Innovation and the Procurement Act 2023
Our theme for this month is Innovation Matters. One of the objectives of the Procurement Act 2023 is to empower public bodies to procure more innovative solutions.
As part of the new procurement legislation, procurement professionals will have a wider set of tools giving more flexibility to choose newer solutions to fit the procurement process to specific needs.
Innovation across the public sector will be vital for meeting future challenges including the provision of health and social care.
We sat down with Mary Mundy, Partner at Capsticks LLP to discuss how the new Act and accompanying regulations will support innovation.
What innovative approaches to flexibility does the new procurement legislation offer?
The main way that the Procurement Act 2023 offers flexibility to procurement professionals is by permitting procurement professionals to design their own procurement process. The Act allows procurement professionals to either use the open procedure or design their own procurement process that they consider appropriate for awarding the public contract – this is referred to as the competitive flexible procedure. This means that depending on the relevant market, supply chain or specification for example, procurement professionals could have dialogue or negotiation with the bidders if they feel it’s appropriate and would lead to a better outcome in the procurement process. They don’t have to have dialogue or negotiation though – they could stick to a paper-based exercise similar to the restricted procedure or they could have a few rounds within the tender stage for example. Clearly there will be no one size fits all approach and procurement professionals should consider what has and hasn’t worked well in the past, the available resource, what is proportionate based on the value and complexity of the contract and how the market will respond.
The Procurement Act 2023 also enables procurement professionals to set up open framework agreements that can last up to 8 years – these are effectively framework agreements that continue to replace the previous one and new suppliers could gain a place on the framework agreement when it is opened. This would be really useful for markets where there is continuing innovation or updated products or services that can be available. There will still be “closed” framework agreements that can last up to 4 years (which is what we have under the current legislation) so procurement professionals can choose what will work best for their category strategy.
How will the new procurement legislation support innovation in procurement?
The new procurement legislation will require contracting authorities to have regard to potential barriers that Small and Medium Enterprises (SMEs) might have. SMEs may well have some innovative products or services on offer and so contracting authorities should consider how they make their procurement processes more accessible.
The use of the competitive flexible procedure could support innovation, particularly where dialogue could result in the bidders contributing to a solution.
Open framework agreements that suppliers could join at defined points should also support innovation as suppliers will have the opportunity to bring new products/services/solutions to market and not risk being “locked out” of the market for lengthy periods.
What pitfalls do public procurement professionals need to be aware of with the new legislation and innovation?
I wouldn’t necessarily call it a “pitfall,” but procurement professionals need to ensure that if they’re designing their own procurement process, that the market will be able to respond and participate and that the relevant contracting authority has the resource to run the process that they have designed. Also, if using an open framework agreement – procurement professionals will have to clearly set out from the start how that framework agreement will be run and at what point it will be opened up. This could be quite burdensome from an administrative perspective.
What are the pros and cons of the new procurement legislation and how do they specifically apply to innovation?
I think the main pro is the ability to design a procurement process that is right for the relevant specification and market. With this comes a con – I think bidders may be slightly nervous about this as it means there could be lots of different types of processes for them to respond to and participate in and they’ll need to understand how the process will work. I therefore think it will be really important to ensure that pre market engagement is carried out with the market in order to inform the design of the process and the potential bidders to ensure they understand what is expected and to obtain feedback from the market before starting a procurement process. Under the current legislation, procurement professionals can only have dialogue or negotiation for particularly complex procurements. Having dialogue with bidders is a great way to drive innovation through a specification or contract but it won’t be appropriate for all procurement processes and dialogue is resource intensive and can be difficult to manage.
I also think that the open framework agreement will be a pro – it will be a really useful way to drive innovation. A product might not be available at the start of the eight-year open framework agreement but may come available during that time and so new suppliers could join and those calling off the framework agreement get the benefit of the latest product.
For contracts with a value of over £5 million, there will need to be Key Performance Indicators (KPIs) and procurement professionals will need to ensure they manage suppliers and capture their performance against the KPIs as they will have to publish the suppliers’ performance at least every 12 months. This is also a pro and con. It’s a pro as it should drive better performance under public contracts and the KPIs could be linked to innovation. It is a con in the sense that it will be quite administratively burdensome – the key way to reduce this burden is to ensure the KPIs are well defined, clear, and measurable. Again, having pre market engagement prior to the launch of a procurement with potential bidders to test whether the KPIs will work will be really valuable.
The Transforming Public Procurement Innovation Ambition document is available here.