Public sector procurement is a vital aspect of managing resources efficiently and ensuring value for money in various governmental and public institutions. For educational establishments such as schools, academies, and further education colleges, adhering to procurement regulations is critical to maintaining compliance, transparency, and accountability.
Earlier this year, after several false starts and delays significant legislative changes were introduced, notably the transition from the Public Contracts Regulations 2015 to the Procurement Act 2023 and Procurement Regulations 2024.
This article aims to explore the key differences between these two sets of regulations and their specific implications for educational institutions.
Background and Previous Rules
Until this year the rules for public sector procurement, and therefore the rules that applied to schools, academies and FE colleges were incorporated into the Public Contracts Regulations 2015.
The Public Contracts Regulations 2015 were established to incorporate EU Procurement Directives into UK law (and the EU directives were broadly to enact key World Trade Organisation rules).
Key features of these regulations include:
- Threshold values: Contracts exceeding certain monetary thresholds must follow specific procedures.
- Transparency: Requirements for advertising contracts and publishing key information.
- Competitive tendering: Encouraging open competition among suppliers.
- Regulation of procurement processes: Detailed rules governing various stages of procurement.
- Framework agreements: Allowing repeated procurement from a pool of pre-approved suppliers.
These regulations aimed to standardise procurement practices across the public sector, ensuring consistency and adherence to EU principles.
The thresholds were updated roughly every two years and at present the value for goods and services stands at £214,904 including VAT. Other thresholds exist for other types of procurement but we will focus on goods and services here.
An interesting side note, following Brexit there was an opportunity for government to change the procurement rules but instead the only main change was to update the thresholds to be inclusive of VAT, previously they had been exclusive. The net result was that this lowered the threshold slightly bringing more into the regulated procurement net.
Although the legislation is clear, a number of schools and academies and even some colleges failed to adhere to the regulations and instead followed their own financial regulations. For procurements under threshold this is fine but would have left them open to legal challenge for anything over threshold that wasn’t procured correctly.
Although the figure may seem high enough to not concern many education providers it is worth saying that this relates to the total contract price and so when we get into longer contracts it can easily start to apply. For a 5-year contract for example this would be £36k excluding VAT per year.
One of the main ways that above threshold procurements have been achieved in a compliant way is to use framework agreements. These are available from a number of sources, both public and private sector, and cover most areas of procurement. Frameworks use open, PCR2105 compliant tender processes to create a pre-selected group of organisations that can then be selected either for a direct award or further competition for specific requirement.
Frameworks feature heavily in the DfE guidance for schools, academies and colleges; to the extent that they are even suggested for below-threshold procurements in some cases.
As an aside, the use of direct award is often at odds with organisations financial regulations which requires competition. This can cause issues as a number of frameworks, notably the GCloud framework for cloud-related services, is direct award only and so to take advantage of this approach financial regulations may need to be updated.
Procurement Act 2023
The Procurement Act 2023 (“the Act”) marks a significant shift in UK procurement legislation, following Brexit and the need to tailor regulations to domestic priorities. As procurement policy is devolved what follows relates to England although there is close alignment across the devolved nations.
Key features of the Procurement Act 2023 include:
- Greater flexibility: Simplified procedures for lower-value contracts.
- Enhanced transparency: New requirements for reporting and accountability.
- Focus on innovation and social value: Encouraging procurement that drives innovation and delivers social benefits.
- Streamlined processes: Reduction of administrative burden and more efficient procurement cycles.
- Local supplier engagement: Promoting opportunities for local businesses and SMEs.
The Procurement Act 2023 aims to make procurement processes more agile, responsive, and aligned with UK-specific economic and social goals.
The Act supersedes PCR2015 and a number of other prior legal frameworks relating to specific areas such as utilities and defence spending bringing almost all public procurement under the same set of rules.
Under the Act there are now two processes that can be used to procure above threshold elements;
- Open – a single-stage procedure that is closely related to the PCR2015 open procedure
- Competitive Flexible – a multi-stage process that can include stages for demonstrations, presentations, negotiation and other dialogue. An interesting departure is that under some circumstances the Competitive Flexible process can be amended, both process and award criteria after initial bids have been received.
Perhaps one of the most striking changes to the Act is that there is a subtle but important change in terms of how bids are assessed. Under PCR2015 this had to be Most Economically Advantageous Tender and one of the criticisms is that this led to price being the primary factor over other potential benefits (although through weighting of criteria it was never necessary that price was the only factor). Under the Act, this has now evolved into Most Advantageous Tender with the aim of allowing for contracting authorities to consider wider benefits of a bid, including elements such as local economic benefits, environmental and sustainability issues and local employment needs.
Another key change is an attempt to make it easier for Small Medium Enterprises (SMEs) and Voluntary, Community, Social Enterprises (VCSEs) to bid for public contracts. Historically the combination of size of contract and sheer amount of effort and skill needed to respond effectively ruled out SME and VCSE involvement.
Amongst the measures to encourage a wider involvement of those sectors include;
- A responsibility to meet a 30-day payment term throughout the supply chain
- A duty for contracting authorities to actively remove obstacles to smaller organisations taking part in a procurement, particularly to consider if a contract can be broken into smaller lots and a duty to explain decisions where that isn’t the case
To enhance transparency, the central digital platform (Find A Tender) has been updated and includes a simplified registration system, again to encourage more SMEs and VCSEs to register for opportunities. All procurement above threshold must be notified on Find A Tender and the Act also includes a duty in some cases to notify a pipeline of upcoming procurements and there is also a stronger need to engage with potential suppliers at the earliest possible stage for a requirement. Such pre-market engagement has always been seen as best practice but under the Act this is now a requirement.
For most public sector organisations there is also a duty to notify via the central digital platform for what are known as below threshold procurement which we will look at later.
Continuing on the theme of transparency, the Act now introduces a requirement for contacting authorities to publish KPIs for managing a wide range of contract types and value at the time of procurement and for suppliers to report publicly on the performance against these KPIs as part of ongoing contract management.
Authorities must also publish notices outlining why contracts have been terminated and why tenders are withdrawn prior to award.
Under the Act there is now a centralise debarment mechanism. There are two lists, one for Excluded Suppliers for whom tenders cannot be accepted and Excludable Suppliers for which tenders may be ignored.
There are a range of reasons why organisation may end up on the list including the broad Improper Conduct category which can include attempts to influence decision making, failure to provide true information, including partial information that is misleading and accessing confidential information improperly. These debarments also apply should a bidder involve subcontractors and the contracting authority should ensure that they check this as part of the bidding process.
Earlier we touched on so called below threshold procurements. For most public sector organisations, requirements that are below the primary threshold but above a defined value (for central government £12,000 and for wider bodies £30,000) still need to follow a subset of the Act processes, including notification to Find A Tender. The aim again is to widen participation and to open those procurements beyond a contracting authorities usual supplier base.
However, it is worth noting that schools, academies and colleges are exempt from below threshold requirement with a specific exemption within the legislation. What constitutes an exempt organisation is defined in section 123 of the Act.
Impact on Education
So, what is the impact on education providers of these changes? The exemption from below threshold requirements means that in pure legal terms the answer may be very limited. The vast majority of procurements will fall into the below threshold category (indeed across the public sector as a whole around 70% are in this category) which means that current approaches are consistent with the Act.
Any above threshold procurements must now follow the Act processes. However, Framework Agreements are still a compliant route to market and will often be a simpler process than undertaking a full Open or Competitive Flexible process, especially for organisations without the internal skills for such an approach.
Although frameworks provide a simpler route to market they fail to address the issue of widening the pool of potential bidders and there is an interesting dynamic here as the DfE will guide schools and academies in particular to use frameworks for both above and below threshold procurements which as at odds to the wider aims of government procurement policy.
While there isn’t necessarily a legal requirement, many of the processes within the Act represent best practice in terms of procurement and education providers should strongly consider whether their financial regulations and procurement policies would benefit from an update to include elements such as MAT over MEAT, active pre-market engagement and widening the bidder pool by considering broader benefits and local impacts as a factor.
Another potential change to financial regulations relates to direct award via frameworks. This is often either not addressed or not allowed by traditional financial regulations but provides a cost effective route to market across a range of goods and services. A number of key government frameworks (notably the GCloud framework that covers a wide range of cloud and digital services) are direct award only.
More information on the Procurement Act 2023 can be found here and regular updates to guidance via procurement policy notes can be found here.
If you need any help or advice on procurement matters, especially related to IT, Digital and Systems, please drop us a line.
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