Five in Twenty Five - Works Contract Special

Recorded on 7 November 2024. In each of our 30 minute webinars within this series, the Mills & Reeve procurement team looks at a different stage of the procurement lifecycle, summarises the key changes and offers practical tips around tricky issues and grey areas. Jenny Beresford-Jones, Stuart Thompson and Dominic Taylor looks at the works contract special.

Key questions and answers

Please note that the responses provided represent the general views of the public procurement team at Mills & Reeve, however they should not be relied on or treated as a substitute for specific advice relevant to a particular scenario/matter. If you require specific legal advice, our procurement team would be happy to discuss this further with you – contact details of which are provided below.

Our view is based on the Procurement Act 2023 (the “Act”) together with the regulations that sit under it. We are still awaiting official government guidance on some parts of the Act, meaning that the position set out in this note may therefore be subject to change.

FAQs

Can price be negotiated as part of a Competitive Flexible Procedure?

Yes, the Competitive Flexible Procedure does permit negotiation. The government guidance defines “negotiation” in this context as “the discussion between the contracting authority and a supplier with a view to improving the content of tenders” and there is no reason we can see why price negotiations should not be possible within that remit and indeed paragraph 68 of the guidance expressly references price negotiations. If you wish to negotiate price, then the Tender Notice that commences the process must expressly state that the procedure contains a negotiation stage.

The Act requires a minimum of three KPIs to be set where the contract is valued over £5m but if there are e.g. 15 KPIs in the contract – do all of these need to be published and measured?

There are slightly different requirements in relation to setting, publishing and reporting. In relation to publishing, all KPIs in the contract need to be published. In practice this will be achieved by the publication of the contract itself as part of the Contract Details Notice (all contracts valued over the works threshold will need to be published (with redactions of any commercially sensitive information as appropriate). In relation to reporting, the obligation is to use the Contract Performance Notice to report performance against the three most relevant KPIs at the time the notice is published. The three KPIs chosen may vary from year to year (the report on KPIs must be made at least annually).

Does the KPI regime apply to frameworks? e.g. the framework value could be over £5M however individual call off contracts will not meet this threshold?

The KPI regime does not apply to the framework agreement itself (see section 52(6)), however it does apply to any (over-threshold) contract called off from a framework agreement or awarded within a dynamic market, where the value is over £5m.

How we should implement the requirement to publish a redacted contract modification, as this is a new requirement?

This question is in relation to the new requirement that, where a modified contract has a value (or will come to have a value following the modification) of over £5m, a copy of the variation must be published to the central digital platform. Contract variations must be redacted of any commercially sensitive information. We do not yet have any detailed steer on redactions – the guidance on the central digital platform simply notes that the types of information that may be redacted is somewhat narrower than under current legislation – section 94 of the Act tells us what information may not be disclosed – namely, withholding due to national security considerations or sensitive commercial information which it is in the public interest to withhold.

Section 94 It also states that, if information IS withheld, there is a requirement to make a statement that a decision to withhold has been made. It is not yet clear how this will happen in practice, but we expect that this may become clearer once onboarding to the central digital platform begins.

At present, central government bodies are already subject to enhanced transparency policy requirements which involve publishing copies of whole contracts. It will be interesting to see how the relevant Procurement Policy Notes are updated to harmonise that guidance with section 94, which looks to permit redaction in narrower circumstances than at present.

In relation to modifications under the Act, is it naive to assume that a combination of (1) standard form contracts making express provision for modifications and (2) that once in contract, it is not practical to deliver the modification requirement via a new tender/contractor, the majority of normal variations encountered when administrating a typical works contract, are permitted under the Act without the need to publish a notice?

This is the area where the Act really increases the transparency burden. The need to publish a Contract Change Notice ahead of making the variation applies to all contract changes which increase or decrease the value of the works contract by more than 15% or which increases or decreases the term of the works contract by more than 10%. This applies even where the change is one which is already set out unambiguously in the original standard form contract. As such, the obligations in the Act will lead to large numbers of contract notices being published (assuming authorities are able to comply with the obligations). As mentioned in the webinar, it seems to us that the only way to avoid this is if it is possible to characterise the “change” as not a variation at all but as the simple operation of a current term of the contract (see for example, compensation events).

Is the requirement to set 3 KPIs a fixed number; for example, if an Authority set more KPIs than that, could the contractor limit the published ones to 3?

No, it could not limit the number of KPIs based only on the Act (although it might be able to do this commercially of course). The Authority is required to set at least 3 KPIs but there is no prohibition on setting more than this. As mentioned above, the requirement to publish the whole contract with the Contract Details Notice means that all the KPIs in the contract will usually end up being published.

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