New NPPS sets out 'value for money' message for UK public procurement

A new national procurement policy statement (NPPS) has been published replacing the previous version published in May 2024, which was withdrawn in the autumn following the change of government.

The new statement sets out the government's policy on national priorities for public procurement. All public bodies procuring goods, works or services under the Procurement Act 2023 will need to "have regard" to the new statement that sets the future priorities for public sector purchasing.

The new NPPS comes into effect alongside the Procurement Act on 24 February.

New procurement priorities

The new NPPS sets out three main priorities for public procurement: driving economic growth, delivering social and economic value, and building commercial capability. Within each of these areas, it specifies what public bodies should consider in procuring and managing public contracts.

These new priority areas compare with the previous NPPS' focus on value for money, social value, small and medium-sized enterprises (SMEs), commercial delivery and skills and capabilities for procurement.

Driving economic growth

The NPPS requires public bodies to maximise their procurement spend with SMEs and voluntary community and social enterprises in order to drive economic growth and strengthen supply chains. This will increase opportunities for small businesses and social enterprises.

It requires public bodies to ensure their suppliers are committed to high-quality jobs and fair working conditions: Suppliers should provide good jobs, fair pay, and opportunities for progression.

Innovation is encouraged. The new NPPS wants public authorities to develop a "pro-innovation mindset" by engaging early with the market to consider innovative products and services and focus on challenges to solve rather than specific solutions to buy.

Delivering social and economic value

Another priority for public bodies is to secure social and economic value. They should support national missions and local growth plans by partnering with other authorities, the private sector and civil society.

Suppliers are expected to pursue ethical and sustainable practices. They will need to tackle bribery, corruption, fraud, modern slavery and environmental impact, as well as comply with legal obligations and eliminate late payment of invoices in supply chains.

Building commercial capability

The third priority is for public bodies to apply commercial best practices. In order to achieve this, they will need to follow the principles and policies in the government’s "commercial playbook" guidance that focuses on value for money and service quality.

Public bodies will need to benchmark their organisational capability and ensure procurement and contract management skills are adequate to deliver value for money.

They will also need to use collaborative procurement agreements, where appropriate for the requirement and the market, to ensure value for money, provided they comply with relevant legislation and good practice.

Procurement Act's role

The Procurement Act's requirement that all public bodies "have regard" to the NPPS is a statutory duty. Existing case law already confirms that this duty requires that the authority must take the guidance into account, proceed on a proper understanding of the guidance; and act in accordance with or give clear reasons for departing from the guidance.

While the authority is left with discretion as to how much weight it will give to particular policies within the NPPS, a clear justification would be required to step away from it altogether.

The Procurement Act regulates not only the award of public contracts but also their ongoing management and termination. The duty to have regard to the NPPS will, therefore, extend throughout the lifecycle of a public contract and should be considered by authorities when making decisions about contract modifications – and any discretions within the contract such as whether to exercise a right to extend the term.

'Social value' in procurement

The House of Lords, during the passage of the legislation, discussed whether "social value" priorities should appear in the Procurement Act. Parliament determined that the appropriate approach was to leave the legislation silent on this point and address more policy-focused matters in statutory guidance such as the NPPS.

The new NPPS, therefore, announces the government's position on social value and its role in public procurement. Social value, which is grouped with economic value, should support the delivery of the government's national missions, which include accelerating the transition to net zero, encouraging innovation and addressing skills gaps. To achieve these goals, the NPPS notes it will require working in partnership with other public bodies, the private sector, and civil society.

This is in addition to authorities ensuring that suppliers work to the highest standards of integrity, ethical conduct and environmental sustainability.

Cabinet Office PPN

Meanwhile, the Cabinet Office has published a revised procurement policy note (PPN) on taking account of social value in the award of contracts. The note provides further guidance on how public bodies should consider social value under the NPPS

The PPN must be applied 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 PPN or continue using PPN 06/20 during the transition period.

As with PPN 06/20, a minimum 10% weighting of the total score for social value must be applied. It also adds new requirements that all social value commitments by suppliers during the procurement process must be reflected in the contract either as contract terms, key performance indicators and regarding the advertising of any local jobs created. The note continues to reference the social value model as the template for assessment of social value.

Both PPNs are mandatory for central government departments, their executive agencies and non-departmental public bodies. Other public bodies retain a discretion as to whether to apply the PPNs and apply the minimum 10% weighting to social value in their evaluation.

Therefore, while not included in the Procurement Act, the emphasis on social value both in the NPPS and PPN 002 underscores its importance in public procurement.

Osborne Clarke comment

Suppliers should take note of the content of the NPPS as it provides a useful insight into the policy framework their public sector customers will be operating in under the new Procurement Act.

Any departure from the NPPS by a public body may be a starting point for a supplier to raise questions and ultimately consider a potential challenge against that decision.

Public authorities will need to act upon the requirements of the new NPPS when it comes into effect alongside the Procurement Act from 24 February.

Please visit our "Navigating the changes under the Procurement Act" microsite for our insights on the new regime.

If you would like to discuss any of the new developments raised in this Insight, please get in touch with your usual Osborne Clarke contact, or one of the experts listed below.