Originally set to become active in October 2024, the new UK procurement act received an emergency extension on September 12th, 2024 and will become effective in February 2025. This gives organisations more time to prepare ahead for changes that will come with the new act, particularly with regards to corporate sustainability.
The new UK procurement act introduces key provisions that will transform how public bodies engage with suppliers and evaluate tenders. It places sustainability at the forefront of decision-making, requiring businesses to demonstrate their commitment to environmental stewardship and social responsibility. This shift in focus presents both challenges and opportunities for companies vying for public contracts. The act also introduces changes to transparency requirements and introduces new mechanisms for supplier engagement, all of which will have far-reaching implications for corporate sustainability strategies and reporting practises.
Overview of the UK Procurement Act
The UK Procurement Act 2023, which received Royal Assent on 26 October 2023, is set to transform public procurement in the UK. This landmark legislation aims to streamline and simplify the procurement process, making it quicker more transparent and better aligned with the UK's needs. The Act consolidates over 350 individual regulations derived from EU Directives into a single regime for England, Wales and Northern Ireland. It is expected to go live on 24 February 2025, following a delay from the original October 2024 date. The Act covers contracts awarded by most central government departments, wider public sector bodies and utilities companies, with an estimated annual public procurement spend of £300 billion.
Sustainability Provisions in the Act
The Procurement Act introduces significant provisions to promote sustainability in public procurement. It mandates that contracting authorities consider social value when awarding contracts, building upon the foundation laid by the Social Value Act 2012. The Act requires public bodies to evaluate how their procurement decisions can enhance social, economic, and environmental well-being in the communities they serve. The Act emphasises three ESG pillars of sustainability: environmental, social and economic. It encourages minimising negative environmental impacts across the entire lifecycle of goods and services, from raw material extraction to end-of-life disposal. Social considerations include ensuring fair contract prices, ethical standards and compliance with International Labour Organisation conventions (ILO).
To support these objectives, the Act mandates compliance with Government Buying Standards and aligns with the UK's commitments under the UN Sustainable Development Goals. It also introduces new sustainability reporting duties for major projects, enhancing accountability and transparency in public procurement.
Challenges and Opportunities for Businesses
Challenges for Businesses
Adapting to New Compliance Requirements: The UK Procurement Act introduces updated compliance standards and procedures that businesses must align with. This may seem overwhelming at first, as companies will need to adjust their operations and ensure they meet these stricter guidelines.
Navigating Procedural Changes: The shift in processes requires businesses to familiarise themselves with new frameworks and practices, potentially increasing the complexity of engaging with public sector opportunities.
Collaboration with the Public Sector: The Act promotes a more problem-oriented approach, urging private companies to collaborate with the public sector. This collaboration may be challenging for businesses not accustomed to direct involvement in identifying and solving public sector problems.
Opportunities for Businesses
Focus on Innovation: The UK Procurement Act places a strong emphasis on innovation, encouraging businesses to develop creative solutions that address public sector challenges, potentially opening up new markets for innovative products and services.
Sustainability Emphasis: The legislation promotes sustainable practices, giving businesses that prioritise eco-friendly solutions a competitive advantage in public sector procurement.
Pre-Tender Market Engagement: The Act encourages better engagement with the market before the formal tender process, allowing businesses to showcase their capabilities early on and helping public authorities better understand what innovative solutions are available.
Collaboration for R&D: By encouraging public-private collaboration, businesses have the opportunity to direct their R&D efforts toward solving real-world problems identified by the public sector, leading to more targeted innovation efforts and potentially greater business success.
Increased Market Visibility: Engaging with the public sector under this new regime allows businesses to gain increased visibility, making it easier to highlight their unique solutions and build stronger relationships with contracting authorities.
The Bottom Line
As businesses gear up for the Act's implementation, they face both challenges and opportunities. The new requirements may seem daunting at first, but they also open doors for innovation and collaboration with the public sector. Companies that can adapt their strategies to align with the Act's objectives will be well-positioned to thrive in this new landscape. In the end, the UK Procurement Act has the potential to drive positive change, encouraging businesses to play a more active role in building a sustainable future.