Contracting Authorities’ continuing duties after contract award

The Procurement Act 2023 (“the Act”) brings changes to the old Regulations that govern public procurement within the UK. Arguably the most significant shift brought about by the Act is the greater focus on transparency and supplier performance.

With the ‘go live’ date quickly approaching, it is critical that contracting authorities understand the additional obligations introduced by the Act, so that they have time to adjust their working practices. Likewise, suppliers need to be attuned to the potential ramifications that these changes may have on them.

As part of our series of articles on the changes being brought around by the Act, we outline the key post contract award duties to be aware of below.

Notices

As part of its emphasis on transparency, the Act introduces new notices that contracting authorities must publish. The main notices that contracting authorities are required to publish are:

Contract Award Notice: to notify the market that the contracting authority intends to enter into a contract with the preferred bidder. This notice also triggers the start of the standstill period.
Contract Details Notice: published within 30 days of the date that the contract was signed (or 120 days in the case of light touch contracts). This notice is similar to the contract award notice under the old Regulations.
Contract Publication: published within 90 days of the date that contracts valued over £5 million are signed or modified. This does not apply to Welsh contracting authorities (unless the contract was awarded as part of a procurement under a reserved procurement arrangement).
Contract performance notice: published at least every 12 months to set out performance against KPIs, and within 30 days of a failure to perform the contract to the satisfaction of the contracting authority or breach of contract.
Payment Compliance Notice: published within 30 days of the last reporting period (being each 6-month period starting on 31 March and 30 September) to show the contracting authority’s compliance with the 30 day payments terms (as explained below).
Contract Change Notice: published before an above threshold modification is made to the contract. This has widened the position compared with the old Regulations which only require notices to be issued in certain, limited circumstances.
Contract Termination Notice: published within 30 days of a contract’s termination (to include: expiry, termination by any party, discharge, recission or being set aside).

Contract modifications

Modification of public contracts post award are only permitted in limited circumstances. Under the Act these are:

It is a “permitted” modification as set out in Schedule 8
It is not a “substantial” modification
It is below threshold (but the contracting authority must cumulate all previous below threshold changes when relying on this exemption); or
The contract is a light touch contract

Most of the permitted modifications are broadly similar to those under the old Regulations, with the addition of a few new ‘safe harbours’, these being where there is an urgency and need to protect life or a known risk has materialised. However there are differences which we will deal with in a more detailed update on contract modifications.

Of particular note is the new exemption for light touch procurement: the light touch regime was historically regulated under the case law principles famously set out in the pressetext Nachrichtenagentur judgement.

KPIs and supplier performance

Where public contracts are valued over £5 million, the Act requires contracting authorities to set the supplier, and publish, at least 3 key performance indicators (“KPIs”). At least once a year, and on termination of the contract, contracting authorities must publish a contract performance notice with an assessment of the supplier’s performance against the KPIs, stating whether performance is good, approaching target, requires improvement or inadequate.

Where (i) a supplier has breached a public contract resulting in termination, the award of damages or a settlement agreement; or (ii) the contracting authority considers that a supplier is not satisfactorily performing a public contract and has not improved its performance despite being given a proper opportunity to do so, the contracting authority must publish details in a contract performance notice or, if relevant, a contract termination notice.

Poor performance is a discretionary exclusion ground under which suppliers can be made ‘excludable’ when bidding for public contracts. As noted in our article on the qualification of suppliers, this is a significant change. Authorities may feel that they have an additional tool in their armoury when faced with an under-performing contractor, since suppliers to the public sector will be concerned to avoid publication of such contract performance notices and the risk of being excluded from other public contracts. This will likely have a big impact on the way both contracting authorities and suppliers manage performance.

Subcontractors

Where a subcontractor is an excluded or excludable supplier or is on the central debarment list, the contracting authority may terminate the contract in certain circumstances. This will arise where:

The supplier did not disclose the relevant information during the procurement process when asked (or the information provided was false); or
After contract award the subcontractor becomes excluded or excludable or is entered onto the debarment list.

Suppliers changing subcontractors during the contract term should carry out appropriate checks to ensure that the proposed new subcontractor does not meet any of the mandatory or discretionary exclusion grounds. In most cases, where the contracting authority proposes to terminate the contract due to the subcontractor, it must first give the supplier opportunity to make representations and change the subcontractor.

Other terms implied into the contract

Where, during the term of the contract, the supplier becomes excluded or excludable or is added to the central debarment list, there is a term implied into the contract allowing the contracting authority to terminate the contract.

Where the contracting authority considers that the contract was awarded or modified in material breach of the Act, it may terminate the contract. In major contracts with significant sunk costs for the supplier, it may wish to consider whether the award or contract modification complies with the law. In practice his already happens under the old Regulations, for example in relation to major development agreements.

Before exercising this right, the contracting authority must allow the supplier to make representation.

Given the cost and potentially serious consequences for the parties if a contract is terminated, we anticipate that contracting authorities may seek to specify in the contract what the consequences are of termination where the authority exercises this implied right.

Payment and invoicing

Contracting authorities must pay all undisputed invoices within 30 days of an invoice being received or, if later, the day on which the payment falls due in accordance with the invoice (unless the contract is a concession, utilities or contract awarded by a school). These terms are implied into all public contracts and cannot be contracted out of (unless shorter payment terms are agreed). They are also implied into all contracts between the supplier and its subcontractors.

Comment

The changes to the post contract award obligations places a higher administrative burden on contracting authorities, with the many notices costing contracting authorities in terms of both time and resource. It is important that contracting authorities get ahead of the curve and put in place processes for dealing with the required notices, so that the transition to the Act can be as streamlined as possible and notices aren’t inadvertently missed.