increasing pressures of an ageing population, social inequality and the impact of climate change, has further exacerbated the financial pressures with several public organisations facing debt and budget deficits.
The timeliness of the Act has the potential to support the public sector to better deal with the multitude of challenges it is experiencing, against a background of several years of budget cuts and resourcing shortfalls. Key drivers of the Act are to realise better value for money, identify cost savings and monitor signs of waste and inefficiency. Procurement spend will also be more transparent to the public with how much is being spent, with whom and how.
This article explores the opportunities and challenges for the public sector during the transition period to the new procurement regime prior to the go-live date of 28 October 2024.
Embracing Flexibility
The introduction of the competitive flexible procedure empowers contracting authorities to tailor their procurement processes to meet their specific needs and circumstances. It is a powerful procedure for procurement teams, to encourage innovative solutions and better value for money. The new open framework, dynamic markets and direct award routes also offer more flexibility than under the current regulations. By leveraging the Act’s flexibilities, contracting authorities can:
Engage with a wider range of suppliers by accessing a broader pool of potential suppliers, including small businesses and niche suppliers, fostering greater competition and innovation.
Respond rapidly to market fluctuations to address supply chain disruptions, price volatility or changing customer demands the Act sets out a range of situations in which a public contract can be modified where they are “permitted modifications”, where the modification is not substantial, where the modification is below threshold or a light touch contract. There are also several limited scenarios that provide for the direct award of contracts; increasing flexibility to respond to various situations.
With some similarities to the current regulations and “safe harbour” modifications, there are new additions, including new safe harbours, such as, the materialisation of a “known risk”, where identified in the tender or notice as well as the ability to direct award a contract due to urgency or threat to life. These tools are all subject to specific limitations, transparency obligations and other considerations identified in the Act.
Expanded Definition of Procurement - A Driver for Cultural/Behavioural Change
A radical and potential operational challenge for contracting authorities, is the extension of the procurement life cycle to include the pre-procurement stage through to contract management and termination.
The change not only underpins the transparency agenda and aims to encourage better planning but also has the potential to drive behavioural change. The combination of the extended life cycle and the introduction of the competitive flexible procedure will require public sector procurement professionals to shift how they operate, with greater market knowledge, planning and commercial skills. With this shift, the procurement function could migrate from a gatekeeper to a key business advisor role, influencing business planning and commissioning processes for a public sector organisation, vital to effective and efficient service delivery.
The extended procurement life cycle may also present a challenge for organisations with separated contract management functions. A fully integrated “commercial function” covering procurement and contract management would be in a better position to comply with the Act’s transparency requirements and exploit the increased flexibility available under the new regime.
Early and constructive engagement with stakeholders and suppliers will also be key to informing the most appropriate route to market and commercial considerations for planning, approvals and compliance with the Act.
Enhancing Scrutiny and Monitoring
Whilst the Act reduces administrative burdens on suppliers and the type of regulations, it also emphasises the importance of robust scrutiny and monitoring to ensure that procurement activities are conducted ethically, transparently and compliantly. During the transition stage contracting authorities should:
Strengthen internal controls:
Review and establish clear policies, procedures and oversight mechanisms to ensure compliance, accountability and ethical conduct, aligning with the expectations of the Act.
Review digital system and invest in data analytics capabilities:
Whilst e-senders will address many of the transparency requirements, it will be essential for contracting authorities to undertake a due diligence of their digital procurement systems to provide assurance that they can support the new regime.
The Central Digital Platform will allow for more efficient flows of information arising from increased transparency, through the publication of notices, as well as monitoring of procurement and contract management activity, including supplier performance against key metrics. It will also, in later phases, provide useful market data for procurement teams.
Implement robust risk management frameworks:
Identify and mitigate potential risks associated with increased flexibility, such as fraud, corruption or non-compliance with the Act alongside an understanding of commercial risk associated with tailoring a procurement procedure.
Striking the Balance
The key to success lies in striking the right balance between flexibility and the transparency obligations. Contracting authorities should embrace the opportunities afforded by the Act whilst implementing robust safeguards to ensure accountability and compliance. By adopting a risk-based approach, organisations can optimise their procurement processes, maximise value for money and mitigate potential risks.
Invest in training and development by equipping procurement teams with the skills and knowledge necessary to navigate the new regulatory landscape. The government is providing fully funded comprehensive learning and development packages to support teams who will be operating within the new regime. Procurement teams will also need to focus on developing commercial skills needed to fully utilise the flexibilities afforded by the Act.
Strengthen your procurement operating model: The Act provides an opportunity for contracting authorities to take a holistic approach and develop their procurement function to operate at a more strategic level rather than simply to comply with the new procurement regulations. By investing in and strengthening the fundamental core of their procurement function it will create greater agility and resilience to deal with any future regime changes and unforeseen market forces.
Are you ready for the changes that are incoming for procurement?
The New Procurement Act reduces prescriptive procedures and third-party administration, introduces greater oversight and transparency and encourages more competition and innovation with, improved supplier diversity.
We are providing training and working with clients in the public sector to help equip them on the changes, if you're interested to understand how you need to meet the requirements to comply with the new act, please contact us.
