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Forget MEAT, embrace MAT: A Charity’s guide to the Procurement Act 2023

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After some delay, the Procurement Act 2023 (the Act) finally looks to be coming into force next month. The Act represents a fundamental shift in how public sector contracts are procured and managed. So, with the Act’s looming arrival on 24th February 2025, charities are advised to dust off their procurement manuals (or perhaps create them for the first time!) and prepare for a new era in public sector contracting. This article provides a snapshot to help charities navigate this new landscape.

Why should the Procurement Act matter to charities?

Many charities, particularly those for whom public sector contracts are a crucial source of income, or those who need to commission public sector tenders, are already deeply engaged with the Act and will be in the process of bringing on board trained staff, procurement systems and consultants to ensure an effective handover at the end of February. However, of equal importance, the Act itself is a key opportunity for those in the charitable sector to bring forward ideas and plans to bid for work and gain an increasing share of the circa £300 billion spent by the UK Government each year on public procurement, using their charitable ethos, responsiveness and unique and deep knowledge of those they serve, and the domain in which they work to deliver on their charitable objectives for the public benefit.

What’s changed?

The Act itself consolidates and replaces the entirety of the old procurement regime. However, much of the detail of implementation will also be tied up in statutory instruments, policy and guidance, including the new National Procurement Policy Statement or ‘NPPS’ (more on this later).

For those of us experienced in the old procurement regime, the Act almost appears to be written in a different dialect, even if underlying concepts remain the same, for example a “dynamic purchasing system” becomes “dynamic markets”. This has raised questions of whether previous case law will be directly applicable to the Act, and it is certain that some of the detail and the kinks in the drafting will need to be ironed out by the courts.

Crucially however, the Act does not materially extend the scope of public procurement regulation to bodies that were not previously caught. Nor are certain financial thresholds immediately changing despite changes to the underlying regime for ‘exempt’ and ‘below threshold’ contracts (i.e. excluded from procurement rules or subject to more limited restrictions).

With the above generalities aside, we’ve noted below some key themes from the Act that may impact charities:

Charities as Contracting Authorities and as Suppliers:

As now, charities will fit into procurement either as the commissioners of goods and services (‘Contracting Authorities’) or as suppliers to public sector bodies. Contracting Authorities necessarily have to comply with the tendering and management requirements under the Act in procuring goods and services. Suppliers of course need to adhere to the Act, but primarily are responding to the notices and tenders issued by a Contracting Authority and dealing with the procedures governing them.

Some registered charities undoubtedly meet the definition of Contracting Authorities and will remain so once the Act comes into force. It remains important for all charities receiving significant public funds for a sustained period or oversight from another public authority, including from NHS Trusts, or who are otherwise carrying out a public function, to carry out a continued analysis of where they fall within the procurement regime and so whether they may be a ‘Contracting Authority’.

How can you know if you are subject to public authority oversight? Additional guidance issued with the Act suggests that simply being regulated by a public regulator (such as the Charity Commission for England and Wales, Scotland, or Northern Ireland) is insufficient to establish that the charity is subject to oversight, and is thereby automatically a “Contracting Authority”.  Instead a regulator would need to have further powers to direct the board or enforce binding decisions over it for the test to be met. The ability for a public authority to appoint and replace a majority of trustees or otherwise to assert majority management responsibility would also mean that test of ‘public oversight’ was met.

It should not be taken to mean, in the case of charities in the UK that the Charity Commission’s ability to replace a charity’s board of trustees, and having statutory powers over it, would, by itself, be sufficient to meet  the “Contracting Authority” requirement. On the contrary, guidance to date suggests the role of the Charity Commission regulator is not to be generally regarded as managing or controlling the charity, as this is left to the role of the trustees of a charity or its members for charities with a wider voting membership base.  Therefore something more would be needed for a charity to be considered subject to public oversight.

The rest of this article will examine some of the benefits the Act brings to charities that fall within the definition of a Contracting Authority, and to those charities that are bidding to provide certain goods or services to a Contracting Authority. In either case we think the Act can be a positive catalyst for change.

Opening Up the Market:

One of the key opportunities presented by the Act is that it now sets out a formalised procedure for Contracting Authorities to undertake proper market engagement, on notice and prior to contract tendering, aka ‘pre-market engagement’. Pre-market engagement can be used to help fact-finding, identify likely contractual terms, prepare tender notices and design procedures. Guidance proposes that such engagement could include anything from workshops to webinars to one on one meetings. The expectation is that the barriers that Contracting Authorities set up with their suppliers and the wider marketplace will be lifted significantly, reducing the ability of incumbents to crowd out other applicants. Charitable Contracting Authorities in particular could benefit from the less restrictive framework this offers, allowing them to shape their tenders based on better information and to draw on expertise from the wider sector.

Equally, Contracting Authorities are given the option of issuing ‘planned procurement notices’ to alert the market of an impending competitive contract. This is discretionary but allows the Contracting Authority to shorten the actual tender process, so may be expected to be used frequently once the Act embeds.

Charities who hope to be suppliers will therefore have a far better chance to see, plan and structure their engagement with public sector tenders. This additional foresight will help in marshalling resources and expertise, or indeed putting together consortia for bids, while also having greater flexibility in engaging with Contracting Authorities, giving them far better opportunities to make their case. Having greater foresight and market information will also potentially help charities better shape their offering to those they serve.

Even in cases where charities are not the Contracting Authority, in our view, charities should be doing more than being reactive to notices issued by Contracting Authorities as this is an opportunity to be involved in shaping the underlying services being provided (or being tendered for), and to bring a charity’s particular expertise, experience and local knowledge to the fore. With fewer barriers to engagement, charities will now have an opportunity to advise and support their Contracting Authority counterparts, helping to shape service provision, delivering knowledge and establishing themselves as important stakeholders in the contract bidding process.

Enhanced Transparency:

The myriad of notices that can or should be issued by Contracting Authorities are all part of the effort in the Act to create greater transparency in tendering contracts. Indeed, the Government has recently published details of the central procurement platform: the ‘Central Digital Platform intended to act as a central repository for tenders and related notices (including in relation to ongoing contractual performance). As the NCVO has already noted, this is likely to be of practical benefit for charities, who instead of having to navigate upwards of 60 different procurement systems, should be able to register once and not need to reinput their core bidder, or buyer, details every time.

Charities do of course still need to register and should do so as soon as it goes live. Guidance and further details are at https://www.gov.uk/government/publications/procurement-act-2023-short-guides/central-digital-platform-factsheet-html.

Significantly, the Act also sets greater responsibility on Contracting Authorities to respond to queries from bidders, and to notify them of any changes to tender processes (e.g. moving to a direct award). It is currently unclear whether Contracting Authorities have to do more in providing information to unsuccessful bidders, but the Act does suggest that even early stage bidders would need to receive a form of assessment summary.

Overall, the changes around transparency are likely to be of benefit to many charities, whether they themselves are the Contracting Authorities, or whether they are bidding for work with a Contracting Authority. In the latter case, charities should be better able to understand their progression through what can be a complex procurement process which in turn will enable them to refine their future bids. This will be an iterative process where charities can come to understand a Contracting Authority’s needs and language over time and respond to them. The main downside (for both sides) is likely to be the additional resourcing required to issue and/or monitor this flurry of publications and to respond to them. It may therefore be sensible to think about nominating or allocating someone to oversee and monitor these processes.

Procurement Objectives and Removing Barriers:

Contracting Authorities have always needed to have regard to overarching and external ‘objectives’, such as equal treatment and non-discrimination, as well as to Government policies. The Act now expands these objectives to mandate i) delivering value for money, ii) maximising public benefit; and iii) acting with integrity throughout the procurement process. This presents an opportunity for charitable Contracting Authorities to frame their own tenders and set their planned outcomes on a broader basis. It also allows supplier charities to argue more holistically that its bid not only meets its own charitable purpose and the public benefit, but it also meets wider social objectives. This can be achieved for example by arguing that the longer term interventions and support networks that many charities are known for, although more expensive, better maximise public benefit due to their longer term successes. Note also that these objectives extend throughout the lifetime of the relevant contract, and so must be considered even on contract termination.

There is also a requirement for Contracting Authorities to “have regard” to barriers to small and medium enterprises (‘SME’s’) in their participation in the procurement process. Contracting Authorities have to consider whether such barriers can be removed or reduced. Guidance around the Act suggests that this could include splitting larger tenders into more discrete lots and more practical steps such as not having prescriptive demands for information or short deadlines which would disadvantage smaller suppliers. While some charitable Contracting Authorities may consider the additional obligations here to add another layer of complexity to their tender processes, we think this should be considered an opportunity to consciously think about bringing in a wider range of talents, skills and experiences in contract delivery, opening the door to more social enterprise and charity partners.

It is more certain to be welcome news that bidder charities will be a major beneficiary of this facet of the Act’s changes. Whilst charities are not typically seen as pure commercial ‘enterprises’, charities can be categorised as SMEs under the Act and by some definitions more than 80% of charities registered in the England and Wales are in fact SMEs. Local and community charities in particular are likely to have greater opportunities to successfully bid for more manageable and discrete pieces of work, and the charitable sector generally should take this opportunity to make its voice heard and ensure that tenders are structured in a way that supports the wide diversity of charitable providers.

Under the Act, most tenders by Contracting Authorities (including those below the financial thresholds that trigger full procurement regulations) will also need to have regard to the National Procurement Policy Statement, setting out the UK Government’s strategic priorities for procurement. Unfortunately, as at the date of publication, no such statement exists as the new Government has withdrawn the draft prepared by the last administration and is planning to issue a new one setting out ‘”ambitious” new goals in line with its priorities. It is likely that a new statement will be issued on or about the 24 February. Do watch this space on this piece!

From “Most Economically Advantageous Tender” (MEAT) to “Most Advantageous Tender” (MAT):

You may think the title of this article is most befitting for Veganuary, but at the heart of the Act is the shift from Contracting Authorities needing to identify and award the ‘most economically advantageous tender’ (MEAT) to instead awarding the ‘most advantageous tender (MAT).

In practice, Contracting Authorities can move away from weighing bids primarily on cost effectiveness (generally, a price/quality ratio) to more qualitative assessments.  Under MAT, a Contracting Authority can consider, reasonably, what its requirements actually are, set them in transparent criteria and award to the bidder who best meets them. In theory, but almost certainly not in practice, price considerations could be heavily downplayed. Again, this is an opportunity for charitable Contracting Authorities to think about what they actually want from a tender and to set it out in language that extends beyond just a ‘nickel and dime’ criteria, in particular to think about non-pecuniary benefits including social cohesion and quality of life without relying on a reductive formula converting this to a financial ‘gain’.

What this means for charities bidding to provide goods or services to a non-charity Contracting Authority is that the latter can now consider the wider benefits for the community in awarding any contract, an area that members of the charitable sector clearly have a lead in and will help set them apart from non-charitable bidders. Charities should take this opportunity to emphasize and demonstrate their ability to, amongst other things, deliver local employment, community amenities and wider social objectives within their charitable objectives and making the case for a bigger picture assessment, including at the pre-market stage.

Allied to this, the concept of ‘social value’, much talked about in the charitable sector, is nodded to in the Act and was an underlying theme of the last Government’s National Procurement Policy Statement. Labour have advised that the idea of delivering social value will be reintroduced into the new NPPS in stronger terms. Where possible and relevant, charities should highlight and refer to its local authority’s social value statements and, over time, take into account the guidance issued by the Government under the Social Value Act as they may bolster the qualitative assessment and value for a charity bidder.

Flexible Tenders and Frameworks:

Under the Act, charities that are Contracting Authorities will have far greater flexibility in designing their procurement procedures, and with some constraints will be able to adapt and modify them even after they have commenced. There are significant technical details that will need to be considered, but in effect, Contracting Authorities can either choose to undertake a competitive tender by way of an ‘open procedure’ (a single stage, with no restrictions on who can submit bids) or by way of a ‘competitive flexible procedure’.

The competitive flexible procedure allows a Contracting Authority to design their own process, provided it meets the overall objectives under the Act (see above) and is done in a proportionate way. This is likely to include options for staging, limiting the number of lots a supplier can win and by refining award criteria, opening up choices for Contracting Authorities. In the context where charities are bidding to a Contracting Authority, they should be adaptive and responsive to bidding processes, giving feedback and advice and ensuring they are not inadvertently excluded due to badly designed competitive flexible procedures. In this context, there are also a couple of headline changes to the other forms of semi-competitive award:

  • Dynamic markets (aka ‘dynamic purchasing systems’) are no longer limited to commodity markets, and so could be introduced for other goods and services. Charities should make themselves aware of the specific requirements of this form of procurement, although they are unlikely to play an important role immediately.
  • Standard 4 year closed frameworks remain, but Contracting Authorities can also now create rolling ‘Open Frameworks’, whereby new suppliers can be introduced over time. Again, charities should make themselves aware of these frameworks (particularly ones crucial to their respective areas of work), diarise properly and as bidders, put themselves forward as required.

Complete Lifecycle:

As flagged above, the new procurement regime covers the entire contract lifecycle and there is an expectation that contractual performance will be continuously monitored up to the point of termination.

In particular, for competitive contracts with a value of more than £5m, Contracting Authorities will need to set at least 3 KPIs and publish performance against them at least annually. They must also publish contractual performance notices where a supplier either:

  • commits a breach resulting in termination, award of damages or settlement; or
  • fails to perform despite being given a proper opportunity to do so (i.e. persistent non-performance).

The Act also gives Contracting Authorities the discretionary right to terminate contracts, subject to the supplier making representations, in cases of breach of contract or poor performance, and also sets out mandatory grounds for termination, e.g. in cases of corporate manslaughter or theft or fraud.

In the context where charities are bidding to a Contracting Authority, this is expected to have a dramatic impact on them as well as other non-charity suppliers, who will have to consider the potential impact on their reputation of having notices published on the Central Digital Platform showing their non-performance. In some circumstances having a contract terminated may result in a supplier being removed from all future (and some current) tenders and contracts. This could have a major knock on effect, particularly on smaller suppliers.

For charities on both sides, guaranteeing compliance is likely to be a matter of making sure that any KPIs are negotiated on a realistic basis and ensuring their governance, procedures and policies remain up to scratch. It also means ensuring that responsibility for contractual performance and supervision is not siphoned from incumbent procurement and management teams, and that key team leaders keep ‘ownership’ of important public sector contracts.

What now?

This article cannot purport to set out in full the vast number of changes to public sector procurement that the Act will bring about. The Government has published helpful guidance for both Contracting Authorities and suppliers at https://www.gov.uk/guidance/the-official-transforming-public-procurement-knowledge-drops.  It also offers e-learning and other educational material for professional practitioners (including for the relevant teams within Contracting Authorities) that may assist understanding some of the core principles behind the Act.

Our team is also on hand to assist with any specific questions or to provide customised training based on your needs.

For many charities, some of the changes may be bewildering, particularly coupled with the new terminology and greater freedoms set out in the Act. However, as we have sought to explain above, the new procurement regime represents an exciting opportunity for charities to be at the forefront in winning public sector contracts, or as Contracting Authorities to shape them more effectively, and in so doing increase their impact and deliver on their objects. The Act is coming very soon, and all charities affected by it, whether as Contracting Authorities or as bidders it should be ready in enhancing training and compliance, preparing for new opportunities (including learning how to be ready to identify them) and building strategic partnerships within and across their sectors.

To hear the authors of this articles discuss the subject, listen to the latest episode of our Legal Perspective podcast, Charity Law Conversations: David Emery on the Procurement Act 2023.

If you have any questions about this article or on the issues that it has raised, please do contact its authors for further advice and support.

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