New Procurement Act sowing ‘seeds of activity’

The twenty-fourth of February 2025 finally saw the launch of the Procurement Act 2023 (the ‘Act’) — the largest single regulatory change to Public Procurement in over a decade. Its launch concluded what was a four-year long journey for the sector, with a variety of consultation periods, bill readings within both the House of Lords and Commons, and attainment of Royal Assent, followed by an elongated implementation period. The message throughout that journey was a consistent one: that the Act would streamline and simplify public procurement, seek innovative solutions from the market, and encourage sustainable and social offerings while remaining true to the public sector ethos of transparency and compliance.

Tentative steps in navigating the Act

The launch of the Act was always going to see be a slow but steady start. Within the final few days of the outgoing legislation (e.g. Public Contract Regulations 2015), there were a record 1,000-plus contract notices published. These formally commence procurement exercises and alert the market to opportunities — and the high number indicated from the start that public sector contracting authorities were going to adopt a ‘learning-by-doing’ approach when it came to undertaking procurement activity under the guise of the new Act.

Recent research shows around 24,500 notices 
have been published since ‘go-live’ with the new Act across the plethora of new notice types introduced within it. It will not surprise that the majority of those are ‘pipeline’, ‘planning’, ‘tender’, and ‘contract’ notices. Notably, 3,300 of those have been issued by the NHS, with around 310 of them with a ‘construction’ or ‘estate management’ prefix against them.

A waiting game

Time will tell if any or all of those notices will become awarded contracts that provide the innovative, affordable, market-leading solutions with fully engaged and enthused contractors. Equally, it will be some time before we can truly assess the performance of those appointed contractors. The Act now mandates that contracts of a total value of £5 m and above will require at least three key performance indicators (KPIs) to be set for each contract to monitor and manage delivery — and that these will be reported upon via the completion of the new ‘Contract Performance Notice’ at least once every 12 months. This is a first for public sector procurement, and will change the reporting and performance monitoring landscape for contracted parties. What can be said for sure is that in this new ‘go-live’ era, both the ‘learning’ and ‘lessons learnt’ curves in relation to the Act will be long.

To ‘Act’ or not to ‘Act’?

The NHS often operates differently from other parts of the public sector — with unique nuances, challenges, and quirks. This is just as true when it comes to the application of the new Act. Not all NHS procurement is, however impacted by it. The procurement of certain healthcare services in England is undertaken under the Provider Selection Regime (PSR) that came into effect on 1 January 2024 (further detailed within the Health Care Services — Provider Selection Regime Regulations 2023). As a result, not all NHS procurement is incorporated within the narrative of the Act.

While the PSR will remain applicable for the procurement of healthcare services, the Act will apply to construction-related work outside the scope of the PSR, or where the services are procured by public sector organisations (that are not categorised as ‘relevant authorities’ under the PSR). The NHS recognises this, and it hasn’t stopped Trusts getting going and taking advantage of the new system, judging by the number of notices published since the launch of the Act that contain a ‘construction’ or ‘estate management’ prefix.

Meeting the challenge

Of the areas of NHS procurement impacted by the new Act, some of the most major are the large estate transformation projects, and particularly some of the schemes part of the New Hospital Programme (NHP). The NHP initially proposed to deliver 48 new hospitals by 2030, and while the scope and context of the programme is under review, it still represents the largest hospital building initiative for a generation. From a procurement perspective, the launch of the Act provides the perfect backdrop against which to test out the objectives laid out within the regulations.

There is no doubt that the procurement activity aligned to the NHP will include a mixture of framework approaches, the standardised designs in which to obtain efficiencies — from both a cost and timeline sense and, of course, in some instances, the need for lengthy supplier engagement (ideally, ahead of formal procurement), in which to better understand market capacity, capabilities, and innovative offerings, which will result in high-quality outcomes for healthcare infrastructure.

Outside of the ambitious NHP, the NHS of course still has other scheduled construction and real estate procurement activity to undertake — and the potential benefits and opportunities that can stem from the Act (if applied correctly) are universal. This covers not just what is mandated by the Act, but also other related elements that the public sector as a whole must have ‘regard’ to.

Below are just some of the approaches that the NHS could adopt in order to truly maximise the opportunities of the Act:

Early market engagement:

It is well documented that the regulations actively encourage contracting authorities to enter early dialogue via preliminary market engagement with contractors. In an industry that is facing challenges, from both a labour and skills shortage perspective, it is particularly important to engage with SMEs to support them in alleviating this. Early engagement with SMEs could also help to identify and secure more innovative and niche project solutions.

Quality over quantity:

The Act includes a shift away from a most economically advantageous tender (MEAT) approach, to most advantageous tender (MAT). The implementation of this is already evident through the detail contained within the notices published since launch.

In practice, this provides contracting authorities with greater ‘artistic licence’, permitting them to focus on more qualitative outputs relative to the procurement requirement in question, and also more regionalised benefits, such as local job creation and social value outcomes.

Naturally, cost will always remain a major component of NHS and wider public sector procurement, but these newly prioritised qualitative benefits will also produce a wider return on investment throughout the life of the contract and beyond.

Choosing the right procedure leads to success:

The Act has replaced the previous five procurement procedures with just two: ‘open’, and the ‘competitive flexible procedure’. The new competitive flexible procedure has been created to enable contracting authorities to design a procurement process that aligns to the requirements of the market. These processes could look very different across each contracting authority based on the subject matter to be procured.

A competitive flexible procedure must be a multi-stage process, and in its simplistic form could replicate a previous two-stage restricted process. Alternatively, and depending on the market and requirement, it could incorporate more stages, such as an element of dialogue or negotiation, along with the incorporation of site visits, presentations, or demonstrations. In addition, it can include interim/final assessments. As such, a competitive flexible procedure can truly be designed to align with what is being purchased.

There are many different combinations that a competitive flexible procedure could take, but the main takeaway is that it is a multi-stage process, and at all times contracting authorities will need to take into consideration proportionality, and the complexity of the requirement, when designing the process.

It is already evident that not just the NHS, but the wider public sector, are opting for the competitive flexible procedure when it comes to major construction and real estate procurement requirements, due to the opportunities it brings — namely being able to incorporate additional stages to the process.

The gift of greater control:

Robust contract management processes and procedures are now required throughout the life of the contract. As mentioned earlier, essential performance management data must now be reported upon, including a requirement for a minimum of at least three key performance indicators (KPIs) for contracts equal to and above £5 m in value. These reporting and transparency requirements empower contracting authorities to better hold contractors to account on their KPIs — and allow contract deliverables to be tracked throughout. This is just one of many instances where the Act has sought to obtain increased transparency — without compromising the flexibilities that the public sector now have available to them.

Looking ahead

These first six months of the Act have seen the both the NHS and the wider public sector sow the seeds of their formative procurement activity; soon enough we will start to see the green shoots appear. It will be interesting to see where we are on day 300, post-launch. It is also worth noting that the public sector has been asked to respond to a recent consultation exercise reflective of the post ‘go-live’ period. It will be interesting to see how that will change the direction of procurement activity once enacted.