Anja Beriro
There is plenty to be done before the Procurement Act 2023 comes into force on 24 February – four months later than planned due to delays in distributing accompanying statutory guidance – but given the scale of regulatory reform, public authorities must already be thinking beyond this date.
While it’s important to get their house in order by reviewing governance procedures, template documents and skills pre-implementation, the biggest transformation will be in organisational culture.
One of the foremost changes in the Procurement Act – which unifies various regimes that regulate how the public sector purchases goods and services under a single framework that oversees public contracts, utilities, concessions, and defence and security procurement – is a new obligation, in most cases, to publish at least three key performance indicators for contracts exceeding £5m.
Given that supplier performance must be regularly assessed against these metrics, this marks a step change in the relationship between the procuring authority and supply chain.
Setting realistic KPIs
As part of a commitment towards greater transparency, procuring authorities are required to issue public information regarding a procurement exercise, such as tender notices or contract performance notices, from planning to contract expiry.
This places greater emphasis on proactive contract management across the entire lifecycle.
Inappropriate or burdensome KPIs could have a significant impact on the procurement process and contract delivery, with the new monitoring and publishing requirements making it more likely suppliers will push back if these aren’t reasonable.
It could also lead to post-award negotiations with successful suppliers or “in-term” modifications to correct problems, all creating potential delays and potential exposure to a procurement challenge.
Therefore, setting realistic KPIs, encouraging suppliers to engage on these during the pre-market engagement stage and sharing sufficient supporting information in the invitation to tender packs can reduce the risk of derailing the procurement at a later stage.
Proactive contract management
A major change in the Procurement Act relates to the consequences of poor performance. Under the previous Public Contracts Regulations regime, it was difficult to exclude bidders on this basis.
The new legislation introduces a central debarment list, allowing for the exclusion of suppliers based not just on their own performance, but also that of associated suppliers and subcontractors.
Such a visible penalty will clearly have a significant detrimental impact to both the reputation and business of suppliers, while the threat of this has the potential to cause friction between relevant parties.
The upstream result of all this is that procurement and contract management must be culturally embedded within procuring authorities, rather than treated in isolation. Given the greater transparency attached to KPIs and increased reporting requirements, changing targets midway through agreements is more onerous than previously.
Where contract modifications are required, it will be important to have proper processes in place to ensure any changes pass increased scrutiny.
Proactive engagement with suppliers, meanwhile, should help to identify problems before they materialise, offering the opportunity to improve performance where appropriate. This should support a productive and positive contractor-supplier relationship with mutual benefits.
Record-keeping is crucial
Authorities should therefore expect more disagreements over KPIs and performance-related issues, while mitigating against this by keeping adequate records throughout a procurement process and during the term of the resulting contract.
Notes relating to bid evaluations, contract modifications and criteria refinements – the Act allows enhanced flexibilities in the latter – are among those that should be logged to mitigate against any challenges from suppliers or unsuccessful bidders.
Ultimately, there should be a clear audit trail for every decision made during the entire procurement process. Should a dispute end up in court, retrospective notes of these steps won’t be received so well.
Likewise, once the supplier is “in contract”, keeping an audit trail of the supplier’s performance, particularly where it is below acceptable levels, will be crucial to support the annual rating of contracts that require KPIs to be published. Ensuring problems aren’t stored up, but shared in a timely fashion with the supplier, will also be key to maintaining a strong working relationship.
