Limited tenders, frameworks and direct awards: new rules

Limited tenders and direct awards - changes due to the Procurement Act 2023

The Procurement Act 2023 is changing many areas of public sector procurement. One specific area, which is a significant area and potential risk for many public sector suppliers, is the the introduction of limited tenders and the implications for direct awards. If you organisation uses direct awards as a key route to sell into the public sector, via key frameworks such as CCS, you need to carefully consider the impact.

If you are a bidder or supplier of goods, services, or works for the public sector, you may be familiar with the concept of direct awards. A direct award is a type of procurement process where a public sector buyer awards a contract to a single supplier, from a framework they are approved on, but importantly without further competitive tendering. This means that the buyer does not have to publish a contract notice, invite bids, or evaluate proposals from multiple suppliers. Instead, they need to justify why but further competition is not required. Some framework agreements simply have that the higher scoring bidder (when bidding to get onto the framework) have the first opportunity for any new business and a direct award can be made. Other frameworks require a mini competition or call-off to ensure value for money is achieved from all approved suppliers on the relevant lot on the framework. However, many frameworks allow for both call-off or direct award to any supplier.

The impact of limited tendering for suppliers - quick answer

Limited tenders, or the limited tendering procedure is the new name for direct award, and it will allow public sector buyers to award contracts to a single supplier without a competitive process, under certain circumstances and conditions. However, the Procurement Act 2023 also introduces more safeguards and scrutiny for the use of limited tendering procedure, such as:

• Requiring public sector buyers to publish a notice of their intention, allowing other interested suppliers to challenge the decision, and;
• Publishing the details and value of the contract awarded.

Limited tenders and direct awards

Direct awards are used in procurement when the buyer has a clear and justified reason to select a specific supplier, such as:

• The supplier is the only one capable of providing the required goods, services, or works, and there is no reasonable alternative or substitute available. This can be due to the technical specifications, the intellectual property rights, the exclusive rights, or the compatibility issues of the goods, services, or works.
• There is an urgent need for the goods, services, or works due to unforeseen events, such as emergencies, disasters, or crises, and a competitive tendering procedure would be impractical or impossible. This can be due to the extreme urgency, the public health and safety, the national security, or the environmental protection of the situation.
• The buyer has already conducted a competitive tendering procedure and has identified the most suitable supplier, but needs to extend or modify the existing contract due to technical, economic, or legal reasons. This can be due to the unforeseen changes, the additional works, the performance issues, or the contract termination of the original contract.

However, the buyer cannot use direct awards for any other reasons, such as convenience, preference, cost, or speed, as this would violate the principles of fair competition, equal treatment, and transparency that govern the public procurement system. The buyer also has to comply with the following criteria and conditions when using direct awards:

• The buyer has to provide sufficient evidence and documentation to support and justify their decision to use direct awards, and to demonstrate that they have followed the relevant rules and regulations.
• The buyer has to ensure that the direct awards are not used to favour or discriminate against any suppliers, and that the contract terms and prices are fair and reasonable.
• The buyer has to limit the duration and scope of the direct awards to what is strictly necessary to meet the specific needs and circumstances of the procurement.

Limited tenders and direct awards after October 2024

These rules and criteria apply to direct awards until October 2024, when the new Procurement Act 2023 will come into full effect. The Procurement Act 2023 will introduce some changes and modifications to the reasons and criteria for using direct awards, which will be renamed as limited tendering procedure. The main changes are:

• The buyer will have to publish a notice of their intention to use limited tendering procedure, and to provide a clear and detailed explanation of the reasons and justification for their choice of supplier and procurement method. This will increase the transparency and accountability of the process, and will enable other suppliers to be aware of the opportunities and criteria for direct awards.
• The buyer will have to consider the social value and environmental impact of the goods, services, or works, and to align their procurement objectives with the wider public policy goals and priorities. This will increase the sustainability and responsibility of the process, and will enable other suppliers to demonstrate their contribution to the public good.
• The buyer will have to use a standard set of terms and conditions for the contract awarded through limited tendering procedure, and to follow a common framework of rules and guidance for the procurement process. This will increase the consistency and simplicity of the process, and will enable other suppliers to understand and comply with the requirements and expectations.

Planning for limited tenders and their implications

If you are a bidder or supplier who relies on direct awards as a significant route to market, you need to start preparing for the opportunities and challenges that the Procurement Act 2023 and the limited tender 2024 will bring.

Key supplier and bidder actions:

• Ensure you win a place on any existing frameworks and neutral vendor solutions, which can provide some level of initial continuity.
• We believe framework use will increase as public sector buyers will not want to risk running the new procedure and rules themselves, if they can avoid it. Frameworks could become an increasingly important tool, however, with the potential of increased mini competitions or call-offs. Ensure you read the framework call-off procedures carefully for any existing government frameworks you are on, and any new ones you bid for, and ensure you have access to enough bidding capacity, or external bid writing services.
• Relationships with public sector buyers will still be important and this investment should continue.
• Ensure you monitor and respond to the new transparency notices associated with limited tenders to evaluate your opportunities and risks of challenging or participating in their procurement process. Competitor analysis becomes a key step in ensuring a good return on investment from bidding.
• Consider the social value and environmental impact of your goods, services, or works, and align your procurement objectives with the wider public policy goals and priorities. You can use various methods and tools, such as social value measurement, environmental impact assessment, or sustainability reporting, to demonstrate your contribution to the public good.
• Understand the new rules and criteria for using limited tendering procedure, and how they will affect your eligibility and chances to win contracts through this method. You can use various sources of guidance, such as the Procurement Act 2023 itself or the Procurement Guidance Notes.