Regulated procurement | UK Regulatory Outlook February 2025

The Procurement Act goes live!  

The Procurement Act 2023 came into force on 24 February 2025 and applies, from this date, to new procurements commenced by contracting authorities for above-threshold contracts.  To help you navigate the changes, we have produced a series of webinars, Insight articles checklists and infographics, all of which can be found on our microsite. 

Government publish new National Procurement Policy Statement  

The government has published its new national procurement policy statement (NPPS) for contracting authorities. The NPPS outlines the government's strategic priorities and how these can be supported by public procurement. The new statement focuses on three main areas: driving economic growth, delivering social and economic value, and building commercial capability. See our Insight for more.  

New procurement policy statements  

The Cabinet Office, in order to support effective implementation of the new NPPS, has published two new procurement policy notes (PPN) on small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) procurement spend targets (PPN001) and on social value in the award of contracts (PPN002). 

The first policy note aims to help authorities meet the government's strategic priority of giving SMEs and VCSEs a fair chance at public contracts. All central government departments (including executive agencies and non-departmental public bodies) must set a three-year target for direct spend with SMEs from 1 April 2025 and a two-year target for direct spend with VCSEs from 1 April 2026 – and report results annually.  

The second note requires in-scope organisations (all central government departments, executive agencies and non-departmental public bodies) to take account of social value in the award of public contracts by using its social value model. They must apply this to procurements commenced under the Procurement Act 2023 on or after 1 October 2025. For procurements started before this date, organisations can choose to apply this policy note or continue using PPN 06/20 to take account of social value during the transition period. As with PPN 06/20, PPN 002 outlines that social value must be given a minimum 10% weighting of the total score. As with other PPNs, other contracting authorities may also choose to apply the approach set out in this PPN. 

The Cabinet Office has also reissued all other PPNs ahead of the Procurement Act 2023 going live. In an email update, the government confirmed that these updates do not change existing policy or require new actions and are simply to align to the Procurement Act 2023.  

Final government guidance under the Procurement Act 2023 published 

The Cabinet Office has published the final two pieces of guidance under the Procurement Act 2023: Electronic Invoicing and Payment and Payments Compliance Notices. 

Public procurement is at the core of the government's new AI opportunities action plan 

The government's new action plan for artificial intelligence (AI) opportunities places public procurement at its core, urging a unified approach across the public sector to scale effectively AI innovations. It proposes a long-term strategy for AI infrastructure, including AI growth zones and a 10-year investment plan. See our Insight for further details on the plan.  

In most cases, every "contracting authority" (for example, every local authority, NHS trust and utility) has autonomy in what it procures and how it procures it. This can make it difficult for new innovations to be rolled out at scale.  But as highlighted in the paper, the only way to deliver progress on the scale envisaged is for the public sector as a whole to adopt a more joined-up approach to procuring the best innovations. 

While there have been plenty of isolated examples of AI being used to incredible effect in the public sector over the last couple of years, there are relatively few examples of AI innovations being procured at a national level. The plan addresses this head on with some bold aims for public procurement. For it to work, it will need real buy-in from public sector bid teams across the breadth of public services. This is what the report means when it says, in the opening lines, that putting the plan into action "will require real leadership and radical change, especially in procurement". 

AI playbook issued for the UK government

The Cabinet Office has published a new AI playbook for the UK government. From a public procurement perspective, there is a clear push for contracting authorities to utilise existing Crown Commercial Service frameworks, dynamic purchasing systems and Memorandums of Understanding to procure AI. Suppliers should make sure they understand these existing procurement routes and keep an eye out for new standalone procurement opportunities. 

Court of Appeal clarifies when a contracting authority can seek clarification on tender errors 

The Court of Appeal has allowed an appeal brought by Optima Health, overturning a recent decision that the Department for Work and Pensions (DWP) had acted lawfully in disqualifying Optima from a procurement process. 

Optima's bid was rejected for being non-compliant with the DWP's requirement not to bid in excess of maximum unit sums in the framework agreement's pricing schedule. These errors in Optima's bid had an impact of just 0.02% on the evaluation of price, something which the DWP did not seek clarification on. Had it not been for these errors, Optima would have been the winning bidder, having scored the highest for quality. The High Court ruled that the DWP had acted lawfully, finding that its invitation to tender (ITT) clearly indicated that bids exceeding the framework maximum prices would be excluded. It also concluded that the DWP was not obliged to seek clarification from Optima regarding the errors and that seeking clarification would have breached the principle of equal treatment, as it would have unfairly benefited Optima over the compliant bidder. 

Optima appealed the decision, raising the following issues: did the DWP's ITT include a mandatory exclusion clause and was the DWP was entitled to seek clarification of the errors in Optima's bid? The Court of Appeal allowed the appeal, finding that the ITT did not contain a mandatory exclusion provision and that the DWP was obliged to seek clarification regarding the amounts in Optima's price schedule. In regards to seeking clarification, the Court of Appeal argued that the High Court judge failed to properly consider the principle of equal treatment and that, due to the errors being obvious and material, seeking clarification would not have breached the principle of equal treatment. It also concluded that disqualifying Optima was irrational and disproportionate due to the quality of their bid being much higher than others and the errors having very little impact on the overall tender evaluation. 

This ruling by the Court of Appeal will be of interest to both suppliers and contracting authorities as it clarifies when bidders can lawfully be excluded from a procurement. See our Insight for more.

English High Court lifts automatic suspension on £4.4bn NHS logistics service contract 

The High Court has lifted an automatic suspension in relation to a £4.4bn NHS logistics service contract awarded by Supply Chain Coordination to GXO Logistics UK.   

The judgment in Unipart Group & Anor v Supply Chain Coordination [2025] dealt with several claims brought in relation to the procurement by unsuccessful bidders Unipart Group, DHL Supply Chain and Wincanton Holdings.  

The court applied the test in American Cyanamid to determine whether to lift the automatic suspension, which includes consideration of whether damages are an adequate remedy for the claimant or defendant, and where the balance of convenience lies. It is typically difficult for commercial providers to demonstrate that damages are not an adequate remedy.   

While the court considered that damages would be an adequate remedy for DHL Supply Chain, it found that damages would not be an adequate remedy for Unipart due to the prestigious and high-value nature of the contract, Unipart's position as the incumbent provider, its smaller market presence and the complexity of calculating potential losses. The court noted that Unipart had only just crossed the threshold on the adequacy of damages.   

Despite this, it held that damages also would not be an adequate remedy for Supply Chain Coordination and that the balance of convenience lay in lifting the suspension, as delaying the new contract would significantly impact its broader modernisation programme, which is critical for the NHS.  

The outdated infrastructure based on a system known as RESUS faced increasing risks of failure, and the new contract was integral to addressing these systemic risks. Given the significant public interest in progressing the modernisation programme and ensuring the stability of the NHS supply chain, the High Court concluded that the balance of convenience favoured lifting the suspension. Consequently, Supply Chain Coordination's application was granted, allowing the new contract to proceed with GXO Logistics UK Ltd as the winning bidder. 

Government's response to the Grenfell Final Report

On 26 February, the deputy prime minister addressed parliament in response to the recommendations of the Grenfell Final Report. Simultaneously, the government published its formal written response to that report. Within this, the government announced that it will use new powers under the new Procurement Act to investigate Arconic, Kingspan, Celotex and four other firms to decide whether they should be debarred from the public procurement regime. For more on the report see the Health and Safety section.