New government guidance published in June 2026 has brought a specific provision of the Procurement Act 2023 into much sharper focus. The national security exemption has existed within the Act since it came into force in February 2025, but this mechanism is now being actively directed at a broader range of sectors and procurement decisions. For suppliers, understanding what this exemption actually is, and what it permits buyers to do, matters more now than it did six months ago.
What the national security exemption is
The Procurement Act 2023 sets out rules governing how public contracts must be advertised, competed, and awarded. In normal circumstances, contracts above relevant financial thresholds must be openly advertised and go through a transparent competitive process. The national security exemption (contained in Schedule 2, paragraph 25 of the Act) creates a lawful route outside those rules.
Where a contracting authority determines that a procurement should not, in the interests of national security, be subject to the Act, it can disapply the standard competitive tendering requirements entirely. This is not a minor procedural adjustment. It means a buyer can award a contract without advertising it, without running a competition, and without being bound by the Act's evaluation and transparency obligations, where the national security justification is properly made out.
Critically, the Act deliberately leaves "national security" undefined. This is intentional: the Government wanted the concept to remain flexible and adaptable rather than fixed to a narrow list of scenarios. Legal commentary has noted that the exemption's scope extends well beyond traditional defence and military procurement to encompass economic security, energy security, cyber security, critical infrastructure, and counter-terrorism considerations. That breadth is significant, and it is precisely what the new guidance is designed to operationalise.
Exemption vs exclusion
It is worth distinguishing between two separate national security instruments in the Act, because suppliers sometimes conflate them.
The first is the exemption described above (Schedule 2, paragraph 25). This removes a procurement from the Act's scope altogether. If applied, the contract need not be competed. The buyer has maximum flexibility in how they identify and select a supplier.
The second is the exclusion power (Schedule 6 and Schedule 7). This operates within a competitive procurement and allows buyers to remove specific suppliers from consideration on national security grounds. This can either be mandatory, where a supplier appears on the central debarment list maintained by the Cabinet Office, or discretionary, where a contracting authority concludes (with Ministerial agreement via the National Security Unit for Procurement) that a supplier poses a threat. This power also extends to a supplier's associated persons and intended subcontractors.
These are different tools for different situations. The exemption shapes which contracts get competed at all. The exclusion shapes who can participate in competitions that do take place. PPN 025 is mainly about the exemption: when departments can take certain procurements outside the Act’s standard competitive rules for national security reasons. However, suppliers still need to understand the exclusion powers, because those can affect who is allowed to compete when a procurement does go to market.
What PPN 025 changes
The formal instrument behind the June 2026 announcement is Procurement Policy Note 025 (PPN 025): Protecting the UK's National Security Through Public Procurement, published by the Cabinet Office on 19 June 2026 and in force with immediate effect.
PPN 025 does not create new law. What it does is direct in-scope organisations to apply the exemption proactively rather than reserving it for exceptional circumstances. In-scope organisations are required to identify relevant procurements in their pipelines, engage early with the relevant Sector Lead, and deploy the national security exemption where appropriate and justified.
The PPN formally covers four sectors, described explicitly as "pathfinder" areas: shipbuilding, steel, AI and energy infrastructure. That signals that this is the beginning of a broader programme of security-informed procurement rather than a standalone intervention:
- Shipbuilding
Sector Lead: National Shipbuilding Office, Ministry of Defence - Steel
Sector Lead: Department for Business and Trade - Artificial intelligence
Sector Lead: Department for Science, Innovation and Technology - Energy infrastructure
Sector Lead: Department of Energy Security and Net Zero
Each Sector Lead has a published contact email for procurement pipeline engagement (available in the PPN). Suppliers should be aware of the Sector Lead structure, because it is likely to shape early market engagement, pipeline planning and how departments justify procurement routes in these sectors.
It is worth noting that PPN 025 formally applies only to central government. Other contracting authorities are not bound by it, though they are encouraged to consider their own pipelines in light of the guidance, particularly where procurements are high value, complex, or related to national interests. Private utilities in energy infrastructure are also specifically encouraged to engage with the Sector Lead on relevant procurements.
For suppliers, this means the immediate practical effect will be concentrated in central government pipelines, though the direction of travel is likely to influence buyer behaviour more broadly over time.
How the guidance is being implemented
Three structural changes have been put in place to make the policy work across government:
- Dedicated Sector Leads have been appointed within key departments across Whitehall. Their role is to advise ministers on when and how to apply the exemption in upcoming procurements. This institutionalises security-informed procurement decision-making in a way that did not previously exist.
- HM Treasury is writing to accounting officers across government, providing guidance on applying the exemption in a way that is consistent with value for money obligations. This matters because accounting officers carry personal responsibility for spending decisions. The Treasury letter signals that invoking the exemption for security reasons will not be treated as a value for money failure.
- The PPN also confirms the initiative is consistent with the UK's international trade agreements, including the WTO Agreement on Government Procurement. Trusted international partners and allied-nation suppliers remain eligible to compete. This is not a blanket preference for domestic suppliers, but a framework for applying security considerations where they are genuinely relevant.
We covered the specific sectors named in the March 2026 guidance (steel, shipbuilding, AI, and energy infrastructure) and what that earlier announcement meant for businesses operating in those markets, in our post on national security contracts. PPN 025 builds on that foundation, extending the framework to departments more broadly and providing the procedural infrastructure to make it work in practice.
What suppliers need to know
For most suppliers, the day-to-day experience of public procurement will not change overnight. The majority of government contracts will still be competed, still be advertised on Find a Tender, and still flow through procurement frameworks. The exemption is not a wholesale replacement of competitive tendering. It is a tool for specific circumstances, applied with justification.
That said, there are several practical consequences worth taking seriously.
You may not see some contracts coming
Where the exemption is applied, buyers have no obligation under the Act to advertise the opportunity. Contracts in sensitive sectors can be awarded without a public notice. For suppliers who rely on Find a Tender or Contracts Finder as their primary pipeline, this is a genuine gap. Building direct relationships with buyers in critical sectors, and understanding their forward procurement plans through early market engagement, becomes more valuable as a result. Our guidance on SME spend targets covers the wider policy context supporting early engagement as a route to market.
Supply chain scrutiny has increased
Even in competitive procurements that are not exempted, the exclusion powers mean that your subcontractors and associated suppliers are subject to national security assessment alongside your own organisation. Consider if your supply chain includes entities that could attract scrutiny, such as offshore manufacturing, non-allied-nation technology providers, or complex ownership structures. If so, it is worth understanding the risk this creates and being prepared to address it in procurement-specific questionnaires.
Resilience credentials are now an evaluation factor, not a differentiator
The guidance makes clear that buyers assessing value for money should weigh national security and supply chain resilience as substantive criteria. For suppliers who can evidence UK-based delivery capability, domestic supply chains, and operational continuity under disruption, these are now attributes to foreground in bids rather than treat as background context. Where you have previously led on price and quality, consider how resilience fits alongside them.
The framework route remains important
Approved suppliers on relevant procurement frameworks already carry a level of pre-qualification that aligns with the new priorities. In sectors where the exemption is applied, buyers using framework routes have a ready-made mechanism to award quickly to pre-approved suppliers. Being on the right frameworks in affected sectors is likely to become more, not less, strategically important.
What this means in practice for your bids
The most immediate action for suppliers in sectors likely to fall within the scope of PPN 025 is to audit how resilience and security credentials are presented in bid responses. That means reviewing how you address supply chain risk, UK delivery capacity, data sovereignty where relevant, and long-term security of service. For many businesses, the evidence already exists; it simply hasn't been positioned as a win theme because buyers have not historically scored it heavily.
The Procurement Act 2023 already shifted evaluation away from a narrow focus on upfront cost. PPN 025 reinforces that shift with a clear policy direction and the structural machinery to act on it. Buyers who apply the exemption will need to justify their decisions to accounting officers and Sector Leads. Suppliers who make that justification easier by presenting clear, evidenced arguments for their contribution to UK resilience are better placed in that environment.
Thornton & Lowe works with suppliers across public sector markets to develop bid strategies and tender responses that reflect current buyer priorities. If you would like to discuss how PPN 025 might affect your pipeline or how to position your bids for this environment, get in touch with our team.
