The Procurement Bill – some key business and contract management implications to consider

On 11 May 2022, the Government introduced the Public Procurement Bill (the “Bill”) to the House of Lords. The draft law follows the Green Paper on the transformation of public procurement of December 2020 and the response to the consultation on the Green Paper, published in December 2021.

The bill sets out the rules for the procurement process itself. Gone are the myriads of different procedures. These are replaced by the open procedure and the flexible competitive procedure, referred to in the draft law as a “competition procedure other than an open procedure”, the latter offering contracting authorities the possibility of designing their own process. Most Economically Advantageous Offer (MEAT) is replaced by Most Economically Advantageous Offer (MAT) and dynamic purchasing systems become a dynamic marketplace, with an extended reach that is no longer limited to commonly purchased goods and services . However, what is often overlooked in the bill are the contract management provisions which could have a significant commercial impact on the remedies available for contract enforcement. The provisions will also have a day-to-day impact on contract managers.

This article focuses on areas that need to be considered from a business and operational perspective, including what needs to be prepared for now in terms of time and resource allocation.

KPIs and contract performance

Clause 50 of the bill requires every contract over £2 million to have at least 3 key performance indicators (“KPIs”), unless the contract is a framework agreement, a contract for services through a private utility, concession contract or light contract, or when performance cannot be assessed by reference to KPIs.

Although KPIs may be included in many contracts of this value, they currently are not in all such contracts because their inclusion is very much dependent on the business risk profile that has been adopted for a particular contract. Going forward, contracting authorities will need to ensure that any KPI deficiencies are addressed in the contract documentation and with this will be key considerations on the robustness and measurability of those KPIs.

Linked to the inclusion of KPIs, the new provisions of Section 66 of the Bill require that, at least every 12 months, performance against contractual KPIs be assessed by the contracting authority and the results published. Currently, we do not know what the posting requirements will look like and whether any procurement portals will be in place to process KPI results in the required form. However, there are a myriad of business and contract management issues associated with publishing supplier performance as part of KPIs due to the potential repercussions of non-achievement.

KPI – business considerations

Undoubtedly, suppliers will be very keen to ensure that all KPIs are clearly defined and achievable. This may impact the potential robustness of KPIs and/or the business remedies that would otherwise be available in the event of KPI failure. For example, a supplier who might have been willing to assess the risk of failure to meet a particular KPI instead of a financial deduction from the contract price, may be less willing to take the risk of such failure being published. , which could prevent him from bidding on other projects. Contracting authorities and suppliers can move towards fewer, more standardized and easier to assess KPIs.

While standardization can be seen as a benefit, there is a potential downside: it results in fewer and less robust KPIs due to vendor concerns about the impact of non-execution. This could have an impact, in particular, on new innovative projects where KPIs may not be as proven as elsewhere. Additionally, vendors will no doubt be keen to ensure that their performance is assessed on a ‘like for like’ basis rather than a vendor being inadvertently penalized due to the inclusion of certain KPIs that may not be within the scope of their performance. other contracts but where, if included, performance would also be problematic.

KPI – Contract Management Considerations

From a contract management perspective, monitoring and reporting on KPI compliance will require additional resources. Currently, some contract managers may only have the ability to manage contracts when performance becomes problematic. However, going forward contracting authorities will need to start thinking about what steps they can take to comply with Term 66 now, which may mean recruiting at least one new role within the organisation, both in terms of KPI development and KPI tracking. and reported. Vendor self-monitoring, which is reported to the contracting authority, can be a pragmatic solution in some cases and contract managers will need to review how individual contracts are drafted and performed in each relevant context.

Violation of KPI – consequences

Section 66 of the bill requires that if breaches occur and result in full or partial termination, an award of damages, or a settlement agreement, that must also be published. This feeds into the new poor performance provisions.

Violation for poor performance

Related to the above is the revised discretionary ground for exclusion based on “breach of contract and poor performance” contained in Schedule 7 of the Bill. It has long been felt that the bar for the current discretionary grounds for disqualification for past poor performance was set too high. Contracting authorities were also reluctant to use the reason for fear of a challenge from the supplier, especially if the information they were relying on had been gleaned from another contracting authority.

The bill allows a contracting authority to exclude a supplier when the latter has committed a breach “serious enoughand which has been (1) declared by a court to be so; or (2) Supplier has committed a corrective violation that has not been remedied. “serious enoughwas defined as a breach resulting in full or partial termination, an award of damages, or a settlement agreement.

Clause 56 of the Bill requires contracting authorities to notify the relevant competent authority (the Cabinet Office or Welsh Ministers, as appropriate) of an exclusion in order for the supplier to be added to the central exclusion list. This means that contracting authorities will be able to exclude on the basis of poor performance under any relevant contract. While there are benefits, we anticipate that vendors who would have otherwise agreed to termination and settlement when the relationship between the parties has broken down, may be more inclined to sit still or take legal action in order to avoid to abide by the poor performance clauses and ultimately end up on the exclusion list for all future opportunities. Suppliers will no longer be able to limit performance risk; the failure of a contract could have significant consequences for the company.

Contract management – payment information

There will be an obligation to publish information on any payment over £30,000 made under a public contract. It is not yet known what this information will be or where it will be published. In addition, under section 64 of the bill, contracting authorities will be required to issue regular “payment compliance notices” indicating whether the contracting authority has met the requirement to pay all undisputed invoices. within the required 30 day period.

In short, the combination of new contract management and publication requirements and the increased fear of litigation due to the implications for suppliers of publishing their poor performance means that contracting authorities will no longer be able to perform reactive management of contracts as their resources Allow. Instead, they will need to put resources in place to proactively manage and report on every contract over £2m, as well as to ensure they are happy with the inclusion of performance indicators. robust key performances, both from an operational and commercial point of view. Although it could be said that this is what should happen anyway, we do not live in an ideal world.

The Public Procurement Bill provides a number of opportunities and improvements for public procurement in the UK. However, as the bill is expected to become law in 2023, there are measures contracting authorities should proactively consider now in order to be able to meet the challenge.

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