Regulated procurement | UK Regulatory Outlook January 2023

Procurement Bill

With the Procurement Bill starting its journey in the House of Commons in January, we can expect it to be enacted during the middle of 2023. The government has stated that there will be a six month period before its main provisions come into force, to enable contracting authorities and suppliers to prepare for the changes under the new regime. In a recent public session, it was suggested that the rules would be likely to come into force by early 2024.

The key changes brought about by the bill are currently expected to be:

• increased flexibility for contracting authorities designing tendering processes;
• broader transparency obligations, with the introduction of a number of new notice requirements;
• provision for ministers to make regulations instantly permitting direct contract awards for a class of contracts (such as personal protective equipment) where it is necessary to "protect life"; 

• a new exclusion and debarment regime (see our earlier Insight on this); and

• a greater emphasis on monitoring suppliers' performance during the life of the contract.

The bill was heavily amended during its time in the House of Lords (with a  large number of government amendments being made) and will be further scrutinised and amended during its passage through the House of Commons. Early indications suggest that hot topics in the House of Commons will be the impact of the bill on SMEs and the new transparency measures, as well as the interaction of the bill with the Health and Care Act 2022.

Social value

While a requirement to assess social value is not a new feature of the procurement landscape, it is an area which is continuing to mature as both contracting authorities and suppliers grapple with building relevant aspects into tender design and bids.

There is a risk that social value can become a tick-box exercise, but when done well it can be a catalyst to harness positive action and promote new contracts as opportunities to embed progress towards social value and sustainable goals. During 2023 we expect to see increasing market engagement with the challenges and opportunities of incorporating social value into procurement activity.

Net zero and carbon reduction

The UK has a target to be net zero by 2050 and the NHS has set itself a target to achieve this by 2040 in relation to emissions it controls directly. In order to achieve these challenging goals, significant changes will be needed now to secure long-term carbon reduction.

Although production of a carbon reduction plan is currently required only for central government procurements, many other contracting authorities are voluntarily incorporating them into tenders. Alongside the increased emphasis on social value, we expect the trend of carbon assessment and reduction will continue and expand.

The Retained EU Law (Revocation and Reform) Bill

The bill, if enacted as currently drafted, would lead to the repeal of the current procurement rules (which remain in place under the EU (Withdrawal) Act 2018) at the end of 2023. The Cabinet Office indicated recently that the Procurement Bill would not come into force until 2024 at the earliest. As a result, the current procurement regulations will need to remain in place beyond the end of 2023, but would be repealed automatically under the EU Law (Revocation and Reform) Bill.

However, there is provision within the bill for a minister to extend the application of EU-derived rules where needed. Therefore, the government could make rules to extend the current procurement regulations to cover this period before the new Procurement Bill comes into force.

Standing of campaign groups to challenge procurements may be further clarified

Over the past year there has been some clarification of the circumstances in which a campaign or interest group can challenge a procurement by way of judicial review, but the position may be developed further by various cases to be decided this year.

Numerous challenges were brought in the wake of the government's use of the direct award procedure to purchase personal protective equipment (PPE) at speed during the pandemic, including allegations of bias and failure to follow the proper rules.

In one of the first cases brought by the Good Law Project (GLP), a campaigning group, heard in February 2021 (R (on the application of Good Law Project Ltd) v Secretary of State for Health and Social Care), GLP was granted standing to bring the case alone, in a decision that may have opened the door to more challenges to government contracts by outside parties with no direct loss arising from breach of the procurement rules, thus increasing the risks attaching to higher profile government contracts.

Several further cases progressed during 2021 until, in late January 2022, the Court of Appeal stated obiter in R (Good Law Project) v Minister for the Cabinet Office (2022) that the position on standing of a campaign group to challenge was "ripe for review". In two subsequent decisions in 2022 the Administrative Court and the Technology and Construction Court both found that GLP did not have standing alone (Good Law Project & Anor, R (On the Application Of) v The Prime Minister & Anor (2022) and R (Good Law Project) v Secretary of State for Health and Social Care (“Abingdon”) (2022)).  We therefore expect that campaign groups are unlikely to seek to bring challenges alone in the near future and will need to seek litigation partners with a direct interest in a case.

Supreme Court decision awaited in PPE procurement challenge

The Supreme Court is due to hear the appeal in the Good Law Project (GLP) v Secretary of State for Health and Social Care and Pharmaceuticals Direct Limited (2022) this year, one of many claims brought by GLP concerning the award of contracts for PPE during the Covid-19 pandemic.

 While the Supreme Court will be considering the question of validity of service of the claim form, the substantive claim concerns allegations of breach of the principles of equal treatment and transparency in the context of Regulation 32(2)(c) and apparent bias. When the claim form was set aside by Mrs Justice O'Farrell in the Technology and Construction Court in 2021, GLP filed a new claim on largely identical grounds which was stayed pending the outcome of the appeals process. So, whichever way the Supreme Court decide the question before it, the substantive claim will continue.

However, GLP has a further significant hurdle to overcome if it wishes to proceed with its substantive claim, in addition to the matter of its standing discussed in the section above, following the recent decision by the Supreme Court not to hear its appeal in GLP v Minister for the Cabinet Office and Public First (2021).  As a result, the judgment of the Court of Appeal on apparent bias in a procurement context, which was firmly against it, still stands, arguably making its claim of apparent bias in this case untenable.

No cross-undertaking in damages required to be provided during suspension of contract

In Inhealth Intelligence Limited v NHS England (2022), a procurement competition was paused and the authority agreed to extend the automatic suspension preventing the contract from being signed until the liability trial is determined in early 2023.

On the basis that the authority had voluntarily agreed to pause the procurement competition pending the outcome of the trial to determine whether a bidder was unlawfully excluded, the court refused to require the claimant to give an undertaking to pay damages to the authority in the event that its challenge is unsuccessful. 

The authority asked the court to order the claimant to provide an undertaking in damages, as is routinely given in procurement cases where an authority and successful bidder might incur losses as a result of a contract being prevented from being signed. However, such undertakings are normally given as a precondition of an authority agreeing to suspend contract signature: in this case the authority had decided voluntarily to continue to suspend contract signature. Mr Justice Fraser highlighted that the court cannot order a claimant to provide an undertaking if it is not willing to provide one voluntarily, so in this case the authority had effectively missed the opportunity to obtain interim relief by way of an undertaking before agreeing to keep the suspension in place.