Reforms to public procurement will improve the way supplies, services and works are procured for the public sector. Helen Povah, public sector client management director at Aon, explains the changes and how organisations can prepare for the new rules.
The Procurement Act 2023 represents the most significant change to the way public sector organisations buy goods and services in a generation. Although it’s unlikely to come into force until October 2024, organisations should start preparing for the new regime now.
Bill benefits
The Act, which replaces the EU regulations and received royal assent on 26 October, aims to improve the UK’s public procurement, creating a simpler and more flexible system. Under the new legislation, public sector organisations will have fewer processes to deal with, some new requirements and rules to understand, but will also have more opportunity to tailor the procurement process to their requirements. The regime should also open up public procurement to new entrants including SMEs and social enterprises, although this is unlikely to have much impact on insurance procurement.
Transparency is key within the new system. Around £300bn a year is spent on public procurement – equivalent to one in every three pounds of public money – so accountability is essential. As part of this, the public will have access to procurement data, enabling them to scrutinise spending decisions.
Key changes
It may be nearly a year before the new procurement regime comes into effect, but these are the key changes that will require attention:
- Fewer procurement procedures
Rather than the seven procedures that are currently in place, there will be just two, plus the use of Direct Awards and Frameworks/Dynamic Purchasing Systems. Anyone not using a framework will be able to use either an open procedure or the new competitive flexible procedure. This new competitive flexible procedure should give more flexibility to specify the exact scope and process required.
- Switch from MEAT to MAT
The removal of ‘economically’ to transform MEAT into ‘most advantageous tender’ demonstrates a shift in procurement philosophy. While price will still be an important factor in procurement, it will no longer be the overriding factor. This move to a more holistic approach will enable organisations to shift the focus on to a broader range of criteria that are important, for instance service standards, location and ESG which may not have been given as high priority in prior processes.
- Greater transparency
As part of its drive for transparency, the Act will require organisations to publish more notices to ensure that procurement information is publicly available. This will create an additional administrative burden on contracting authorities. This supports effective competition and enables the public to understand how money is spent, but it will require changes to processes to ensure information is published in line with the new rules.
- More emphasis on ongoing contract management
The requirements laid out in the Act also extend beyond the award of the contract, outlining steps that must be taken to manage a contract. This includes ensuring suppliers are paid within a set time and new requirements to assess and publish information about how suppliers are performing.
Be ready
The new Act will mean change across procurement, with ramifications for risk. Insurance officers will need to understand how the changes affect them, both from an insurance procurement perspective but also in terms of any changes to risk within the organisation.
As an example, the Act introduces new requirements around data as part of its drive for greater transparency. To ensure compliance, organisations should be examining where data is held on existing e-procurement systems and how secure this is. Engaging with procurement will ensure that both parties understand the ramifications of the new regime and can roll this out across the organisation. There will be a six month transition period, likely to begin in April 2024, before the Act becomes law in October 2024. Any tenders which have commenced prior to October 2024, including where the PIN or tender notice has been published, will be conducted under the current rules. Putting the right framework in place now will help to ensure a smooth transition.
It is also prudent to engage with your insurance broker to help you identify areas within your organisation that may need attention to ensure you’re ready for the new regime.
More information
To find out more about how the Procurement Act will affect your organisation and the changes you might need to implement, speak to your Aon account manager or contact Helen Povah ([email protected]).
About Aon
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