Procurement Act 2023 (Consequential and Other Amendments) Regulations 2025

Baroness Twycross Excerpts

Monday 10th February 2025 Lords Chamber

Moved by

[Baroness Twycross]

That the draft Regulations laid before the House on 12 December 2024 be approved.

[The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)]

My Lords, in moving these regulations, I start by acknowledging the substantial contribution of the noble Baroness, Lady Neville-Rolfe, in bringing the new procurement regime to fruition.

This statutory instrument represents the final legislative step in implementing the Procurement Act 2023, the new public procurement regime responsible for over £385 billion in public contracts annually. Commencing on 24 February 2025, the new regime brings our public procurement procedures in line with the Government’s mission-driven approach and will support economic growth by establishing a simpler and more transparent system. It will deliver better value for money across the public sector, lowering costs and burdensome red tape for businesses, and creating a prosperous environment for government and businesses alike.

The legislation being discussed today is a technical statutory instrument, with the purpose of updating existing procurement references in a wide range of UK legislation to align with this new regime. For example, references to the Procurement Contracts Regulations 2015 throughout UK law will now reference the Procurement Act 2023. These types of consequential amendments are, as noble Lords will be very familiar with, a routine and necessary aspect of implementing primary legislation. The SI updates the schedules to the Act to ensure compliance with our international obligations. The threshold values are being revised to bring them in line with the current thresholds applied to public contracts, set by the WTO’s government procurement agreement. This merely amends the Act to match the values that we currently apply to public procurement contracts.

Additionally, the regulations amend Schedule 9 to update the list of specified international agreements, which identify which countries’ suppliers have the right to access UK public procurement. This implements updates to the UK’s market access coverage in our trade agreements with Ukraine, Moldova, Georgia, Kosovo, North Macedonia and Albania, removing access to contracts for healthcare services and enabling the Health Care Services (Provider Selection Regime) Regulations 2023, introduced in January last year, to work as intended. These updates to the threshold values and schedule allow contracting authorities to correctly grant access to suppliers from partner nations. Further technical amendments include updating the list of central government authorities to reflect the recent machinery of government changes, ensuring that the departmental structures are accurately represented in the new regime.

In addition to these technical adjustments, this instrument enhances transparency in public procurement. It supplements the transparency requirements established by the Procurement Act 2023 and Procurement Regulations 2024 on detailed procedural points, including matters such as the issuance of tender documents, direct award procedures, contract modification requirements, self-cleaning procedures and payment compliance notices. These measures provide clarity on specific processes, required by the new regime, which are intended to open up more public sector opportunities to a wider variety of businesses, which helps to drive down costs and promote innovation. This instrument updates how key performance indicators are handled in contract details and performance notices. These changes will help improve how suppliers are evaluated, giving the public sector better information to make more effective decisions to promote value for money.

Finally, the regulations outline how to calculate whether the sale of excess electricity, gas or water produced as a by-product of a non-utility activity falls under the Act when the operator wants to sell it to a network. It explains the calculations needed to determine eligibility for vertical and horizontal arrangements, exemptions and the utility contract exemption for affiliated persons.

Given the highly technical nature of the instrument, I was somewhat surprised that an amendment of regret was put before the House in respect of these regulations specifically. The powers under which the regulations are made are limited and do not allow for more substantive policy measures to be introduced. The instrument introduces no additional burdens for business and simply ensures that the Act can be implemented smoothly and efficiently. The regulations have been reviewed by the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee, neither of which has drawn any special attention to it.

Contrary to the amendment proposed by the noble Lord, Lord Robathan, the Act introduces a number of reforms to make it easier for small businesses to access public sector supply chains and removes unnecessary burdens and costs. It introduces an obligation on contracting authorities to have regard to the particular barriers facing SMEs through the procurement life cycle and to consider what can be done to overcome them. In particular, the Act makes bidding easier for SMEs by requiring bidding companies to submit their core credentials only once on to a single digital platform, saving them time and money. It makes it clear that contracting authorities may not, in most instances, require audited accounts to test the financial standing of bidders, nor require insurance relating to the performance of a contract to be put in place prior to contract award. This will encourage start-ups that are not legally required to file audited accounts but can instead show financial capability by other means. The Act ensures that prompt payment flows down the supply chain, making it more and not less viable for SMEs to get involved.

--- Later in debate ---

[Baroness Finn (Con)]

My Lords, while the Government’s proposals may appear to serve the public interest, we have a lot of sympathy with the regret amendment in the name of my noble friend Lord Robathan.

This Labour Government promised to “simplify the procurement process” and “reduce micromanagement” to foster innovation—a noble intention. Yet, as we assess Labour’s position on procurement, we must ask whether the Government are creating a more accessible and efficient system and truly simplifying procurement, as the Bill intended, or whether they care more about stifling competition for their friends in the unions or prioritising costly equality and green add-ons.

The Procurement Act 2023, introduced by the previous Conservative Government, aimed to streamline procurement, reduce micromanagement and encourage innovation. Labour claimed to support these principles in its election manifesto, promising a more flexible and accessible procurement landscape, particularly for small and medium-sized enterprises, SMEs. However, this Government have since delayed implementing the Act from October 2024 to February 2025 to publish a new national procurement policy statement. Does this not simply prolong uncertainty, making it harder for businesses, especially SMEs, to engage with government contracts?

I turn to the details of the regulations. The regulations propose consequential amendments to align the Procurement Act with previous rules and to comply with international obligations, including the latest updates to the World Trade Organization’s agreement on government procurement. But do these amendments contribute to a more efficient, transparent procurement environment, or are we merely preserving outdated structures that complicate rather than streamline the process?

One notable change being made is the revision of thresholds and direct award justifications. Regulation 8(6), for instance, allows contracting authorities to award contracts to previously excluded suppliers if that is deemed in the public interest. This raises the question: where is the accountability? This provision opens the door to increased discretion in awarding contracts, which could undermine transparency and encourage favouritism. Without clear guidelines, we risk creating a procurement environment that is less competitive and more susceptible to conflicts of interest.

We also see an expansion in reporting requirements, particularly in terms of key performance indicators. While transparency is crucial, can we expect these new requirements to overwhelm contracting authorities, especially smaller ones already struggling with administrative burdens? The regulations mandate reporting on a broader range of metrics, which could impose significant strain on public bodies, diverting scarce resources from public services.

Moreover, these changes place greater responsibility on smaller contracting authorities, local councils and SMEs, which may struggle to comply with a more complex system. Larger organisations may have the resources to absorb these demands, but smaller entities could be disproportionately affected. In our effort to create transparency and accountability, we must be cautious not to stifle innovation or dissuade SMEs from engaging in public procurement.

The revisions to procurement thresholds also risk undermining the Procurement Act’s original intent of promoting fairness and inclusivity, particularly for SMEs. By increasing reporting requirements and complicating the procurement process, we may create a system that is more navigable for larger businesses while leaving smaller ones behind.

One of the key concerns around Labour’s changes is their impact on small businesses. Labour’s manifesto promised

“greater access to government contracts”

for SMEs, but new procurement rules risk introducing more red tape, making it harder for SMEs to compete. Rather than fostering innovation and inclusivity, these regulations enforce the status quo, favouring larger, established players with the resources to navigate complex procurement procedures.

We must also consider the impact on local authorities and public sector bodies. The delay in implementing the Procurement Act has already caused significant disruption. While the Government claim that the delay allows for a smoother transition, we must question whether this justifies the extended uncertainty. How much longer will it take before the Act is fully implemented, and what are the consequences for time-sensitive procurements? Legal experts such as DLA Piper have warned of potential confusion as contracting authorities try to navigate both the old and new systems. Are we setting these authorities up to fail by forcing them to choose between abandoning projects or managing an overwhelming amount of new bureaucracy?

I would also be grateful for clarification on the status of ARIA, the Advanced Research and Invention Agency, which is one of the great innovations in the British state of recent decades. One of the central features of ARIA is that it is not subject to public procurement rules, as of course it cannot be if it is to serve the mandate that Parliament has set for it. Can the Minister give assurances that ARIA will not be subject to the requirements of the Procurement Act, nor the 2015 regulations?

While we agree with the Government’s supposed intentions to improve public procurement, we remain sceptical and have yet to see evidence of them. I urge the Government to think carefully about their approach to the national procurement policy statement and align with the Procurement Act’s original vision. We need a procurement system that is efficient, transparent and accessible to all businesses, especially SMEs, the true drivers of innovation and growth. We cannot afford to squander this opportunity for meaningful reform; the economy and public sector deserve better.

[Baroness Twycross (Lab)]

I am very grateful to all noble Lords who have spoken in this debate. As I outlined at the start, this legislation will support the commencement of the new Procurement Act 2023, which embodies our ambition to open up public procurement to a more diverse supply base, making it easier for new entrants such as small businesses and social enterprises to compete and win public contracts, including measures to improve prompt payment and transparency of opportunities on a single platform, and enable basic supplier details to be submitted once only.

I am less surprised by the comments made by the noble Lord, Lord Wallace of Saltaire, than by those of the Opposition Front Bench. I have asked repeatedly in briefings about whether this instrument would differ from that of the previous Government, had they introduced it, and have been told that it would not. I am slightly surprised, but I appreciate that we now have a different Government and I very proud to be introducing this on their behalf.

I will go through a number of points to make sure that I respond to the questions raised. The key point that came up from both the noble Lord, Lord Wallace of Saltaire, and the noble Baroness, Lady Finn, was on the timing of the updated NPPS. We will be publishing this shortly and it will be in time for the commencement of the Procurement Act. It is perfectly reasonable and right to ensure that the NPPS reflects the Government’s approach and the mission, so I cannot accept that we should have just gone ahead with the previous one.

The noble Lord, Lord Wallace, made a point about the time that businesses may have to adapt between the publication of the policy statement and the commencement of the Act. As I said, the Government are going to publish this statement in time for the commencement of the Procurement Act on 24 February this year. We have been consulting with stakeholders in developing the statement, and this has included a series of round-table discussions. It is aimed at contracting authorities and should not place burdens on suppliers, and we have trained 16,000 procurement practitioners in the new rules.

The noble Baroness, Lady Finn, raised a point around whether the regulations would be more burdensome. The amendment made by these regulations will ensure that contracting authorities are not incurring an additional burden for having to report against every performance indicator used to manage a contract throughout its life, but only those most material to the performance of the key obligations of the contract at the time the relevant notice is published. This is in line with the original policy intent, as communicated to stakeholders through the passage of the Bill, and the amendment corrects an error in the drafting.

I will now address some of the issues raised by the noble Lord, Lord Robathan. In doing so, I hope that I will persuade him that he does not need to regret in the way that his amendment suggests. In relation to what the transparency measures would do, changes have been made in response to feedback on the Procurement Regulations 2024 about the potential burden of, for example, raising the thresholds for certain transparency requirements, removing the proposed requirement for publication of tenders received, reducing requirements for publication of valuation details and creating exemptions for schools and private utilities. The Government believe that the revised requirements represent a proportionate approach.

On the noble Lord’s points around what the consequential amendments do in practice, the consequential amendments to existing UK legislation are a technical aspect of this instrument. These regulations amend language and references to the previous procurement regime to reference the 2023 Act and the terminology used in it. The consequential amendments will not impact the way procuring entities conduct procurement as intended under the Act or make new policy decisions. Necessary consultation with departments holding ownership of the legislation to be amended has taken place to ensure that existing legislation can function as intended. For legislation that is relied on by devolved authorities, the Government have consulted officials to ensure that it functions as intended.

The noble Lord asked what amendments the regulations make to the Health Care Services (Provider Selection Regime) Regulations 2023. These amendments help to ensure that the provider selection regime’s exclusion requirements align with those set out in the Procurement Act. This will help to ensure consistency across the two regimes and better protect healthcare services procurement from suppliers that pose a risk.

The noble Lords, Lord Robathan and Lord Fuller, asked questions about the vertical and horizontal and affiliated undertakings exemptions relating to Regulations 42A to 42F. The detailed and technical explanation of various calculations ensures that thresholds for these exemptions are effective as a form of anti-abuse mechanism. This will prevent any abuse of the activities threshold that would give the controlled person an unfair advantage over other suppliers by being subsidised by the controlling contracting authority. Contracting authorities will also benefit from clear and consistent rules on how to apply the rules.

The noble Baroness, Lady Finn, asked why ARIA, the Advanced Research and Invention Agency, is an excluded contracted authority. These regulations only repeal an old amendment to the Public Contracts Regulations 2015 and do not affect the status of ARIA. However, ARIA is now an excluded contracting authority under the Procurement Act. This is due to the nature of ARIA’s work. Most of its procurement would not be considered covered procurement. Therefore, the Act made ARIA exempt from the UK’s domestic procurement legislation.