How will the New Procurement Act 2023 impact local authorities?

Our latest Time to Talk focused on the introduction of the Procurement Act 2023 in October this year and the impact this has had on procurement in local government to date. Our subject matter experts provided an overview of the Act and discussed the opportunities it presents for councils to innovate, transform how they buy services, deliver better value for money and improve outcomes for their local communities.

The Procurement Act 2023 is aimed at creating a more open and transparent public procurement regime. It achieves this through six primary objectives.

Notably, one of the objectives of the Act is to encourage public sector innovation in how they procure and develop services and products. In the private sector, there are a lot of channels through which organisations can collaborate with their suppliers to drive innovation in procurement. This is why we are excited to see innovation as one of the primary objectives of the Act. However, this will present a new way of working and a challenge for many councils on how they drive innovation within such a highly regulated environment.

This challenge is addressed by the Act’s second objective to allow more flexibility in procurement, mainly through the introduction of a new competitive flexible procedure for councils to design the procurement to best fit their needs and to encourage innovation. Other flexibilities include the ability to refine award criteria, modify contract terms and to use direct awards, subject to certain limitations. These new flexibilities are aimed at reducing procurement delays and costs.

The third objective is providing greater transparency with the establishment of a Central Digital Platform to collect data and information on how public money is spent and the outcomes achieved. A significant change is the requirement to report on a supplier’s contract performance on at least an annual basis for higher value contracts, in a move which is hoped to encourage improved contract management and improved quality services for citizens.

There is also an increased focus on social value and providing for local communities through procurement. The current Regulations require contracting authorities to award contracts based on the Most Economically Advantageous Tender. The new regime introduces a greater focus on quality and added value, such as social value, with the shift to the Most Advantageous Tender. And with the strengthening of the link to the National Procurement Policy Statement, the Government can also implement procurement policies that could support a drive for more community investment, aimed at ensuring public procurement provides wider societal benefits.

The Act also encourages supplier diversity through introducing requirements for faster electronic invoicing, prompter payments and the reduction of administrative burdens with “tell us once” supplier registration and other measures. These reforms and the improved transparency with the Central Digital Platform are aimed at reducing barriers for small and medium-sized enterprises and therefore better access to public sector opportunities.

Greater flexibility and transparency however come with more centralised oversight. The greater risk of non-compliance will raise the bar on strategic sourcing and contract management and robust record keeping will be a safeguard.

These initiatives, of greater transparency to identify opportunities, improved flexibility over how our public sector organisations procure, and the benefit of a more diverse supply chain should, encourage greater innovation and better value for money.

We outlined how the changes contained within the Procurement Act 2023 will impact people, process, data and reporting, governance and technology requirements for local authorities.

Procurement professionals will need new skills and training to understand the new law – there is free and extensive government training available, together with webinars, guides and templates. Local authorities should also consider developing in-house contract management and commercial skills to fully exploit the potential of the procurement transformation.

To ensure compliance with the new Act, strategic sourcing and contract management processes will need to be reviewed to identify gaps that need to be addressed, as well as with a local authority’s own processes and procedures.

Data requirements could present a challenge to numerous local authorities, who historically have fragmented data infrastructures and separated functions. The increased transparency, with the need to develop and maintain a procurement pipeline, publish additional notices, report on supplier performance and supplier payment data against contracts, will need to be embedded in the procurement and commercial reporting cycle to ensure compliance. Local authorities would do well to invest in digital streamlining to, where possible, automate their data management and reporting processes and free up resources.

Most councils will need to significantly review their governance requirements to fit with the new regime to ensure robust practises throughout the procurement lifecycle and particularly around the contract compliance obligations.

Technology may also present some challenges. Some Council eSender systems may not be able to integrate into the Central Digital Platform, or support the full procurement lifecycle, including the range of new notices, reporting requirements and the less prescriptive competitive flexible procedure. There is also a need to report spend against contract rather than supplier.

We are seeing three different approaches local authorities are taking in response to the Act:

1. Compliance: some local authorities are working on adjusting their operations to be, at the minimum, compliant with the Act, and not taking it as an opportunity to lay the foundations for transforming their procurement function. Competing priorities, lack of procurement resources and a difficult financial environment are contributing to this.

2. Strategic: some councils are taking this opportunity to change their procurement team ways of working to embrace the new direction; especially to be more flexible in procurement processes and generate savings.

3. Transformative: some councils are using the Act as a catalyst to transform their commercial and procurement functions to provide improved commercial business partner support which will generate greater value across the entire council.

Clients find that traditionally, procurement can often be seen as a gatekeeper for compliance in council services and not as an enabler for value creation; however, this should be changed through the greater flexibility provided for by the new Act. This is an opportunity for councils to realise value across the business by adopting more flexible procurement practices.

The success of this journey to new and better procurement of goods and services is to position the transformation as everyone’s business – it’s not just the responsibility of procurement teams. Procurement should enable the delivery of responsive, quality-led commercial, procurement and contract management capability, however for this change in direction to happen there is a need for senior leadership to lead cultural change across the organisation.

It is also important to engage with suppliers. Some organisations felt suppliers who bid for public sector contracts have not been sufficiently engaged on the new regime, which may mean suppliers have limited knowledge of the changes and may initially struggle with being fully compliant. Public sector contracting authorities will have to coach both their suppliers as well as their own organisation through the new procurement processes. Market engagement, to shape procurement delivery, will be essential in the new world. There may also be a few minor issues to address for suppliers. Suppliers cannot bid unless they are registered on the Central Digital Platform, which is still being built, leaving suppliers little time to prepare for the new processes and could cause delays at go-live.

While the new Procurement Act is a significant step in the direction of more flexibility and less burdensome public procurement practices, it is coming at a time when many public sector bodies do not have the privilege of focusing on transformation. The lack of procurement resources is of key concern to our clients, many of whom worry about satisfying the new requirements, especially in relation to reporting and contract management. The Act is part of a wider public procurement regime composed of the current Public Contract Regulations 2015, the NHS Provider Selection Regime and the new Procurement Act 2023, creating a large administrative burden for already stretched procurement teams. In addition, there is also a difference of focus between senior leadership and procurement leadership. Because of the lack of resources in procurement specifically, the procurement teams’ focus is often solely on compliance; leaving little headspace for transformation, even when senior leadership outside of procurement, are taking a more strategic view and pushing for change.

One way in which local authorities may start to transform is by procurement functions providing oversight, steer and advice to the wider business on contract management. With procurement functions taking a more ‘hands on’ approach with high value, service critical and complex contracts. For local authorities that haven’t done this already, this would be a transformational step towards bringing procurement closer to service delivery and ensuring its importance and value is better understood by operational leads.

Reach out to our procurement experts to learn how we can help you make the most out of the change of direction in the new Procurement Act.

We are currently helping numerous clients transform their procurement and realise significant savings while ensuring compliance. Reach out to our team below to discuss how we can help you:

Contacts:

Hari Pillai, Director, Local and Regional Director

Karen Tait-Lane, Procurement Lead

Avnish Patel, Global Procurement Lead