When should a supplier consider seeking advice on its rights under the Procurement Act 2023 (the “Act”)? In our experience, suppliers often do so too late and many decent claims do not progress because they are wholly or partly time-barred.
In this article we identify the important stages of a procurement; the enforcement process under the new Act; and the key pressure points in the process when suppliers may wish to consider their rights if they want to be sure that these are fully respected. Given the tight timescales to bring a challenge it is important for suppliers and those advising them to consider the potentially fertile ground for challenges throughout the full procurement process. If a would-be supplier is being adversely treated in the procurement process, it will nearly always be necessary to act within the short time limits. Those time limits are tighter than under previous law: a claim must still be brought within 30 days from the day on which the supplier first knew or ought to have known about the circumstances giving rise to the claim for most challenges (ss.106(1) and 65(2)(c)) but there is now only an eight day standstill period (for interim relief against debarment, s.63(2) and on award, s.51(2)).
Initial Design of a Covered Procurement
Is the Contract Covered by the Act?
The first pressure point occurs when a supplier becomes aware that a contracting authority intends to award a contract, regardless of whether it is treating the Act as applicable. The Act applies to a category of procurements referred to as Covered Procurements. These are subject to the Act under s.11, and authorities must award public contracts in compliance with the duties created by s.19 (when running a competitive tendering process); ss.41 and 43 (when making a direct award); and s.45 (when making an award under a framework).
When the authority takes the view that the Act applies it must publish a notice which publicises its intention to make an award of a contract under it. A supplier will likely be assumed to have become aware of the intention as a result of this notice. Notices include a planned procurement notice setting out the authority’s intention to publish a tender notice (s.15), or a notice of a preliminary market engagement (as defined in s.16). The authority must publish a preliminary market engagement notice before publishing a tender notice, or explain why it did not given that notice in the later tender notice (s.17). Suppliers may also become aware of an intended award through wider market intelligence. Even at this stage the content of the notices may indicate features of the proposed procurement which are adverse to a would-be supplier’s interest in winning the contract, and if so the challenge will have to be made at this stage.
By contrast, there may be no formal notice of an authority’s intention to award a contract that it considers is outside the scope of the Act (e.g. is below the applicable threshold value or is an exempted contracted, under s.3 and Schedules 1-2 to the Act). A supplier should be alert to any information it receives that indicates such a development. Avoidance of the application of the Act may itself be cause for concern if that is done to prejudice the supplier.
There might therefore be numerous questions to consider.
Does the contract fall within the definition of “public contract” in s.3?
- Is it a contract for the supply of goods, services or works to an authority (s.3); a framework (as defined in s.45(2)); or a concession contract (as defined in s.8(1))?
- Has the authority assessed the estimated value of the contract correctly in accordance with the Act? Or has the value been estimated so as to secure that the Act does not apply, in breach of s.4(3)?
Unfairness from Preliminary Market Engagement
A second potential pressure point arises if the authority engages in preliminary market engagement to design the procurement process. If a supplier’s participation in any such engagement has put it at an unavoidable unfair advantage in relation to the award of the contract, the authority must exclude that supplier from the tender under s.16(4)-(5). Suppliers may therefore seek to keep up to date with market engagements whilst themselves being careful as to the content of their participation.
If a supplier considers that another supplier should be excluded, it may be necessary to seek sufficient information to build the basis of a challenge. There can be serious obstacles to doing this given confidentiality issues which may arise. Time may be still be running on any challenge in the meantime so prompt action is needed.
Design of Competitive Procurement and Procedure
The third pressure point may arise when the initial tender document in a covered procurement is published. The authority is subject to duties to achieve certain objectives and to consider certain matters when designing the process – failure to comply with these duties offers possibly fertile grounds for challenge, in particular regarding the s.12 duties described below.
For example:
Has the authority had regard to the importance of: delivering value for money; maximising public benefit; sharing information to enable others to understand its procurement policies; and acting and being seen to act with integrity, as required under s.12(1)? There may be opportunities for suppliers to argue that such objectives constrain the previously wide margin of discretion enjoyed by an authority in designing and setting award criteria under the old body of caselaw. If that affects a supplier’s prospects in the procurement, perhaps there will be grounds for challenge?
Has the authority considered whether the contract or the goods, services or works could reasonably be awarded by reference to lots (s.18)?
Has the authority had regard to barriers to participation for SMEs and considered whether those barriers can be reduced or removed (s.12(4))?
Has the authority had regard to the matters set out in s.54(1) when setting time limits for the procurement?
Has the authority considered any incumbency advantage, if relevant?
If an authority is using the competitive award procedure under s.19, additional potential avenues for challenge may include:
Has the authority ensured that the procedure is a proportionate means of awarding the public contract, having regard to the nature, complexity and cost of the contract (s.20(3))?
Are the conditions (if any) of participation proportionate for ensuring suppliers have the legal and financial capacity or technical ability to perform the contract (s.22)?
Is the tender notice sufficient under s.21(5)? It must contain sufficient information to allow suppliers to prepare a tender. That information must be sufficiently clear and specific (s.21(6)).
Has the authority satisfied itself that the award criteria meet the requirements in s.23(2), i.e. the criteria relate to the contract subject matter; are sufficiently clear, measurable and specific; do not break the rules on technical specification in s.56; and are proportionate?
Suppliers can expect authorities to keep a record of these matters. Failure to do so may harm an authority’s defence. They may therefore, as a practical step, consider seeking early disclosure to test and develop a potential challenge that the procurement design breaches the rational limits of consideration, or indicates no consideration, of these matters.
Processes to Award a Public Contract
Publishing an Award
The fourth pressure point may occur when the authority publishes its contract award notice. Such a notice is required for all public contracts (s.50(1)), except those awarded under defence and security frameworks, and direct award user choice (s.50(6)).
The publication of the notice starts an eight-day standstill period under s.51 (except for certain excluded contracts) during which the authority cannot enter into the contract. This provides a crucial opportunity to bring a challenge where a supplier can seek remedies of award of the contract or a rerun of procurement, rather than being confined to damages. A claim filed within the standstill period will engage the automatic suspension, under s.101(1), preventing the authority from entering into or modifying a contract whilst proceedings are ongoing – subject to any application to lift by the authority to change that position.
Following a competitive tender process, the authority must provide an assessment summary to each supplier that submitted an assessed tender before publishing the contract award notice under s.50(3). That summary must set out information regarding its assessment of the tender and, if different, the most advantageous tender submitted for the contract.
At this stage of the process, suppliers may wish to consider the following questions:
Has the authority published a contract award notice and set time running for limitation?
Has the supplier received the assessment summary prior to the contract award notice? Does that summary contain the information required by Regulation 31 of the Procurement Regulations 2024, such as for example the requirement to explain how the tender was assessed by reference to each sub-criterion (Reg 31(2)(e)(i)(bb))?
The duty on authorities to have regard to sharing information and to act with integrity when carrying out a covered procurement under s.12(1) underlines the importance of disclosure under the new regime and may assist challengers. Seeking disclosure at an early stage, particularly on review of the assessment summary, is likely to be as important in challenges under the new Act as it was under the old regime.
To take the benefit of the automatic suspension, it is necessary to issue proceedings within the standstill period and to notify the authority. However, there is no longer a provision mandating service of any claim form within seven days, and therefore particulars of claim are no longer required within seven days of issue. Therefore, the usual rules under the CPRs apply. Although an authority may apply for early service of the claim form, the default position would that there are four months for service. This may provide challengers potentially more breathing space to get information from disclosure to reach an informed view on the merits, or even discussion between the parties.
Challenge to Covered Procurement
The fifth pressure point arises in relation to the evaluation and outcome of the procurement, particularly in the competitive process. Based on the assessment summary provided and any early disclosure, grounds of challenge may arise from investigating the following issues:
Has the authority complied with its duties under s.12(1) in carrying out the procurement?
Has the authority had (rational) regard to barriers to participation of SMEs and their reduction or removal under s.12(4)? (This may refer back to points that have arisen earlier in the process – suppliers should be quick to act on their first knowledge).
Has the authority breached its duty of equal treatment, including to take all reasonable steps to ensure that any purportedly justified unequal treatment does not put a supplier at an unfair (dis)advantage under s.12(2)-(3)?
Has the authority failed to disregard excluded or excludable suppliers (see next section)?
Has the authority failed to disregard any tenders that are abnormally low (s.19(3)(c)), or wrongly determined a tender is abnormally low? Has it notified the supplier in advance that it considers the price to be abnormally low and given the supplier a reasonable opportunity to demonstrate that it is not, as required under s.19(4)?
Has the authority disregarded tenders in breach of any of the procedural requirements set out in its tender notice document (s.19(3)(d)) or failed to disregard a competitor’s tender that does not meet conditions of participation (s.19(3)(a))?
Direct Award Without Competition
In special cases, an authority may award a public contract directly. Direct awards provide a possible sixth pressure point. S.41 allows a direct award to be made to a supplier on the basis of the justifications set out in Schedule 5. If the authority has avoided a competition by relying on one of them it would therefore would be a fertile ground for challenge if the justification is not properly made out.
Ministers may also make regulations providing for a direct award if it is necessary to protect human, animal or plant life or health, or to protect public order or safety (s.42), although none are in force at the time of writing.
An authority may switch to a direct award if it ran a competitive process, received no suitable tenders or requests in response, and it considers an award under s.19 is not possible in the circumstances (s.43).
Where an authority makes a direct award, suppliers may wish to consider the following matters:
If the authority has published a transparency notice as required by s.44 before making a direct award, does it properly set out the authority’s intention to make a direct award and any other information specified in Procurement Regulations 2024/692 (noting in particular Regulations 5, 26 and 35)? If there is a failure to publish a transparency notice but market intelligence or other sources indicate that it ought to have done so, a supplier could also consider seeking to challenge such failure.
Is the direct award of the contract justified?
Dynamic Markets and Framework Agreements
The sixth pressure point may arise in relation to the establishment of a dynamic market. These are a new form of commercial agreement, set up under s.35, comprising of a list of qualified suppliers who are eligible to participate in future procurements with the flexibility to be utilised for a range of goods, services or works. An authority may set conditions for membership of the market, provided the conditions are a proportionate means of ensuring members have the legal and financial capacity or the technical ability to perform the contracts under s.36. That provision also places limits on the conditions an authority can set (e.g. it may not require insurance relating to the performance of the contract before its award). An authority must publish a notice before and as reasonably practicable after establishing a dynamic market, as well as if it makes any modifications, in accordance with s.39.
Where a dynamic market or membership of it may have implications for a supplier’s business, it may wish to consider whether the authority has complied with its obligations around the publication of notices, setting of conditions for participation or application of those conditions.
Awards under frameworks provide a seventh potential pressure point. Under s.47(1), frameworks can be set up for a maximum of four (or, in the case of defence and security or utilities frameworks, eight) years. An authority can grant a framework for longer if it considers the nature of the goods, services or works require a longer term – it must set out such reasons in the tender or transparency notice for the framework (s.47(2)-(3)).
Frameworks must provide for the future award of contracts following a competitive selection process (s.45(3)), unless the exceptions in s.45(4) apply (i.e. one only supplier is party to the framework, or the framework sets out the core terms of the public contract and an objective mechanism for supplier selection). Where a competitive selection process is used, and it provides for conditions of participation, the authority must be satisfied the conditions proportionate (s.46(1)).
Therefore a supplier may wish at this stage to consider:
Has the authority met the requirements in s.45(4) if it seeks to award a contract under a framework without competition?
Has the authority considered and rationally concluded that the conditions it has set for a competitive selection process meet the requirements in s.46?
Exclusion and Debarment
Exclusion
The new Act expands the supplier exclusion regime, which provides various further possible pressure points.
Within a competitive process, authorities must disregard tenders from an excluded supplier (s.26(1)) and may do so for an excludable supplier (s.26(2), s.26(3)). This also applies to associated persons i.e. persons that the supplier is relying on in order to satisfy the conditions of participation (s.26(4)), as well as subcontractors, who must be excluded if they meet the definition of excluded or excludable suppliers (see s.28(4)). There are equivalent provisions for other procurement processes at s.27 (for the competitive flexible procedure), s.37 (for dynamic markets – a direct award can only be made to an excludable supplier if there is an overriding public interest in doing so) and s.48 (for framework agreements).
A supplier is an excluded supplier if they meet the requirements under s.57(1):
– a mandatory exclusion ground applies to the supplier or an associated person or (where relevant) a connected person (as set out in Schedule 6) and the circumstances giving rise to its application are continuing or likely to occur again;
– or the supplier or associated person is on the debarment list by virtue of a mandatory exclusion ground.
Note that mandatory exclusions extend to equivalent convictions abroad (para. 34 of Schedule 6).
A supplier is an excludable supplier if the authority considers that a discretionary exclusion ground applies to the supplier or associated person or (where relevant) a connected person (as set out in Schedule 7) and the circumstances giving rise to its application are continuing or will likely occur again – or the supplier or an associated person is on the debarment list by virtue of a discretionary exclusion ground (s.57(2)).
Therefore, bidding suppliers can be an excluded or excludable supplier even where the bidding entity itself is not tarnished but as a result of the status of associated persons and sub-contractors. Moreover, each of those entities may be an excluded or excludable person by virtue of a connected person. As such, authorities are expected to undertake wide due diligence on the question of excludability (see para. 54 of the Cabinet Office Guidance on Exclusions Guidance (Exclusions (HTML) – GOV.UK). For example, authorities are required to gather information about sub-contractors relied on in the tender and must determine if they are on the debarment list. Authorities may also take steps to identify if the sub-contractors are excludable or excluded (s.28).
Additionally, authorities can treat a supplier as an excluded supplier if they determine that it has acted improperly in relation to the award of a public contract so it is put at an unfair and unavoidable advantage (s.30).
Pressure points that a supplier may therefore wish to consider at this stage:
What due diligence has the authority undertaken on the suppliers?
Has the authority considered if a competitor supplier is excludable, or excluded?
Is the authority’s decision on excluded or excludable suppliers (and the consequential exclusion or failure to exclude) rational?
Has the authority given the requisite notice if it has excluded a supplier on the basis of e.g. national security (s.29(2)); improper behaviour (s.30(3)); an associated person or sub-contractor (s.26(3), s.27(4), s.28(4))?
Debarment
Pursuant to s.60, a Minister of the Cabinet Office may consider whether to launch an investigation into adding a supplier to the debarment list. This offers a distinct potential pressure point, and the possibility of bringing a judicial review claim against a decision to investigate a supplier, or a failure of the Minister to do so.
After investigation, under s.61, the Minister must prepare and publish a report setting out whether they are satisfied that the supplier is an excluded or excludable supplier; the grounds for that decision; the date they expect the ground will cease to apply; and whether the Minister intends to make an entry to the debarment list (s.61(3)-(4)). Where a Minister adds a supplier to the debarment list under s.62, then, as above, authorities are to treat them as an excluded or excludable supplier within procurement processes, as applicable. However, a Minister cannot add a name to the list before the end of a standstill period of eight days from when they give notice to the supplier of their intention to add them to the list. This is plainly a critical pressure point during which a supplier may file an appeal under s.65 against the decision, in order to prevent such entry. The appeal can only be brought on the basis of a material mistake of law (s.65(2)).
Conclusion
This overview of critical key stages of the procurement process illustrates the myriad opportunities for suppliers to consider their rights and explore challenges under the new Act.
Instead of waiting until a procurement has produced a negative outcome, suppliers are likely to be in a stronger position if they are alive to the new and important pressure points, and engage with strategic advice at an early stage to best protect, and enhance, their position.