Are there problems on the horizon for public sector purchasing? - Chris Murray

For the first time in history, the procurement rules that regulate the way Government and the wider public sector spends taxpayers’ money will be markedly different between Scotland and the rest of the UK.

Some of these changes are certainly welcome improvements to the way public procurement is carried out. However, with Scotland retaining the existing system, we have to ask, are there more problems on the horizon in public procurement?

Being a devolved matter, responsibility for procurement sits with the Scottish Government. However, up until now, all intra-UK procurement laws were almost identical to one another to ensure alignment with overarching EU rules.

Brexit changed that and on 26th October the Procurement Act 2023 received Royal Assent, after a mammoth 18 month journey through Parliament. Westminster has taken the opportunity to ‘simplify’ the existing procurement system. Its changes will, amongst other things, implement greater transparency, streamline processes and introduce more stringent rules on who can win contracts with public sector bodies.

Chris Murray, Legal Director at Eversheds Sutherland

Keen to keep alignment between itself and the EU, Scotland has retained the existing system. Unlike its counterparts in Belfast and Cardiff, the Government in Edinburgh declined overtures to participate in the wider UK refresh.

This means, for the very first time, that businesses bidding into the public sector across the whole of the UK will have to do so under two quite different legal regimes.

It is yet to be seen what real impact this divergence will have, and the first signs are unlikely to be visible until after October 2024 when the new Act is due to come into force. However, it is possible that less intra-UK trade will result, with less competition for some public contracts and sub-optimal results for public sector purchasers.

This potential impact is arguably greatest in respect of SMEs, who already face a significant administrative hurdle when participating in public procurement, and who may be further deterred by divergent legal systems.

The impact on the market as a result of the differing rules is not the only concern for the Scottish public sector. As noted, some (not all) of the changes introduced by Westminster are genuine improvements. A particular example is the increased transparency of the new UK regime, which will see authorities publishing far more information about how public money is spent than is currently the case, and will also enable bidders to better understand decisions that are made during a procurement process, including why they have been unsuccessful.

Another innovation under the Procurement Act is the introduction of a centralised debarment list, which once established will make it easier for individual authorities to identify which bidders should and should not be allowed to participate in procurement processes, owing to things like previous convictions and poor performance of past contracts.

The changes should, in time, make for a simpler and more open procurement system in which business has greater confidence in bidding into. Once these improvements materialise in other parts of the UK, the Scottish public sector is likely to face increased pressure to take a similar approach.

Chris Murray, Legal Director at Eversheds Sutherland