Government procurement in the United Kingdom

In 2021, the government estimated the value of public sector expenditure on goods and services at around £290 billion per year,[1] an increase of around £70 billion from 2008-09.[8] Both estimates suggest that one third of all public sector spending was devoted to the acquisition of goods and services.

Central government expenditure on third party goods and services was estimated at around £54 billion in 2009-10 and £45 billion in 2011-12.[9]

The Office of Government Commerce (OGC) set up a "Collaborative Procurement Programme" in 2007, managing over £18 billion of expenditure falling within eight categories of goods and services frequently purchased across the public sector, namely energy, vehicle fleet, travel, office solutions, information and communications technology, professional services, food and construction. A further category, facilities management, was added at a later date.[8] The National Audit Office (NAO) argues that collaborative procurement begins with standardising specifications, which

allows public bodies to aggregate demand and compare unit costs. Lower prices should result either from economies of scale, or from using pricing information to challenge suppliers. Collaboration should result in fewer tendering exercises, leading to lower administrative costs, and allow public bodies to concentrate on more specialised purchases that are unique to them.[8]

In the light of the economic downturn of 2008 onwards, sometimes referred to as the "Great Recession", the UK government adopted a series of ten "procurement for growth" principles, intended to ensure that UK government procurement would "take account of supply chain opportunities for UK companies in policy and delivery planning" and "analyse markets to assess where growth is achieveable".[10] In the March 2008 budget statement, the government announced that it wanted to see small and medium-sized enterprises (SMEs) "compete more effectively for public sector contracts". The statement also announced that businesses supplying services to Government would be able to sell their public sector invoices to debt specialists, a change which was expected to be "particularly advantageous to SMEs in managing their cash flow".[11] This was a reversal of previous government contracting practice in model contract documents, where assignment of debts was allowed only with the prior consent of the relevant public body.[12]

The UK public sector relies heavily on the use of framework agreements: the NAO found that 93% of the public bodies they surveyed had used a framework agreement during the financial year 2008-09.[8] However, in a 2010 review of the use of framework agreements and other forms of collaboration, they noted that were was a "wide variation" among public bodies in the extent to which they were being used.[8]

The coalition government of 2010 made a "commitment to promote small business procurement", in particular by aiming to award 25% of government contracts (by value) to small and medium sized enterprises.[13] At the same time a policy presumption was made that individual ICT contracts and projects "should be less than £100m lifetime costs".[13] The government promoted and welcomed reform during the period from 2010 onwards, especially the development and implementation of European Commission's proposals to modernise procurement legislation published in 2011. The Cabinet Office was responsible for leading on UK engagement with the EU. In research undertaken by the Local Government Association (LGA) in 2010 to inform the LGA's views on the proposed modernisation legislation, 36% of local government officers responding to a survey stated that the 2006 directives had led to more efficient and effective procurement practice, but 54% felt that "the simplicity of the procurement process" had deteriorated. The 2006 directives had created greater legal uncertainty within the local government procurement community. Several responses highlighted the need for better guidance and support from the EU and from the Office of Government Commerce (OGC), which was then responsible for procurement policy.[14] In February 2011 the UK Government stated its view that "the public procurement regime needs to be radically simplified to reduce red tape and improve value for money".[15]

Part 3 of the Small Business, Enterprise and Employment Act 2015 allows the Minister for the Cabinet Office or relevant Secretary of State to impose further regulations on public bodies regarding how they undertake procurement.[16] The Minister for the Cabinet Office is the minister with overall responsibility for procurement policy, which is delivered through the Crown Commercial Service, an executive agency sponsored by the Cabinet Office.[17]

The Crown Commercial Service (CCS) publishes Procurement Policy Notes from time to time, which advise procurement staff in the public sector of government policy developments and best practice in relation to procurement.[18] Procurement Policy Notes on responding to the 2019-2020 coronavirus pandemic were published in March 2020 [19] and remained in effect until 31 October 2020, allowing public bodies to make advance payments and retention payments for contracts which have been interrupted by the measures taken to reduce the spread of the coronavirus. Since 1 January 2021, the social value model in use among central government public bodies has included COVID-19 recovery, employment and social and community support as a key aspect of the economic, social and environmental well-being supported by public sector contracting.[20]

CCS operated a Mystery Shopper scheme from February 2011 to November 2018, whose remit was to provide a route for suppliers to raise concerns about public procurement practice in England,[21] The service was rebranded as the "Public Procurement Review Service" in November 2018, responding to feedback from suppliers and public bodies that the "mystery shopper" title did not properly reflect the role of the service.[22]

General transparency principles applicable to government procurement were published in March 2015 and updated in February 2017, stating that there is a presumption in favour of contractual information being made publicly available (except in matters of commercial confidentiality such as pricing, intellectual property and business plans).[23] Tender opportunities advertised by public sector bodies in the UK are legally required to be published to the following sites:

• Contracts Finder for England for all tenders and contracts valued over £10,000 for central government and £25,000 for sub-central authorities and the NHS.[24] According to OpenOpps, a tender publishing company, only 27% of all UK public sector tenders were published on Contracts Finder between 2015 and 2017.[25] Updated information regarding the use of Contracts Finder was published by the Cabinet Office on 21 June 2021.[26]
• Public Contracts Scotland for Scotland
• Sell2Wales for Wales
• eSourcing NI for Northern Ireland, in use since May 2008.[27]

The Public Contracts Regulations 2015 provide that public sector buyers must pay prime contractors within 30 days and must ensure that any subcontracts through the supply chain include a similar provision. In 2014–15 at least 33 NHS trusts paid fewer than half of their trade invoices on time, up from 23 in 2015–16 and 11 in 2014–15. Under the Better Payment Practice Code, they should pay at least 95% of non-NHS invoices within 30 days.[28]

Within the context of local government, many local authorities have adopted the National Procurement Concordat for Small and Medium-Sized Enterprises to encourage SMEs to engage in procurement and supply for local public services. Examples include the City of Wakefield's Concordat agreed in 2005,[29] and the Concordat agreed by East Suffolk Council in 2019.[30]

The UK government requires all government departments and their related organisations to ensure that they meet the minimum mandatory Government Buying Standards (GBS) when buying goods and services. Organisations in the wider public sector are also encouraged to specify the minimum mandatory standards in their tenders.[31]

The Government Commercial Function (GCF) is a cross-government network procuring or supporting the procurement of goods and services for the government. Sitting within the GCF, the Government Commercial Organisation (GCO) is the employer of senior commercial professionals (at Grade 7 and above) and consists of 250 senior commercial specialists. Around 4,000 civil servants who undertake or support the procurement of goods and services for government form the GCF alongside the more senior GCO professionals.[48]

The GCF is responsible for the Government Commercial Operating Standards,[49] whose purpose is "to set expectations and drive consistency in the planning, management and execution of commercial activities, ensuring contracts and relationships with suppliers realise value for money and result in delivery of high quality public services",[50] and for optimising use of procurement information across UK government. The GCF's "Contracts and Spend Insight Engine" (CaSIE), first established in 2017, includes a "data lake" embracing current and future supplier and expenditure information used to enhance procurement decision-making and contract management.[51]

Under the agreement on the withdrawal of the United Kingdom from the EU, procurement procedures commenced under the EU regulations before the end of the transitional period continued to be governed by the relevant regulations up to the issue of a contract award notice.[52] From 11 pm on 31 December 2020, "a UK-specific e-notification service" called the Find a Tender Service (FTS) replaced the use of OJEU. Contracting authorities and entities were expected to ensure that their contract notices are published on the new e-notification service as well as the relevant site listed above.[53]

Since 31 December 2020, most UK e-senders (third parties who operate publication systems which submit notices to the EU Publications Office) have been able to post notices to the FTS, although the Cabinet Office has identified several e-senders who had not as of December 2020 successfully completed integration work to post notices.[54]

Lord Agnew

A green paper on reform of public procurement was published on 15 December 2020, taking advantage of "the end of the [Brexit] Transition Period", according to Lord Agnew, "to overhaul our outdated public procurement regime".[55] Procurement Policy Note 11/20, also issued by the Cabinet Office on 15 December 2020, noted that following the end of the Transition Period, "below threshold procurement" could be reserved for suppliers based in certain geographical areas and/or reserved for small and medium-sized enterprises and voluntary, community and social enterprise organisations.[56] An instruction to consider such reservations applies to central government departments, executive agencies and non-departmental public bodies while other contracting authorities are encouraged to apply the same principles in their own procurement.[57]

The Competition and Markets Authority (CMA) issued a response to the green paper on 10 March 2021 detailing "ways in which reforms can harness the benefits of healthy, competitive markets". The CMA has proposed that "effective competition" should become a legal principle of public procurement, in order to secure better value for money and to reduce the possibility of illegal bid-rigging cartels influencing procurement decisions.[58]

Subsequently, on 3 June 2021, a "National Procurement Policy Statement" was published, establishing that public procurement "should be leveraged to support priority national and local outcomes for the public benefit", in order to secure the creation of new businesses, jobs and skills, waste reduction, climate change mitigation, supplier diversity, resilience and innovation. National priorities were identified in this statement relating to social value, commercial and procurement delivery, and skills and capability for successful procurement, and the Government announced plans to introduce legislation to ensure that:

• all contracting authorities are required to have regard to the National Procurement Policy Statement when undertaking procurements;
• larger contracting authorities are required to publish procurement pipelines and to benchmark their procurement capability - those with an annual spend of £200m or more from April 2022, and others with an annual spend of £100m or more from April 2023.[1]