Procurement Act 2023 - Frameworks and Dynamic Markets

Frameworks, and their cousin, the dynamic purchasing system, are a large and increasingly important part of the procurement landscape in the UK.  A recent (7 December 2023) report from the Public Accounts Committee of the House of Commons on competition in procurement indicates that Government use of frameworks for large contracts increased from 20% of contracts by value in 2018–19 to 68% in 2021–22. 

In evidence to the same Committee, the Crown Commercial Service (CCS) agreed that there was a pronounced trend, in terms of value, to increasing use of framework agreements rather than other competitive procedures. CCS stated that of the c.£260 billion of spend in Government each year on public contracts, £120 billion passes through its "marketplace".

From a supplier's perspective, this surely rings true. It has never been more important to secure a place on a Government framework, whether run by CCS or another central procurement manager, in order to secure public sector work. 

But frameworks are no panacea. The Public Accounts Committee report noted that whilst frameworks allow Government departments to realise benefits from economies of scale, they are not always the way to achieve the best competition. Award under a framework is limited to those suppliers who are appointed to the framework, potentially cutting out competition from off-framework suppliers or new entrants for the duration of the framework. There is also a sense that direct award, whilst permitted under many frameworks including CCS frameworks, may be over-used. The Government Commercial Function, in evidence to the Committee, highlighted that there is a distinction between good and bad frameworks as well as too many frameworks.  There is also a lack of data about contract awards, in particular direct awards, under frameworks, something that the Procurement Act 2023 (Act) seeks to address – see further below. 

The provisions of the Act dealing with frameworks and dynamic purchasing systems (renamed dynamic markets), build on the current rules with some notable reforms.

Duration of frameworks

The maximum term for most public authority frameworks remains four years. However, the Act provides more leeway to a contracting authority to increase this term if it considers that the nature of the goods or services justifies doing so (as opposed to the current "exceptional circumstances duly justified" test which applies under the Public Contracts Regulations 2015 and other procurement regulations).  If an authority increases the term of a framework, it must set out its reasons for doing so in the tender notice when it establishes a framework (or in a "transparency notice" in the perhaps rare case where a framework is set up without competition on the basis of a direct award). For defence and security frameworks and utility frameworks the maximum term, subject to the possibility of increase as above, is eight years.

One might question, in the light of the recent comments of the Public Accounts Committee referred to above, whether giving contracting authorities more freedom to award frameworks that last for more than the usual four year maximum term is a good thing. However, authorities will still need to justify any framework term of more than four years and will (implicitly) need to have a reasonable basis for such justification. This may not be very different from the way that award of longer frameworks has normally been approached under the current rules.

Award of call-off contracts

The mechanics for awarding call-off contracts under a framework are simplified and clarified.  The basic position is that a competitive selection must be used unless (in the case of a multi-supplier framework) the framework sets out the "core terms" of the call-off contract and an objective method for supplier selection, in which case direct award under the framework is allowed. The reference to "core terms" replaces "all the terms governing the provision of the works, services and supplies concerned" in the current regulations. This is probably both a more flexible formulation and one which more closely reflects the reality of many framework agreements which will typically contain empty service schedules which are to be completed for each individual call-off.

Open frameworks

In sharp contrast to the current regulations, the Act makes provision for open frameworks. It has never previously been possible to appoint new suppliers to a framework during its life. The Act will enable contracting authorities to set up open frameworks with an opportunity for new suppliers to join the framework at least twice during its term. The maximum term of an open framework is eight years (four years for an open framework with a single supplier).

Dynamic markets

Another innovation in the Act is the introduction of dynamic markets. Dynamic markets are an evolution of the dynamic purchasing systems under the current rules. In essence they will introduce for the public sector qualification systems that have been used in the utilities sector for many years (and, for utilities, replace qualification systems under the Utilities Contracts Regulations 2016).

The essence of a dynamic market is that it will allow a contracting authority, when it runs a competitive tendering procedure other than an open procedure, to provide for exclusion of suppliers who are not members of a particular dynamic market. A dynamic market may be established for any kind of goods or services (not just commonly procured goods or services as under the current rules on dynamic purchasing systems).

Any contracting authority or utility or centralised procurement authority may set up a dynamic market for its benefit and/or the benefit of other authorities/utilities. Applications for membership of a dynamic market must be open throughout the term of the market and there may be no limit on the number of members. Conditions for membership must be a proportionate means of ensuring that members have the legal and financial capability to perform contracts awarded by reference to membership of the market and have the technical ability to perform such contracts.

There is no limit in the Act on the duration of a dynamic market. Dynamic markets may be open-ended, but where they are of definite duration this must be stated in the notice establishing the dynamic market. Fees may be charged to members of a dynamic market that are awarded contracts by reference to their membership of the market. In the case of utilities, fees may be charged for obtaining and maintaining membership of the market.

A key difference between utilities dynamic markets and dynamic markets for the public sector is that, where a public sector authority wishes to limit a procurement to members of a dynamic market, it must nevertheless publish a tender notice that will be accessible to suppliers generally. It is then open to suppliers who are not currently members of the dynamic market to apply for membership and there is a duty on the authority to consider such applications for membership. 

In the case of utilities dynamic markets, however, there is no obligation to publish a tender notice to suppliers at large; a tender notice may be sent only to members of the particular dynamic market. This is understood to be intended to replicate the present qualification system rules for utilities.  

Qualification systems have been an established feature of utilities procurement for many years and there is a well-developed industry of providers of such systems to the utilities sector. The introduction of qualification systems to public sector procurement in the form of dynamic markets is an important innovation in the Act that has the potential to generate significant efficiencies for the public sector if techniques and systems that have worked well for utilities over the years are expanded into the public sector. 

Transparency and notices

One of the concerns raised in the recent Public Accounts Committee report, echoing comments made by the Government in evidence to the Committee, was a lack of transparency around contract awards, particularly direct awards, under frameworks. As matters stand, obligations on contracting authorities to publish information about contract awards under frameworks are very limited (the name of the contractor, the date the contract was entered into and the value of the contract should be published on the Contracts Finder website).  Cabinet Office guidance recommends the publication of further information and a copy of the contract itself but this is non-binding. There is, for instance, no requirement to publish a contract award notice following the entry into a call-off contract. Nor is there even any express obligation to provide information to unsuccessful bidders following an award decision under a framework (although it is very much good practice for authorities to do so).  Direct awards under frameworks are very much liable to fall under the radar. 

This will change once the Act comes into force.  As with any other non-framework contracts, the contracting authority will have to publish a (new style) contract award notice after it has taken its award decision but before entering into a call-off under a framework. This is the case both for call-offs awarded by way of further competition and by way of direct award. The contract award notice will have to include details of both the successful and (if applicable) unsuccessful tenderers. The same applies to contracts awarded by reference to a dynamic market. 

However, unlike non-framework contracts, the contracting authority will not have to apply a mandatory standstill of eight working days after publication of the contract award notice. A voluntary standstill may, however, be applied.

Contracting authorities other than private utilities will also have to publish a "contract details notice" following entry into a call-off under a framework or contract awarded by reference to a dynamic market.  Again, this aligns the position with standalone public contracts. 

The current rules (or lack thereof) on publication of information about the award of call-off contracts under frameworks are the product of policy choices over many years to minimise administrative burdens on contracting authorities when using frameworks. The Government's comments in the recent Public Accounts Committee report suggest that that policy may have gone too far and that the absence of transparency over contract awards under frameworks might lead to bad practice, such as direct awards where a further competition might have achieved a better outcome. Softer forms of encouragement via the Cabinet Office guidance appear to not have been effective in materially improving transparency in this area.

In bringing the post-tender notice requirements for call-off contracts largely into line with those that apply to standalone contracts, the Act will create new burdens for contracting authorities but also shine a light on an aspect of procurement that has hitherto sat in the shadows.