New UK Procurement Act: Advancing Pro-Growth Agenda with Stricter Measures Against Competition Law Breaches
"Go live" date approaching: the final countdown
The UK's Procurement Act 2023 is set to go live on 24 February 2025, representing a real shift in approach for UK public sector buyers, and suppliers seeking to navigate the new rules. The new Act (inherited by the Labour government from the previous Conservative administration) will streamline the way in which public procurement procedures are run (by merging the four separate existing public procurement laws into a single, and simplified, framework) and increase transparency (making it easier to find and bid for contracts with a central digital platform).
Below, we discuss the ways in which the new regime is expected to complement the Government's pro-growth agenda, how AI feeds into the new regime, and the significant new measures meaning that competition law compliance will be more important than ever from a procurement standpoint.
Pro-growth and pro-ESG
As reflected in the Government's recently published National Procurement Policy Statement, the new framework aims to benefit prospective suppliers of all sizes, including by opening up access to small businesses, start-ups and social enterprises in particular: neatly aligning with the Labour Government's pro-growth agenda. The new Act also creates space for contracting authorities to place more weight on public benefits, such as employment opportunities or the bidder's ability to minimise its carbon footprint, rather than focusing solely on price. That said, funding constraints are likely to mean that price will remain a key factor in many public sector outsourcings.
The Procurement Act 2023 aligns with the UK Government's pro-growth agenda in several ways:
- Streamlining Processes: It seeks to simplify and streamline procurement procedures, making it easier for businesses to participate in public sector opportunities.
- Enhancing Competition: It introduces stricter measures against breaches of competition law, including the possibility (and in some cases requirement) of exclusion from public procurement processes. This aims to ensure a level playing field for all businesses, encouraging fair competition and innovation. The exclusion and debarment provisions are discussed in more detail below.
- Promoting SME Participation: As mentioned above, the Act aims to open up public procurement to a wider range of suppliers, including SMEs. By making it easier for SMEs to compete for contracts, the Government hopes to stimulate economic growth and innovation across different sectors. The Act has also been called out specifically in relation to the Government's aim to position the UK as a leader in AI (see below).
- Fostering Innovation and Efficiency: By encouraging more businesses to engage in public procurement activities, the Government hopes to see increased innovation and efficiency within supply chains.
- Sustainable Economic Growth: By creating a more transparent and competitive procurement process, the Government aims to attract investment, support domestic businesses, and ultimately drive economic growth. Similar thinking on sustainability lies behind other recent measures in the procurement space, such as the Budget announcement on a more demanding prompt payment standard for many businesses contracting with the public sector (designed to promote faster payment of suppliers and subcontractors, particularly SMEs).
Focus on AI procurement
The "go live" date for the Procurement Act 2023 also ties in with the publication of the Government's "AI Opportunities Action Plan" last month. So how does AI fit in with the new procurement framework?
The broad aim of the Action Plan is to position the UK as a world leader in AI, and it features the procurement regime in several places. The Government recognises that "government purchasing power can be a huge lever for improving public services, shaping new markets in AI, and boosting the domestic ecosystem". As a result, the Government considers that a "faster, multi-stage gated and scaling AI procurement process" is needed "that enables easy and quick access to small-scale funding for pilots and only layers bureaucratic controls as the investment-size gets larger. Multi-staged “Competitive Flexible Procedures” should be encouraged, and startups compensated for the rounds they make it through".
These statements are very much in line with the Act's SME and pro-growth focus.
But beware: a tougher line on exclusions for competition law breach
The new procurement regime will allow the Government to take a harder line on excluding bidders from future contracts where those suppliers have, for example, acted improperly, pose a risk to national security or have breached (or potentially breached) laws including competition law. These provisions will be accompanied by a new debarment list, which will allow the Government to prohibit certain suppliers from taking part in any future procurements for a specified period of time. Competition compliance is therefore a key risk for all businesses engaged in material public sector customer facing activities, and equally for bidders in M&A deals involving target businesses with value tied up in such contracts. The ability for bidder to 'self-clean' (discussed below) will, however, enable the mitigation of these risks to a certain extent.
Mandatory exclusion
In short, under existing procurement rules (applying to pre-24 February 2025 procedures), parties found liable for a breach of the Chapter 1 prohibition (the UK's prohibition against anti-competitive agreements) may be excluded from procurement processes. However, the new incoming regime provides that parties (other than successful immunity applicants) must be excluded if they have been found liable for cartel activity. (Cartel activity refers to the types of competition infringement generally considered to be the most-egregious, such as price fixing, market sharing, bid-rigging etc).
Significantly, this mandatory exclusion requirement extends to cartel findings by regulators or courts outside of the UK, meaning that a supplier found liable in a European Commission cartel decision would be subject to mandatory exclusion.
In terms of timing, public bodies will be required to look back at cartel fines imposed up to three years before the Act comes into force (but no more than five years).
Discretionary exclusion
Discretionary exclusion remains a relevant consideration for businesses that are found to have participated in non-cartel competition infringements, such as resale price maintenance (generally meaning the fixing, or limitation, by a supplier of the prices charged by its distributors/resellers) or abuses of a dominant position. Public bodies may exclude bidders where they are found to have committed such competition law infringements or even where there is no competition law decision or judgment, but the public body considers the supplier to have infringed competition law. Similar to mandatory exclusion (see above), public bodies can take non-UK decisions / judgments, or even simply behaviour, into account.
Debarment list
Debarment is a new mechanism under which a UK Government Minister can add a supplier to a centrally published debarment list if he/she is satisfied that a supplier is an excluded supplier or an excludable supplier (see above). The list will be managed by the Procurement Review Unit (PRU) and published on the Government's website (gov.uk). The debarment list must always be checked by public bodies when undertaking procurement procedures covered by the new Act. Where a supplier is on the debarment list, other than in limited cases, public bodies must or may exclude that supplier from the procurement, depending on whether the exclusion ground is mandatory or discretionary.
Self-cleaning
It is important to remember however that, even where the grounds for mandatory or discretionary exclusion apply, the contracting authority must only exclude a supplier where the circumstances giving rise to the exclusion are continuing or are likely to occur again. As part of this assessment, contracting authorities will need to take a range of factors into account, including any evidence of "self-cleaning" measures taken by the supplier (e.g. steps taken to prevent the anticompetitive conduct from occurring again, which could include the changing of management or staff and the roll-out of internal competition compliance programmes). The government's headline message on exclusion may, therefore, be watered down somewhat in practice given these self-cleaning mechanisms are likely to be heavily relied upon by contracting parties caught out by competition law.
Take-aways
The new Public Procurement Act 2023 will need to be front of mind for all businesses engaged in material public sector customer facing activities, and for bidders in M&A deals involving target businesses with value tied up in such contracts. In terms of debarment risks for breaches of competition law, and the ability to rely on "self-cleaning" measures if required, suppliers will want to ensure that they have robust compliance measures in place – not least because, again on the topic of AI, the Competition and Markets Authority (CMA) recently announced a trial to use an AI tool designed to scan and analyse bidding data at scale in order to detect collusion (such as anti-competitive bid-rigging) in public procurements. The risk of breaches being detected is, therefore, a real one.
