The UK’s procurement landscape is undergoing a significant transformation with the introduction of ‘The Procurement Act 2023’, which goes live this February. This new legislation is poised to reshape public sector procurement by offering greater flexibility, enhancing transparency, and emphasizing social value. But what do these changes mean for managing supplier relationships and conducting negotiations in the public sector? Let’s explore.
Setting the Scene: Evolution in Public Sector Procurement
Traditionally, public sector procurement has been governed by stringent regulations to ensure transparency, fairness, and value for taxpayers. These regulations often restricted the ability to negotiate freely with suppliers, requiring that every engagement be documented and conducted under equal conditions. While this safeguarded fairness, it usually left procurement teams feeling constrained, focusing more on compliance than a strategic outcome.
My Experience in the Public Sector
As explained above public sector procurement is all about balancing regulations and processes with collaboration to achieve great outcomes.
In my short tenure within the world of public sector procurement, I’ve had the privilege of working with incredibly intelligent and dedicated people, though our potential has sometimes been limited by overly rigid systems.
That’s why I’m excited about this new era of procurement – one that seems to embrace flexibility and a people-first approach. By focusing on what truly matters, like social value, transparency, and collaboration, we can create meaningful change for our teams and the communities we all serve.
Key Changes in the Procurement Act 2023
The UK’s Procurement Act 2023 introduces several notable changes to the public procurement process, which is fundamentally reshaping how public sector contracts are awarded and managed.
The transition from MEAT to MAT
One of the most notable changes in procurement is the transition from the “Most Economically Advantageous Tender” (MEAT) to the “Most Advantageous Tender” (MAT).
This adjustment addresses some of the rigidity historically associated with contracting, enabling authorities to consider a wider range of factors beyond just cost and quality. By utilizing MAT evaluations, authorities can now place greater weight on aspects such as environmental sustainability, community impact, and broader societal benefits when awarding contracts.
This shift represents a significant step towards aligning procurement practices with larger societal goals, emphasizing the importance of environmental stewardship, social responsibility, and fostering community wellbeing in decision-making processes.
Enhanced Transparency and Accountability
The new Procurement Act introduces significant measures to enhance transparency across the entire procurement lifecycle. One key requirement is that contracting authorities must publish Key Performance Indicators (KPIs) for public contracts valued at over £5 million. These KPIs are not only a tool for measuring supplier performance, but must also be reviewed and assessed at least annually to ensure ongoing compliance and effectiveness.
Another critical development is the creation of a public debarment list, preventing suppliers with a record of misconduct or unethical practices from participating in future public procurements. This will reinforce accountability by ensuring that only responsible suppliers are eligible for government contracts.
By mandating these changes, the Act promotes fairness, integrity, and public trust in the procurement process. Additionally, the increased accessibility of performance data allows stakeholders to monitor outcomes more effectively, further aligning public sector procurement with principles of transparency and accountability.
Emphasis on Social Value
Another essential aspect of the Procurement Act 2023 is its strong emphasis on social value, which signals a shift in how public sector contracts are awarded. The government is actively considering revisions to procurement rules to give greater weight to social value when selecting private contractors. This approach goes beyond traditional measures like cost and efficiency, instead focusing on the broader societal benefits that a supplier can bring.
One of the key goals of prioritizing social value is to direct more public funds to smaller organizations and businesses that often struggle to compete under traditional procurement frameworks. These smaller entities often have deep connections to their communities and are well-positioned to deliver meaningful benefits, such as empowering local populations, creating jobs in underserved areas, and contributing to sustainable economic growth at the grassroots level.
This shift has far-reaching implications. By placing social value at the heart of procurement decisions, the act encourages contracting authorities to work with suppliers that actively support positive change. For example, contractors might prioritize environmentally sustainable practices, invest in training programs for marginalized groups, or create initiatives that strengthen community ties. These efforts don’t just benefit the immediate stakeholders – they foster a ripple effect of inclusive and sustainable economic development that aligns procurement practices with long-term societal goals.
In many ways, this focus on social value is about rethinking what success looks like in public sector procurement. It’s no longer just about delivering services at the lowest possible cost – it’s about creating contracts that leave a lasting, positive legacy for communities and the environment.
The Future of Public Sector Procurement With The Procurement Act 2023
We recently ran a survey of public sector professionals to understand their thoughts and challenges ahead of the new Act. This survey revealed that of the many changes discussed, people believe the two biggest impact areas will be:
As the Act introduces new measures to improve accountability and ensure fairer competition, we expect to see a boost in trust in public procurement.
The survey also identified a significant need for training, particularly in regard to supplier relationship management and negotiation skills. As procurement practices evolve, developing these skills will be crucial for maximizing value and building stronger, more collaborative supplier partnerships, ultimately helping to achieve the broader societal goals set out in the Act.
Adapting Our Approach to Supplier Relationships
With the introduction of The Procurement Act 2023, how we engage with suppliers in the public sector must evolve. This includes:
- Strategic Negotiation: Developing skills tailored to public sector requirements, emphasising transparency, fairness, and value creation.
- Enhanced Relationship Building: Investing in SRM capabilities to foster trust, accountability, and innovation within supplier partnerships.
- Outcome-Focused Procurement: Prioritizing precise, well-defined requirements to ensure that all potential suppliers compete on equal terms while exploring opportunities to deliver broader societal benefits.
Let’s break this down more.
New Flexibility in Negotiation
The new legislation is the increased flexibility it provides for negotiation. By prioritizing MAT, procurement teams can adopt a more nuanced approach, balancing cost with broader societal benefits. This flexibility enables a shift from rigid, rule-bound engagements, to strategic discussions that drive value for the contracting authority and society.
Impact on Supplier Relationship Management (SRM)
Supplier Relationship Management (SRM) will play a pivotal role under the new act. The enhanced transparency requirements and emphasis on performance metrics mean building strong, collaborative relationships with suppliers is more important than ever. To succeed, procurement teams must:
- Develop clear and measurable KPIs to track supplier performance.
- Foster open communication to address challenges and align objectives.
- Focus on creating partnerships that deliver long-term value, not just immediate cost savings.
Resources to Support Your Transition To The Procurement Act 2023
The UK government has made several resources available to help public sector professionals navigate these changes, including webinars, detailed guides, and tips on implementing the new procurement framework. Access these resources here.
Why a Structured Process Matters
A structured negotiation and relationship-building approach is essential for driving success under the new act. Our Red Sheet® methodology and SRM program are designed to help procurement teams excel in this new environment. By providing tools and frameworks tailored to the public sector, we empower teams to achieve compliance while delivering value.
Conclusion
The Procurement Act 2023 marks a significant step forward for public sector procurement, offering opportunities to drive better outcomes through enhanced flexibility, transparency, and a focus on social value. By adapting our negotiation strategies and strengthening supplier relationships, we can navigate this new landscape with confidence and success.
Working in the public sector comes with its challenges, but it can be rewarding allowing you to make a real impact. The future of public sector is changing and I am excited to see what happens next.
Written by Sarah Stevenson, Business Development Manager at Positive Purchasing, with over 10 years of experience in procurement within the public and defence sectors.
Looking to understand how to negotiate in the public sector? Read our insight here.