Public service schemes: Ready for the procurement revamp?
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
An overhaul of procurement laws will mean public service schemes will need to design their own competitive procedure, making the task potentially much more onerous. The bill could also introduce supplier exclusions based on past poor performance for five years with information being shared between authorities.
A third of all public expenditure, around £300bn a year, is made through public procurement. After the UK’s exit from the EU, government consulted on reforms to public procurement in 2020 and has now published a draft procurement bill, announced in the Queen’s Speech earlier this month. The bill will change how public sector bodies – including pension funds of local authorities, teachers, the NHS, the civil service and others – award contracts from asset management and pension administration to cleaning services.
The government says it wants “to speed up and simplify public procurement processes, place value for money at their heart and create greater opportunities for small businesses and social enterprises to innovate public service delivery”, deeming the current regime “too restrictive and complex for buyers and suppliers alike”. Instead of seven, there will now only be three processes available for buyers.
The government is also keen on making the rules more flexible, so one of the three processes will be the buyer largely designing their own competitive tender. While this gives them much room to adapt a tender to individual circumstances, “the downside is it’s a lot of work and not all authorities are sufficiently capable of designing their own”, said Jenny Broderick, a senior associate at law firm Squire Patton Boggs.
The government has promised to design ‘off the shelf’ procedures for those who prefer to have certainty, but on the whole, Broderick said schemes will “have to get their heads around the new procedure and develop policies to implement” the new procurement framework.
Extra work will also come from the stated aim to have more transparency, which means schemes will need to publish a notice every time they amend their contracts – something which is not currently the case but is “very frequent” in normal contract relationships, according to Broderick.
On the upside, pension funds will be able to benefit from a dynamic market – effectively a bench of providers that can be added to if suppliers meet certain criteria. “I imagine that one will be quite popular,” she said.
Bob Holloway, secretary to the Local Government Pension Scheme Advisory Board, said the SAB “will consider carefully the provisions of the bill and discuss with scheme stakeholders the extent, if any, to which the bill might impact on the way that LGPS administering authorities procure services and award contracts”.
Suppliers can be excluded for past poor performance
For suppliers, the changes – if implemented as drafted – could make life harder. Discretionary exclusions are now for five instead of three years, and there are new grounds to exclude a supplier based on past poor performance. Broderick said this change was “pushed by public authorities”, who have to deal with suppliers being repeatedly in breach of contract without any mechanism for sharing this information. There are several tests for poor performance, including whether a supplier has settled. Broderick said this was controversial because settling does not necessarily mean that a supplier was liable – they may have settled for financial or other reasons. “I think that is pretty controversial,” she noted.
A second reason allowing buyers to exclude a supplier is based on it being given the opportunity to improve but failing to do so. “There is scope for lack of consistency in the application of that ground,” she said, noting that suppliers will be “extra cautious when bidding for contracts with very onerous KPIs”. Public sector contracts are by their nature onerous, but while suppliers might just fall back on settlement where they breach a KPI, this will have consequences in future.
Exclusion will extend further than it has so far – if an associated supplier is excluded, this can affect a provider, though they must be given a chance to replace the associated supplier.
The bill had its first reading on 11 May and could see amendments as it progresses through parliament. The second reading is scheduled for Wednesday in the House of Lords.
