Procurement Policy Note 05/21

This article was first published by Lexis Nexis (June 2020). The original article can be found here (subscription required).

Original news

PPN provides contracting authorities with guidance on National Procurement Policy Statement (NPPS), LNB News 03/06/2021 65
The Cabinet Office has published PPN 05/21, highlighting key considerations on the NPPS. Forming part of the government’s plans for ‘transforming public procurement’ in the UK, the NPPS sets out the national priorities for public procurement and actions to support their delivery. PPN 05/21 applies for in-scope authorities from 3 June 2021. See LNB News: LNB News 03/06/2021 65.

What are the main headlines from the new (NPPS?)

The NPPS was first referenced in the government’s Green Paper ‘Transforming Public Procurement’ that was published at the end of 2020. In this the government stated that the aim of the NPPS was to establish strategic national priorities that contracting authorities must focus on and to ensure that the power of public procurement is leveraged to support these priorities.

The NPPS, published alongside PPN 05/21 (containing guidance and explanation of the NPPS) applies to all contracting authorities as defined in section 39(3) and (4) of the Small Business Enterprise and Employment Act 2015 and whose functions are wholly or mainly reserved. This includes local authorities, NHS bodies, central government departments and the wider public sector.

The NPPS does not change the current procurement legislation. However, as set out in the Queen’s Speech in May 2021, the government does intend to bring forward a Procurement Bill to reform the UK’s public procurement regime and replace the current regulations, entailing a fundamental overhaul of existing public procurement law in the UK. The new Bill will require contracting authorities to have regard to the government’s strategic priorities for public procurement as set out in the NPPS. The Bill is expected to be published in the next six to nine months.

The NPPS priorities are split into three areas.

Social Value

• contracting authorities should take a broad view of value for money that must include improvement of social welfare or well-being. This includes incorporating award criteria for comparing bids that measure social value outcomes, where it is relevant to the subject matter of the contract being procured and it is proportionate to do so
• PPN 06/20 established the new Social Value Model that must be used by certain contracting authorities in all procurements, requiring a 10% weighting in evaluation criteria for social value. The government intends this to become a legislative requirement in the new Bill

Commercial and Procurement Delivery

• contracting authorities should consider whether they have the right policies and processes in place to manage the key stages of contract commercial delivery. The greater complexity, cost and risk, the more important a project or programme will be and the more robust and rigorous a process is required to successfully set up, procure and manage contracts relating to it. The government’s Sourcing Playbook and Consultancy Playbook provide additional detail on how procurements should be run
• there is a focus on the publication of procurement pipelines. The Bill will ensure that
  contracting authorities with an annual spend of £200m or more are required from April 2022 to publish procurement pipelines and to benchmark their procurement capability; contracting authorities with an annual spend of £100m or more are required from April 2023 to do the same

Skills and Capability for Procurement

• contracting authorities should carry out an analysis to ensure that they have the correct organisational capability and capacity with regard to procurement and commercial skills to deliver their procurement pipelines
• the NPPS also encourages contracting authorities to benchmark themselves annually against relevant commercial and procurement operating standards and other comparable organisations. The annex to PPN 05/21 states that the government will work with local government, NHS and other public sector bodies to develop a set of core commercial operating standards that can be used for benchmarking

What should contracting authorities be doing now to prepare to comply with their commercial delivery obligations?

The implication of the ‘Commercial and Procurement Delivery’ priority is that contracting authorities need to carry out a full review of their entire procurement and commercial structural function and skills capabilities. This needs to be carried out alongside ensuring that the procurement pipeline is understood and being planned for.

Checking that current published guidelines and reporting obligations are being complied with is also key, including the Sourcing Playbooks, use of Should Cost Models, Modern Slavery Statement requirements and the Local Government Transparency Code 2015.

Although the use of the Social Value Model and application of PPN 06/20 is not yet mandatory outside central government and NDPBs, all contracting authorities are likely to have to comply when the new Procurement Bill is passed. Therefore all contracting authorities should be considering/including social value requirements and appropriate evaluation criteria in their future procurements.

Of immediate relevance, contracting authorities should consider the following national priority outcomes in the course of their procurements:

• creating new businesses, new jobs and new skills in the UK (for example, by helping new and/or small businesses grow, increasing employment opportunities where there are barriers or for those located in disadvantaged areas, and offering training opportunities)
• tackling climate change and reducing waste (such as contributing to the reduction of greenhouse gas emissions to net zero, reducing waste, and prioritising sustainable procurement)
• improving supplier diversity, innovation and resilience (so as to better support start-ups, SMEs and VCSEs, to increase innovation, and to modernise delivery and increase productivity)

What difficulties/opportunities do you envisage for contracting authorities in the short to medium term?

Some of the key stages highlighted in the NPPS include:

• the use of ‘pilots’ (particularly where a service is to be outsourced for the first time)
• market health and capability assessments
• delivery model assessments; the use of ‘Should Cost Models’
• the assessment of the risk of a supplier going out of business during the life of a contract

Many contracting authorities outside of central government will not have had to work through these practices and stages. Accordingly, a lack of skills and experience in procurement and commercial functions will be a difficulty in the short to medium term.

The opportunity is that through the NPPS contracting authorities are being given a clear mandate to invest in commercial and procurement functions in order to deliver on the NPPS requirements.

What difficulties/opportunities do you envisage for bidders in the short to medium term?

The NPPS is not focused on bidders, although it provides very helpful insight into how to engage with contracting authorities at pre-procurement market engagement stage and where the public sector focus will be in evaluating tenders.

The requirement to publish procurement pipelines will be helpful for bidders to prepare for contracting opportunities coming to market. The focus on the delivery of social value through public contracts is only going to increase. Bidders who want to succeed in winning public sector contracts should ensure they understand their compliance with social value obligations such as delivering net carbon zero by 2050 and eliminating modern slavery in supply chains and can evidence these when required to do so in procurements.

What is your overall view of the new NPPS? Will it deliver on the governments promises on greater flexibility and less bureaucracy?

The NPPS is a strong reflection of the government’s post-Brexit and coronavirus (COVID-19) recovery agenda. It also reflects the ongoing fall out from high profile public procurement failures, including Carillion, the Report of the Holliday Inquiry into the failed award of the Magnox Decommissioning Contract and the ongoing focus on the lack of transparency in the award of PPE contracts during the coronavirus pandemic.

The NPPS contains several well-established concepts and principles, but is looking to give them a wider application across the public sector. While the Annex to PPN 05/21 provides some links to tools to support contracting authorities deliver on the NPPS, there is no mention of extra funding or training to help the wider public sector outside central government to meet the desired policy outcomes.

The Procurement Bill will be where we see whether the government will deliver on its desire to have greater flexibility and reduce bureaucracy in public procurement. However, the NPPS gives all contracting authorities plenty to be implementing even before the wholesale change to procurement law that is to come.