What is regulated procurement?

The UK government's Green Paper Transforming public procurement, published in December 2020, contained proposals around the creation of a future, post-Brexit public procurement regime for the UK. Subsequently, the Green Paper was subject to a consultation, following which the proposals were refined and amended.

The Procurement Bill received Royal Assent in October 2023 and came into into full force as the Procurement Act 2023 on 24 February 2025.

What is the Procurement Act?

The public procurement rules require public bodies to follow procedures when selecting suppliers and to conduct procurement in particular ways to ensure value for money. The rules also impose requirements aimed at ensuring that public procurement is fair on suppliers so that all eligible suppliers bidding for public contracts have fair and equal access to public contract opportunities.

The procurement rules that have applied in the UK, prior to the Procurement Act, date from the time when the UK was a member of the EU and embody EU rules (directives) on public procurement dating from 2014 – which every EU Member State at that time (including the UK) was required to implement in its own national laws. In the UK (other than Scotland), these laws currently comprise four main pieces of legislation, each of which governs a different broad type of public procurement (public contracts, utilities sector contracts, defence and security contracts and ‘concession’ contracts in which operating risk is handed over to a contractor in return for the right to make money from operating an asset). 

Now that the UK is no longer part of the EU, the EU-derived rules can be replaced. The Procurement Act 2023 (the Act) received Royal Assent on 26 October 2023. The Act represents a radical overhaul of the law governing public procurement in England, Wales and Northern Ireland. The aim of the Act is to create a body of procurement rules that better serve the UK's particular interests than the EU-derived procurement regime that applied. The Act contains the power for the UK government to determine the precise date on which the Act will come into force, and also the power to bring different parts of it into force on different dates (section 127).

The Act technically extends to Scotland but does not regulate procurement by ‘devolved Scottish authorities’. These are authorities whose functions are exercisable only in or as regards Scotland, and whose functions only relate (or relate in part) to devolved matters. Scotland has instead decided to retain its own current public procurement regime. The Scottish procurement regime is also derived from the EU procurement directives, and is principally based on them (with some Scottish domestic legislation supplementing the directives-based framework).

Although the pre-Act regime no longer regulates procurement processes that started on or after 24 February 2025, it will continue to regulate:

• procurement exercises that started before that date and are still in progress after it and
• public contracts that are the result of procurements that started before that date. This latter feature will be relevant principally in relation to variations (i.e. changes) to contracts procured under the pre-Act regime; the pre-Act regime will continue to govern such variations.

Scope of the Act

Four key pieces of procurement legislation made up the pre-Act procurement regime that the Procurement Act has replaced (for procurement processes that start on or after 24 February 2025). They are:

• The Public Contracts Regulations 2015, which governed most public procurement undertaken and covered the bulk of government contracting – for example, central government procurement, local authority projects such as highways, waste services, and care services and, for now, much NHS procurement.
• The Utilities Contracts Regulations 2016, which applied to procurement by utility companies in connection with their regulated activities (such as the provision of gas and electricity) and to the procurement of transport infrastructures such as high-speed rail.
• The Defence and Security Public Contracts Regulations 2011, which governed the procurement of contracts in the defence sector and for various national security purposes.
• The Concession Contracts Regulations 2016, which applied to the procurement of so-called ‘concession’ contracts, where a contractor agrees to run a particular asset (for example, a leisure centre, event or attraction, or a toll road) and thereby exploit it for profit – while in return taking on significant operating risk in doing so.

All four have been amended to some extent during their period in force, most notably to incorporate changes made necessary by Brexit. When the Procurement Act enters force, all four of these Regulations will be revoked (Schedule 11 of the Act), and the four regimes brought together into one (albeit with some sector-specific provisions retained) to consolidate them as much as possible. The result, despite the consolidation, is still a weighty Act.

However, procurements that have started (which generally means advertised) before the Act came into force (so that the pre-Act regime applies to those procurements) will continue to be governed by the pre-Act regime, not by the new Act. The same applies to contracts that are the result of procurements starting pre-Act, even if the procurement is ongoing at the point when the Act enters full force. This, therefore, means that if a contract awarded through a pre-Act procurement is (for example) varied (i.e. changed), then the rules that regulate that variation will be the ones contained in the pre-Act regime, and not the Act itself. Neither will the Act suddenly ‘bite’ on a procurement process that started before 24 February 2025 but is still ongoing after that date: that procurement – and its resulting contract – will continue to be regulated by the pre-Act regime.

Anyone dealing with public procurement should retain their copy of the pre-Act regime – it may still apply to some contracts for several years yet.

The Act itself does not represent the whole body of domestic procurement law that will apply once it is in force. Secondary regulations that will accompany the Act will supplement a number of the Act's provisions to give full effect to them. The power to make such regulations is given by the various sections of the Act where the secondary legislation is required. The Procurement Regulations 2024 are effective from 24 February 2025.

The Procurement Regulations 2024 prescribe:

• the various forms of notices that procurers will have to publish about their procurement, as part of the Act’s drive for better transparency
• the subject matter of so-called ‘light-touch contracts’ – those can benefit from a lighter set of rules around their procurement and
• specific ‘crisis’ situations, which, if and when they arise, would allow the direct award of some contracts (this builds on learnings from the COVID-19 pandemic, which threw into sharp relief some of the limitations of the existing regime around the ability to make direct awards). 

As well as consolidating into one Act all the areas of procurement that were governed by separate rules, the Act expressly excludes some types of procurement from its scope altogether. Of these, a number are already excluded from the scope of the pre-Act rules, for example, certain types of financial and legal services and most research and development contracts.

Principles and objectives of procurement under the Act

Anyone involved in public procurement will be familiar with the EU-Treaty-based principles, which apply to procurement that the pre-Act regimes regulate – namely equal treatment, transparency, non-discrimination, mutual recognition and proportionality. Procurement must be conducted in accordance with these principles.

In the Procurement Act, these principles will broadly continue to survive as themes and several of the Act's provisions pick up on them by creating particular obligations. However, the general principles of procurement have been recast by the Act, which refers to ‘objectives’. The Act requires contracting authorities to ‘have regard to the importance’ of the following ‘objectives’:

• delivering value for money
• maximising public benefit
• sharing information for the purpose of allowing suppliers and others to understand the contracting authority’s procurement policies and decisions and
• acting, and being seen to act, with integrity.

Suppliers are to be treated the same unless a difference between them justifies different treatment, and contracting authorities will have to take all reasonable steps to ensure different treatment does not confer an advantage or disadvantage on a supplier. Contracting authorities should have regard to the fact that small- and medium-sized enterprises may face barriers to participation and consider whether such barriers can be removed or reduced. All contracting authorities should have regard to the National Procurement Policy Statement (NPPS), published and updated by the government. This, in effect, places national procurement policy on a legal footing, as contracting authorities who conduct public procurement will effectively be required to comply with the NPPS unless they have a good reason not to.

Thresholds

Value thresholds will continue to apply to public procurement under the Act, just as they do currently. On 1 January 2024, some of the UK procurement thresholds increased slightly to the following (inclusive of VAT):

Contract type	New threshold from 1 January 2024 (VAT-inclusive)
Public works contracts	£5,372,609
Public services and supply contracts (central government authorities)	£139,688
Public services and supply contracts (sub-central government authorities)	£214,904
Works contracts (utilities)	£5,372,609
Public services and supply contracts (utilities)	£429,809
Concession contracts	£5,372,609
Light-touch regime contracts	£663,540 (unchanged)
Small lots	£70,778 (services and supplies) (unchanged) £884,720 (works) (unchanged)

Five routes to market under the Act

Where a potential contract meets the relevant value threshold (and it is not an exempted contract), then contracting authorities will need to follow one of the five procurement procedures detailed in the Act. The key themes running through the new procedures are flexibility and innovation. One of the main criticisms of the pre-Act regime has been that its procedures were too complex. The Act seeks to streamline the rules and empower contracting authorities to mould the process to fit their specific needs and deliver the best outcomes.

1. Open procedure

The Act retains the open procedure – a single-stage procedure with one submission from interested tenderers and no negotiation. It broadly operates in the same way as it under the pre-Act regime.

Any organisation can respond to the tender notice and the contracting authority must evaluate all submissions (unless the suppliers are excluded or excludable) in line with the tender documents to identify the most advantageous tender.

This is useful for uncomplicated procurements where tenders are straightforward to evaluate.

2. Competitive flexible procedure

The competitive flexible procedure is a new multi-stage procedure. As part of the general aim of introducing a simpler regime in terms of procedure, the competitive flexible procedure is not prescriptive and permits contracting authorities to design their own competitive procurement process so long as it meets the broader requirements in the Act.

The main limitation is that the process must be proportionate, and contracting authorities must consider the nature, complexity and cost of the contract. Contracting authorities also need to observe the overarching procurement principles.

Subject to the above, the procedure can include whatever phases or components will allow the contracting authority to get the best from the market, e.g. supplier presentations, site visits, R&D, down-selection, negotiation, dialogue, etc. There is nothing in the Act establishing a fixed menu of options. Contracting authorities are encouraged to engage and collaborate with suppliers (through pre-procurement engagement) to develop their understanding of what is available and thereby reach the best solution. It is even possible to refine award criteria as the procurement progresses.

This will be useful for more complex, high tech, or innovative requirements. One of the examples given by the UK government is a cyber-security company working with cutting edge technology – being able to offer a variant bid would allow it to demonstrate additional innovation.

3. Direct award

Direct award is the successor to the pre-Act regime's ‘negotiated procedure without publication’. This type of award, without any competition, is only allowable in specific circumstances. Many of these are similar to those found in the pre-Act regulations.

First, a contracting authority can directly award a contract if one of the justifications applies (e.g. the supplier owns exclusive IP rights) and the intended supplier has not been excluded (unless there is an overriding public interest as defined in the Act). Many of the justifications are similar to the pre-Act grounds, but there are also new ones like contracts concerning the production of prototypes.

Second, it is possible to switch to a direct award if no suitable tenders were received in response to a competitive tendering procedure (i.e. an open procedure or competitive flexible procedure). As is currently the case, there is a test for what constitutes a ‘suitable’ tender.

Third, there is a new power for a Minister to publish regulations allowing specified contracts to be directly awarded where this is necessary to protect human, animal or plant life or health, or protect public order or safety. This picks up on the impact from the COVID-19 pandemic, where questions were raised as to whether the derogations in the pre-Act procurement rules allowed for direct awards or not.

Where a contracting authority directly awards a contract under one of the first two routes described above, it must publish a mandatory transparency notice to highlight its intention of undertaking a direct award.

4. Dynamic markets

Dynamic markets are similar to the pre-Act regime's ‘dynamic purchasing systems’, except they can be applied to any types of purchase as opposed to just the simplest. Any contracting authority will be able to establish a dynamic market, provided it complies with the notice requirements in the Act.

A dynamic market is, in effect, a fluid list of qualified suppliers eligible to participate in future procurements. There is no limit on the number of members, and the dynamic market always remains open to new entrants. Conditions of membership must be a proportionate means of ensuring suppliers have legal and financial capacity and technical ability.

One difference from existing dynamic purchasing systems is the opportunity for contracting authorities to charge a fee at the point of contract award. This should help cover the costs of establishing and running the dynamic market.

There will be a central register of dynamic markets to bring greater transparency and reduce duplication.

5. Frameworks

The conventional concept of a framework as it exists in the pre-Act regime has been retained, but the Act also introduces a new ‘open’ framework. The general principle of both is the same: to allow contracting authorities to set up an arrangement that sets out the basis on which future awards will be made.

The fundamental difference between conventional and open frameworks is the ability to add new suppliers.

Conventional frameworks will operate in much the same way as they do under the pre-Act regime. They will be closed to new entrants during their term. The maximum term of a conventional closed framework will be four years, although the Act retains the possibility of a longer term if this is justified.

Conversely, the new ‘open frameworks’, which the Act has introduced, give contracting authorities the opportunity to refresh the supplier base. Open frameworks are a scheme of successive frameworks running for up to eight years in total.

The contracting authority must decide at the outset how many times it will award new frameworks under the umbrella of the open framework (and each time one framework ends, the next will begin immediately). The Act sets a minimum timeline for this, but the contracting authority could choose to do this more frequently. New suppliers can be added each time a framework is let under the open framework system. These are fixed points in time, so this is different to a dynamic market where new suppliers can be added at any time.

The Act clarifies that the award of frameworks under an open framework must be capable of being made by reference to the same tender or transparency notice without substantial modification. Therefore, this will be useful where a contracting authority is effectively reiterating its requirement. It will not work if a contracting authority wishes to change pricing or other terms.

Note that, similarly to the position with dynamic markets, contracting authorities can charge fees at a fixed percentage of the estimated value of any contract awarded under a framework. Additionally, there will be a central register of frameworks

Time limits

Much like the pre-Act regime, the contracting authority must have regard to certain factors set out in the Act (including the nature and complexity of the contract as well as the need for site visits or other practical steps) when setting time limits for different stages of a procedure.

Despite the greater flexibility under the Act, the Act does still mandate certain minimum time limits for key stages of the various procedures. We have summarised these time limits (as they apply to standard contracts) in the following table. Many are shorter than current equivalents.

Stage	Minimum time limit
Participation (relevant to the competitive flexible procedure only)	25 days or 10 days where there is a state of urgency
Tendering	25 to 35 days (depending on whether tenders may be submitted electronically and whether the tender notice and associated tender documents are all provided at the same time) or 10 days where there is a state of urgency or 10 days for dynamic markets
Standstill	8 working days But this does not apply to: direct award justified by extreme and unavoidable urgency direct award by reference to the Minister's regulations awards under frameworks or dynamic markets

The most advantageous tender

Procurement under the Act will lead to the award of a public contract to the supplier that submits the ‘most advantageous tender’ in a competitive tendering procedure, as opposed to (at present) the ‘most economically advantageous tender’. The fact that the Act recasts the language in this way when referring to a winning bid underlines the fact that contracting authorities may identify the winner by using award criteria that reach well beyond factors that are merely financial. It is likely that social value, the environmental and net-zero-related aspects of bids, and other broad policy-driven factors are likely to feature large in the award decisions of many contracting authorities in future. 

Duty to ‘Treaty State’ suppliers

Even though the Act is a product of Brexit, the duties that it will impose on contracting authorities when undertaking procurement will not extend only to UK suppliers. Free Trade Agreements to which the UK is party exist with a significant number of other countries of the world, and, where those agreements concern procurement, UK contracting authorities must not discriminate against those countries' suppliers. The full list of specified international agreements (on the basis of which duties to ‘Treaty State’ suppliers arise under the Act) is set out in Schedule 9.

Exclusion and debarment

Under the Act, contracting authorities are required to consider whether suppliers are ‘excluded suppliers’ or ‘excludable suppliers’ and it must:

• disregard tenders from excluded suppliers (a contracting authority may also disregard tenders from excludable suppliers)
• exclude excluded suppliers from participating in, or progressing as part of, a competitive flexible procedure (a contracting authority may also exclude excludable suppliers)
• request information regarding suppliers' intentions to subcontract any part of a public contract and then determine whether the intended subcontractors are on a debarment list (contracting authorities may also request information for the purpose of determining whether any intended subcontractor is an excluded or excludable supplier)

If a contracting authority considers a subcontractor to be an excluded supplier, it must treat the supplier bidding as an excluded supplier and exclude the supplier from participating in, or progressing as part of, the competitive tendering procedure.

If the contracting authority considers a subcontractor to be an excludable supplier, it must treat the supplier bidding as an excludable supplier and may exclude the supplier from participating in, or progressing as part of, the competitive tendering procedure.

In each case, before excluding a supplier who is an excluded or excludable supplier as a consequence of it being either a proposed subcontractor or an 'associated person', a contracting authority must:

• notify the supplier of its intention and
• provide the supplier with reasonable opportunity to replace the proposed subcontractor or associated person (as the case may be).

Similar provisions are included in relation to suppliers who turn out to be excluded suppliers or excludable suppliers during a contract:in this case a contracting authority must give the supplier a reasonable opportunity to

1. cease subcontracting to the excluded or excludable supplier and
2. if necessary, find an alternative supplier to which to subcontract.

Exclusion of suppliers on national security grounds

Special provisions will apply where a contracting authority intends to either disregard a tender or exclude a supplier on the basis that it poses a threat to national security. In these circumstances, a contracting authority may not do so unless it has first notified the relevant Minister of its intention and the Minister considers that the supplier or subcontractor is an excludable supplier, and that the tender should be disregarded, or supplier excluded.

Improper behaviour

The Act also introduces a further circumstance under which a supplier may be treated as an excluded supplier where:

• a supplier has acted improperly in relation to the award of a public contract by:
  • failing to provide information requested by the contracting authority
  • providing information that is incomplete, inaccurate or misleading
  • accessing confidential information or
  • unduly influencing the contracting authority's decision making
• in consequence, the supplier is put at an unfair advantage in relation to the award and
• the unfair advantage cannot be avoided other than by excluding the supplier.

However, before excluding a supplier, a contracting authority must allow the supplier to make representations and provide relevant evidence.

If having requested information the supplier fails to provide the information requested, or provides information that is incomplete, inaccurate or misleading, the contracting authority will be obliged to treat the supplier as an excluded supplier for the purpose of assessing tenders, and exclude the supplier from participating in, or progressing as part of, any competitive tendering procedure.

Excluded suppliers

Suppliers will be excluded suppliers if a mandatory exclusion ground applies to (i) the supplier or (ii) an associated person and the circumstances giving rise to the exclusion ground are continuing or likely to occur again or where the supplier or associated person is on the debarment list by virtue of a mandatory exclusion ground.

Schedule 6 to the Act sets out a broad list of mandatory exclusion grounds. In determining whether a mandatory exclusion ground applies, contracting authorities must:

• ignore any event that occurred before the five-year period ending with the date on which the determination is made
• ignore certain events that occur prior to Schedule 6 coming into effect (including corporate manslaughter, homicide, theft, robbery, burglary, etc., inchoate offences and corresponding offences outside the UK, and threats to national security) and
• ignore certain events that occur before the three-year period ending when Schedule 6 comes into effect (including offences relating to tax, fraud, blackmail, labour market offences, modern slavery, cartel offences, and competition law infringements).

Excludable suppliers

Suppliers will be excludable suppliers if a discretionary exclusion ground applies to (i) the supplier or (ii) an associated person and the circumstances giving rise to the exclusion ground are continuing or likely to occur again, or where the supplier or an associated person is on the debarment list by virtue of a discretionary exclusion ground.

Schedule 7 to the Act sets out the discretionary exclusion grounds. In determining whether a discretionary exclusion ground applies, contracting authorities must:

• ignore any event that the decision maker is aware (or should have been aware) occurred before the five-year period ending with the date on which the determination is made
• ignore certain events that occurred, or the decision-maker was aware of, before the three-year period ending with the date on which the determination is made (insolvency, bankruptcy, etc., potential competition infringements, professional misconduct, breach of contract, adverse information about supplier published by contracting authority and acting improperly in a procurement) and
• ignore certain events that occurred before the coming into force of Schedule 6 (including labour market misconduct, environmental misconduct, poor performance, adverse information about a supplier published by contracting authority where the information is not published in relation to a breach of contract and national security).

Debarment list

Contracting authorities will be required to notify an appropriate authority within 30 days of the date of a decision to disregard, exclude or replace a supplier. The Cabinet Office may investigate, and may determine that a supplier's name be added to a debarment list, which will include details relating to the debarment and the date on which the Minister expects the exclusion ground to cease to apply.

Before entering a supplier's name on the debarment list, the Minister must give notice to the supplier setting out the decision to do so, and an explanation of the supplier's rights under the Act. The Minister may not enter a supplier's name on the debarment list before the end of the period of eight working days beginning with the day on which the Minister gives notice to the supplier (the debarment standstill period).

Suppliers notified of their inclusion on the debarment list will need to apply to the court for suspension of a Minister's decision. They may also, at any time, apply to the Minister for removal from the debarment list, or revision of an entry on it.

The debarment list will be published and kept under review. The Minister may remove any entry from the list or revise an entry.

Transparency, contract performance and implied terms

The Act includes a raft of changes to increase the overall transparency of public procurement significantly. This sections highlights some of the key changes that centre around contract performance and, in particular, the measures designed to increase visibility concerning how well suppliers are delivering on their contractual commitments. These changes mark a significant broadening of the scope of procurement law when compared to the pre-Act regime.

Notices

There are far more types of notices prescribed by the Procurement Act in comparison to the pre-Act regime. The parts of the Act that govern them came into effect on 24 February 2025, meaning that publishing them will become a legal requirement (for the procurements to which they relate to) from 24 February 2025. The exception is the payments compliance notice: the guidance on transition to the Act, which explains that the phased delivery model of the central digital platform will mean the digital capability to publish a payments compliance notice on that platform will not be available when the Act comes into force. In addition, it means that contracting authorities should therefore continue to publish their notices under regulation 113(7) of the Public Contracts Regulations 2015; until the payments compliance notice obligation under section 69 of the Act comes into force.

Key performance indicators

The increased flexibilities introduced by the Act around procurement procedures are kept in check by a range of new measures mandated by the Act to ensure visibility to the public of what authorities are procuring, or intending to procure, how they are going about it, and how well the contractors they select subsequently perform. Key to this visibility is the extensive range of new notices and information - all mandated by the Act and in forms prescribed by the Procurement Regulations 2024 - that contracting authorities will be required to publish at various points in the procurement (and contract) life cycle. This publicity will include information on key performance indicators.

Where a contracting authority is about to enter into a public contract worth £5 million or more, it must set and publish at least three key performance indicators (KPIs) in respect of that contract. Then, at least once every 12 months during the contract's life cycle, and on termination, the contracting authority must assess the performance of the supplier against the KPIs previously set and publish this as required under the Act.  Failure to publish could be challenged under the Act's remedies regime, and systemic failure to publish notices of this type could also be investigated by the Procurement Review Unit, the new oversight body set up under the Act. Certain types of contracts, such as frameworks and concession contracts, are exempt.

Breach of contract and unsatisfactory performance

If a supplier:

• breaches their contract leading either to termination, the award of damages or a settlement agreement or
• is not performing to the contracting authority's satisfaction and does not improve their performance after being given a proper opportunity to do so,

the contracting authority must (within 30 days of either of these things occurring) publish a notice stating:

• that subsection 71(5) of the Act applies (i.e. that there has been a breach)
• the circumstances of the breach or poor performance giving rise to its application and
• any other information required under the Act.

Publication of information: the central digital platform

The Act requires a Minister to make arrangements to create and operate an online system for the publication of information required under the Act. Such a dedicated system will help to improve transparency by sharing information on the performance of suppliers for free.

The measures above will help to increase transparency in the procurement regime. Suppliers, now knowing that information about their performance can be shared publicly, may feel a greater sense of accountability as poor performance may impact future awards (in certain situations, poor prior performance can constitute a ground for discretionary exclusion from future procurement processes). However, this transparency can also have its downsides. If a supplier has previously performed badly, a contracting authority could end up rejecting their application, even if the contract now being procured is completely different from that to which the poor prior performance related.

Implied terms

There are a wide variety of terms that the Act implies into contracts. An important one relates to the payment of suppliers. Under the Act, any sum that a contracting authority is due to pay under a public contract must be paid within 30 days of receiving an undisputed, valid invoice; as long as the invoice does not stipulate a later payment date. Furthermore, this condition doesn't just relate to contracting authorities: if a subcontractor is employed, then the same term is also implied into these subcontracts. This goes further than the pre-Act regime.

Contracting authorities are also be required to publish payment compliance notices if they make a payment under an above-threshold public contract, or a sum that they owe under a contract becomes payable before the end of a period of 30 days beginning with the last day of the reporting period. Importantly, that form of notice must contain specified information concerning the contracting authority's compliance with its duty to pay suppliers within 30 days.

Finally, the implied right to terminate a contract in certain circumstances is also important to consider. There are three termination grounds implied into every public contract. Contracts can be terminated if:

1. the contracting authority considers that the contract was awarded or modified in material breach of the Act or regulations made under it
2. a supplier has, since the award of the contract, become an excluded supplier or excludable supplier (including by reference to an associated person) and
3. a supplier (other than an associated person) to which the supplier is sub-contracting the performance of all or part of the public contract is an excluded or excludable supplier.

How are contract modifications (variations to public contracts) be governed under the Act?

Generally, the approach to modifications has been carried over from the pre-Act regime, in that contracting authorities may modify a public contract if the modification is:

1. a permitted modification
2. not a substantial modification
3. a below-threshold modification or
4. a light-touch contract.

However, the Act includes a new permitted grounds for modification and a new concept of 'convertible contracts' - whereby a below-threshold contract becomes a regulated public contract where, if modified, its value ends up exceeding the relevant financial threshold. The permitted modifications also include four new grounds, highlighted below.

In addition, new notice provisions will require authorities to publish ‘contract change notices’ to signal their intention to modify public contracts before doing so, and allow them to observe a voluntary standstill period ahead of implementing the proposed changes. If the contract has a value greater than £5 million, an authority must publish a copy of the modification or the modified contract.

Permitted modifications

For all public contracts, including convertible contracts, Schedule 8 to the Act outlines the conditions under which contract modifications are permitted. Some of them are new with the Act and are not covered in the pre-Act regime (flagged as [New] in the descriptions below).

In summary, modifications are permitted under Schedule 8 without a new procurement where any of the following circumstances apply:

Modification was provided for in the contract

The modification:

• was unambiguously provided for in the contract and the tender or transparency notice and
• would not change the overall nature of the contract.

Urgency and the protection of life [New]

The modification:

• could be achieved by the direct award of a contract and
• is due to extreme and unavoidable urgency or
• is necessary to protect life, public order or safety.

Unforeseeable circumstances

• the circumstances could not reasonably have been foreseen by the authority before the award of the contract and
• the modification would not:
  • change the overall nature of the contract and
  • increase the value of the contract by more than 50% (this ceiling does not apply to utilities contracts).

Materialisation of a known risk [New]

• a known risk materialises (i.e. a risk that the authority considered (when it awarded the contract) could jeopardise the satisfactory performance of the contract, but could not be addressed in the contract as awarded)
• as a result, the contract cannot be performed to the authority's satisfaction
• the modification goes no further than necessary to remedy that fact
• awarding a further contract, rather than modifying it, would not be in the public interest in the circumstances and
• the modification does not increase the value of the contract by more than 50%, ignoring for this purpose the fact that the risk has materialised (this ceiling does not apply to utilities contracts). In considering whether a new contract would be in the public interest, an authority must consider whether a new contract could provide more value for money.

Additional goods, services or works

The modification provides for the supply of goods, services or works in addition to those already provided for in the contract, where using a different supplier would result in goods/services/works that are different from (or incompatible with) those already provided for in the contract, and

• the authority considers that the difference or incompatibility would result in:
  • disproportionate technical difficulties in operation or maintenance, or other significant inconvenience and
  • substantial duplication of costs for the authority and
• the additional supply does not increase the value of the contract by more than 50% (this ceiling does not apply to utilities contracts).

Transfer on corporate restructuring

The modification is a novation or assignment of a public contract, following a corporate restructuring or similar circumstance (as long as the new supplier is not an excluded supplier).

Defence authority contracts [New]

The modification is necessary to:

• take advantage of developments in technology, or prevent or mitigate any adverse effect of those developments and
• ensure the Armed Forces can maintain their operational capabilities, effectiveness, readiness for action, logistical capabilities or safety (and to ensure there is continuous supply of those goods, services or works).

Substantial modifications

The definition of what will amount to a ‘substantial’ modification has been simplified, which should help contracting authorities to work out whether a proposed contract change is likely to be a substantial one or not.

A modification will be substantial (and therefore not permitted without a new procurement) in circumstances where:

• it increases or decreases the term of the contract by more than 10% of the maximum term provided for on award
• it materially changes the scope of the contract (i.e. a modification providing for the supply of goods, services or works of a kind not already provided for in the contract) or
• it materially changes the economic balance of the contract in favour of the supplier.

Below-threshold modifications

A modification (other than one that is already permitted by Schedule 8, or because it is not substantial) will also be permitted where it is a below-threshold modification. This applies where the modification would not itself increase or decrease the estimated value of the contract by more than:

• in the case of a goods or services contract, 10% and
• in the case of a works contract,15%.

In all cases, the aggregate value of a below-threshold modification must be less than the threshold amount for the type of contract (i.e. goods, works or services). In addition, a below-threshold modification must not materially change the scope of the contract.

Light-touch contracts

Light-touch contracts can be freely modified under the Act, providing greater flexibility to authorities.

How will authorities be affected by the new regime governing contract modifications?

This re-shaping of the rules around contract modifications will provide more flexibility for authorities, as well as making it clearer as to precisely when public contracts can be varied without a new competitive procurement, and how far those variations can go. The added transparency brought about by the new requirement to publish contract change notices should increase accountability on the part of both authorities and suppliers, by preventing contracts from undergoing potentially significant change under the radar.

Equally, the increased transparency mandated by the Procurement Act may cause some nervousness given that information about proposed modifications will be placed into the public domain, and thereby potentially subject to greater scrutiny. This might have an impact on the types of changes that end up being made to contracts; and could act as a deterrent against varying contracts by, for example, extending them for longer than necessary, or implementing revised terms that overly favour suppliers.