Not so simple

The UK is planning a pared back procurement regime. But could a less prescriptive approach result in a more complex landscape, asks Paul Jarvis

When the House of Lords held the second reading of the Procurement Bill in May 2022, the government touted the document as replacing 350 EU rules with a “simple and flexible system”.

At the same time, Steve Barclay, who was then Chancellor of the Duchy of Lancaster, said the bill would “do away with bureaucratic rules that are both complicated and time-consuming for firms to navigate”.

However, in a sign perhaps that creating a simple, one-size-fits-all procurement strategy may not be as straightforward as it sounds, by the time the bill reached the committee stage in the House of Lords in July, it was littered with amendments - over 50 of which were introduced by the government itself. As Lord Fox put it: “It is said that there is a productivity crisis in this country - not so in the Cabinet Office amendment-generation department.”

Under the proposals for the new regime, there will be just two routes down which public authorities can travel: a single stage open procedure for simpler, “off-the-shelf” procurements; and a second, somewhat broad option for the public sector to use “such other competitive tendering procedure as the contracting authority considers appropriate for the purpose of awarding the public contract”.

Given the nature of infrastructure developments, they are almost always likely to fall into the latter category, giving procuring authorities significant scope in how they approach the procurement of a multi-million-pound development.

The ambition to create a less bureaucratic procurement system remains generally popular. Investors, developers and the public sector can see the benefit of being able to go through a streamlined procedure that not only gets projects up and running more quickly, but also means costs can be kept to a minimum through shortened bid times.

“The OJEU process made it more cumbersome, so there should be some more flexibility,” says Zoe Watters, partner at PwC. 

The danger comes, however, in how that flexibility is applied, and whether local authorities and other public bodies are equipped to make decisions on how to run large scale procurements without having a clear structure in place to drive the process. 

As is often pointed out, an authority may only undertake one major procurement, such as a construction PPP or redevelopment joint venture, in a generation - meaning it is unlikely to find the expertise in-house to know and understand the best processes that should be followed.

“There is a fine balance between competitive procurement and being more flexible,” Watters adds.

Part of the problem at present is that there remains a lack of detail in the legislation as proposed. “At the moment it is a bit of a skeleton - quite a surprising amount of it relies on secondary legislation,” says Rebecca Carter, partner at Stephenson Harwood. “There are lots of areas where it says what the principles are but we will have to wait for the detail in the secondary legislation.”

When that secondary legislation is passed, that could create a litany of different pieces of legislation that need to be consulted to find the appropriate approach to any given procurement. 

More significantly, there are questions over whether the proposed changes will be successful in their aims of doing away with bureaucracy, as Barclay insisted.

“It makes the system more flexible but I'm not convinced it actually narrows down the options,” Carter continues.

In fact, it could substantially increase the range of options that a procuring authority faces when deciding how to proceed with a project. The concept of “other competitive tendering procedure[s]” clearly covers all routes used today, but it may also reasonably include a mix-and-match of existing procedures, resulting in new approaches: for example, a two-stage procurement that doesn’t have a statement of qualifications stage.

“This could be good, but if the intention is to make the system more efficient, it won’t do that because you will have divergence up and down the country,” says Carter.

As well as making life more difficult for bidders - by potentially requiring them to follow different procurement procedures every time they make a bid - the changes could result in authorities facing more legal challenges. Lawyers warn that the more user-friendly language of the bill might make it more accessible, but it also may mean the text is less “legally precise”, and therefore more at risk of challenge.

“The principles on discrimination are still there, but because the structure is not there, what constitutes something that is ‘fair’ is not clear,” explains Carter. “So it does increase the risk of challenge from unhappy bidders.”

While there is an expectation that authorities will embrace the freedom from the shackles of EU procurement rules, this feeling of liberation could be short-lived. As challenges potentially mount up, the new laws could inhibit authorities, rather than free them. 

“With challenges still looming large, will anyone want to be flexible?” asks Watters.

This is where the secondary legislation will be so important: it can potentially provide the clarity and precision required to clear up many of the uncertainties that the bill currently creates, and may help to reduce the risk of challenge and help ensure that procuring authorities feel free to use the flexibility that they have been given.

One area in which many practitioners are hopeful the bill will have a positive impact is around the question of how bids are evaluated. Whole lifecycle is now an issue that the procuring authority will consider for all contracts worth over £2m (perhaps a positive legacy of the PFI approach). Such contracts will require the authority to have at least three key performance indicators (KPIs), and their performance in relation to those standards has to be published annually.

From the public sector point of view, this could be a useful tool that helps free them from the constraints of simply taking the lowest bid. “We are seeing social value come in more already,” says one advisor. “It would be helpful to tie in Net Zero as well.” This is something that the new approach could allow for.

However, there are concerns that the private sector may not like this approach. “There is often a whole story behind the raw data that will be published,” warns one source. Carter adds that companies could be tempted to challenge the figures that are produced - which could seriously impact their reputation.

“In a complex joint venture, over many years, it is going to be difficult to set meaningful KPIs: in an old PFI it would be around the paymech, but in broader joint ventures that is going to be quite hard to do,” explains Carter.

It is also unlikely to create a harmonious atmosphere within a partnership.

Another effort to reduce the focus on price is a change in the language, taking procurements from the ‘most economically advantageous tender’ (MEAT), to simply the ‘most advantageous tender’ (MAT). The hope is that such a change could improve long-term value for money.

As Watters puts it: “Procuring authorities should be able to make the case that they want a bidder that is a bit more expensive, but better quality.”

However, not everyone is convinced that the legislation as currently planned delivers the change that is hoped for. “I’m not sure this is anything more than a linguistic change,” argues Carter. “The authority still has to set the award criteria and weight it. It will always want price in there to define value for money. So it will come down to how an authority weights its requirements.”

Nonetheless, stories abound of authorities - even those at a central government level - being given advice to the effect that they are required to choose the lowest bid in order to reduce the risk of a challenge. By making the MEAT to MAT change, the hope is that such a cautious approach will no longer be necessary.

The new bill is therefore some way from being a comprehensive document - and despite the efforts to create a new approach that is perhaps more conducive to more flexible partnerships between the public and private sector, there is clear concern that the apparently simplified approach will only lead to more complication. Time will tell whether secondary legislation can provide clarity and precision to the concept.