United Kingdom Government procurement law reform: a brief comparison to New Zealand
2 February 2022
The United Kingdom (UK) is revising the laws that apply to Government agencies' procurements. While the UK's proposed approach has similarities to New Zealand, there are also significant differences. One which is likely to be of interest to agencies here is the UK's proposed transparency and information sharing requirements, which are more extensive than in New Zealand.
The current UK procurement laws are based on EU directives. As the UK left the EU in 2020, the UK is revamping its laws to be simpler and to focus on its own interests.
The proposed new laws, which have been the subject of extensive public consultation, are expected to be introduced into the UK Parliament this year and come into force in 2023. We will not summarise the entire proposal, but will focus on just the key changes and how they compare to New Zealand. The UK materials can be found here.
A major difference between the UK and New Zealand, both under the current and proposed UK legislation, is that the UK requirements are legally enforceable, whereas New Zealand's Government Procurement Rules (the Rules) do not have the force of law. The Rules cannot be enforced by the courts, although procurement decisions can, in limited circumstances, be subject to judicial review (see our summary of when New Zealand procurement decisions can be judicially reviewed). UK agencies' procurement decisions are therefore much more susceptible to legal challenge.
Value for money
The proposed UK laws are intended to enshrine the following principles of public procurement - the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination.
The UK is proposing a similar approach to New Zealand in determining value for money, by changing its current obligation to select the "most economically advantageous tender" to the "most advantageous tender" to deemphasise a purely lowest cost approach.
The value for money consideration in the UK will include an assessment of the "economic, social and environmental value" of the procurement.
The assessment of social and environmental value has similarity to New Zealand's "broader outcomes" requirements, where Government agencies must consider how their procurements can be used to achieve specific social policy outcomes set by Cabinet, such as improving conditions for New Zealand workers. In the UK, the specific social and environmental values to be taken into account have not yet been proposed and will be set by Ministerial directive.
Flexibility, with strict enforcement…
The UK is seeking to make its procurement processes more flexible. According to the consultation material, the UK currently has seven procurement processes that can be used for particular types of goods or services.
There is currently very limited scope for negotiation during most processes. For example, respondents must submit proposals that closely align to the solution requested in the tender, without the option of proposing innovative solutions that the tendering agency may not have considered or been aware of. The two most common processes do not allow any negotiation prior to final selection. The consultation papers note that between 2016 and 2018 the four processes that allow negotiation prior to selection accounted for less than 10% of all tenders.
The new legislation proposes to scrap these regulated processes and allow agencies to design their own processes in most situations, as it is in New Zealand.
Concerns were raised that additional flexibility will mean additional complexity, as each agency will need to design a process for each procurement, rather than following the standard processes. The UK Government intends to release guidance and standard documents, as MBIE has done in New Zealand, so we expect that standard processes will continue be used for the majority of tenders.
It also bears remembering that, even with this additional flexibility, UK procurement decisions will remain much more open to legal challenge than in New Zealand. It seems likely that this will be a factor in how freely the permitted flexibility is exercised by agencies in the UK.
Open and transparent contracting
The UK proposes to require more transparency of contractual information than in New Zealand. This includes requiring agencies to use the Open Contracting Data Standard to facilitate information sharing.
The notices that must be published during the procurement lifecycle will be more extensive than in New Zealand. However, some of the notice requirements will only apply to contracts over £2 million to lessen the burden on agencies. Examples of the information that must be published include:
- Award notice: This is to be published prior to execution of the contract and include notice of the preferred respondent, anticipated contract value and a description of all bidders. This is to be released in conjunction with a private release to all respondents of redacted evaluation documents from the winning bid
- Contract detail notice: This will provide information on the executed contract, including a redacted version of the contract if the total value is over £2 million
- Contract implementation notice: Agencies will be required to use a central Register of Contract Performance to publish KPIs on contracts above a value threshold (yet to be confirmed), including the supplier's performance against KPI's during the contract
- Contract change notice: Agencies will be required to publish notice of amendments where there is a change of 10% of the value for goods or services or 15% for construction contracts, or an increase in the duration of any contract of 10%.
Considering past poor performance
The UK is proposing to make it easier to consider past performance and exclude firms with poor past performance from procurement processes.
The current UK approach includes past poor performance as a discretionary exclusion ground, however this is restricted to situations where the poor performance led to termination of the contract, damages or another sanction. The proposed changes will lower the threshold, enabling agencies to exclude a supplier where the supplier has previously failed to remedy poor performance or breach in accordance with contractual measures put in place by an agency.
Given the confidentiality obligations in most commercial contracts, in New Zealand it may be hard to know whether such a situation existed, as one agency may not be able to tell another about previous failures to remedy poor performance. As noted above, the UK has proposed to introduce a requirement on agencies to monitor and publish performance against KPIs, which would allow UK agencies to check the past performance of respondents in the tender process.
Setting meaningful and easily measurable KPIs for some types of contracts may be challenging. Publication of performance against such KPIs may also lead to disputes where a supplier does not agree with the agency's assessment, particularly where it is published and considered by other agencies for future tenders.
We will continue to monitor the proposed legislation's passage through the UK Parliament, and provide updates as they become available.