New procurement rules: don’t simply award contracts to the lowest bidder, departments told

Post-Brexit guidance sets out how public spending should drive wider benefits like jobs and environmental protection
Photo: PA

By Richard Johnstone

04 Jun 2021

New guidance has set out plans to increase the benefits of public spending by urging procurement teams to consider how government contracts can be used to boost the UK’s recovery from coronavirus.

The National Procurement Policy Statement issued today by the Cabinet Office further strengthens moves to account for how the wider benefits of spending public money are factored in the procurement process.

In September, the Cabinet Office set out measures to allow departments to measure social value when awarding contracts to suppliers. Under the strengthened regime, procurement teams have been told they must not simply award contracts to the lowest bidder – especially when wider economic benefits can be proved.

The updated guidance follows the UK's exit from the European Union, allowing it to diverge from previous rules.

Publishing the new guidance, Cabinet Office minister Lord Agnew said public procurement in the UK adds up to around £290bn a year.

“The huge power of that expenditure must support us in tackling some of the most important issues we face today, from generating economic growth and helping our communities recover from the Covid-19 pandemic, to supporting the transition to net zero,” he said.

Under the new guidance, which applies across the entire public sector, procurement teams must now consider how public contracts will boost social value across three areas: creating new businesses, new jobs and new skills; tackling climate change and reducing waste; and improving supplier diversity, innovation and resilience.

The Cabinet Office said that while securing the best value for money remains crucial, procurement teams will have to consider these issues when they are assessing bids for contacts.

The guidance has says organisations should ensure they have the right capacity, skills and capability to manage efficient procurements, and must prioritise transparency.

The document calls on all public authorities to consider benchmarking themselves every year “against relevant commercial and procurement operating standards and other comparable organisations”.

Benchmarking should consider seven factors:

  • whether commercial objectives are aligned to relevant policies and organisational objectives
  • whether governance, management frameworks and controls are integrated,  proportionate and appropriate to the commercial work and level of prevailing risk
  • whether work is undertaken and assigned to people who have the required capability  and capacity to undertake it
  • whether business needs are adequately informed by the commercial strategy to determine when, and how to procure services and works
  • whether market conditions are sufficiently understood and procurement routes align with supply capacity and capability
  • whether contract management capability is sufficient and resources are proportional to complexity and risk
  • whether appropriate procurement systems and data reporting enables process efficiency, robust controls and effective decision making

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