Government attempts to introduce flexibility to simplified public procurement processes could have an impact on regulated pension schemes, which will have to deal with increased uncertainty as a result.
The new procurement bill, introduced to parliament a day after its appearance in the Queen’s Speech and currently in its first reading in the House of Lords, builds on a green paper consultation process begun in 2020 and is designed to make use of powers repatriated as a result of Brexit to streamline public procurement.
Schemes will need to consider and revise their existing procurement procedures to ensure they align with any new measures
Jenny Broderick, Squire Patton Boggs
A significant part of the bill, and the one that brings certain regulated pension schemes into scope, relates to language and the changing of definitions, designed to simplify the text of procurement rules that had previously been couched in comparatively opaque terms resulting from extensive EU negotiations between member states.
The pensions implications
Though the bill contains no specific provisions relating to pension schemes, schemes that are classed as “contracting authorities”, or enforced, governed or financed by same in existing regulations are within the scope of the bill, meaning regulated pension schemes will have to procure in the same way as government departments and local authorities.
Besides simplified language, the bill cuts mandatory procurement principles entirely, and reduces the number of procurement procedures available from seven to three.
The green paper consultation proposed having six mandatory principles: the public good, value for money, transparency, integrity, fair treatment of suppliers and nondiscrimination, cut to three following the consultation — transparency, non-discrimination and fair treatment of suppliers — and then dropped entirely from the bill itself, which only requires that contracting authorities “have regard to the importance” of four “objectives”, these being “integrity, transparency, value for money and “public benefit”, according to a blog post from Squire Patton Boggs.
It cautioned, however, that it is “unclear what the legal effect of these objectives will be. In particular, it is unclear to what extent they will influence the interpretation of express obligations elsewhere in the bill or, indeed, create any freestanding obligations upon contracting authorities other than to merely “consider the objectives”.
The bill also adds more flexibility to procurement processes: for example, regulation 18 of the bill permits contracting authorities to award contracts to “the most advantageous tender”, as opposed to the previous formulation “the most economically advantageous tender”.
Jenny Broderick, specialist procurement lawyer at Squire Patton Boggs, told Pensions Expert that the idea is that this will “allow regulated schemes which are contracting authorities greater flexibility in designing their own procedure and tailoring this to their specific purchasing requirements”.
However, she added that one downside would be “less consistency and predictability”, a point seconded by Chris Murray, legal director in the competition, EU and trade group at Eversheds Sutherland, who acknowledged the intent to produce “a much more flexible approach to procurement” with less regulation governing it than under the old system, but concurred that the new text could result in “a fair amount of uncertainty as to what it actually requires in practice”.
“The government has indicated that it will issue model procedures which contracting authorities may adopt to reduce the burden of designing procedures from scratch. Schemes will need to consider and revise their existing procurement procedures to ensure they align with any new measures,” Broderick continued.
She added that provisions around transparency will also be of particular interest to pension schemes as the bill introduces several new requirements, such as “an obligation to publish a range of new notices including: a Preliminary Market Engagement Notice (required where a contracting authority engages in certain procurement planning activities), and a Contract Change Notice (required where certain material variations to existing contracts are agreed)”.
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“These new notices are intended to increase the integrity of the system as a whole, but will inevitably place an increased administrative burden on contracting authorities, particularly around the time of implementation,” Broderick said.
“Schemes which are likely to be subject to the new rules should familiarise themselves with the new notice requirements, evaluate their current capacity and capability to publish the new notices, and revise their policies and procedures to ensure compliance.”
