Albert Sanchez-Graells, Professor of Economic Law, University of Bristol Law School
This blog post is based on the paper that was jointly awarded the Best Paper Prize Award 2024 by the Society of Legal Scholars. The paper will be published in Legal Studies in due course.(*)
Public procurement is concerned with the award of contracts for the supply, for pecuniary interest, of goods, services or works to the public sector. At its heart, public procurement governs the expenditure of public funds and, ultimately, should ensure that such expenditure is in the public interest. One could be forgiven for simplifying the goal of procurement to ensuring that public money is well spent, which could be further elaborated (following Schooner 2002) to encompass promoting integrity and value for money in the award of public contracts, and acting transparently to facilitate accountability. Even at this level of simplification, however, there is scope for contestation of e.g. what value for money entails (with a long-running debate on price/quality trade-offs), or whether it can or must (solely) be promoted through market-based competition (see e.g. Sanchez-Graells 2015, addressing the objections raised by Arrowsmith 2012 and Kunzlik 2013).
Moreover, such simplified account would not ring true to most contemporary scholars and practitioners, who see procurement as a tool to foster the public interest in relation to a myriad of goals, such as: fostering business compliance with human rights in increasingly complex supply chains (Martin-Ortega and Methven O’Brien 2019; Martin-Ortega and Treviño-Lozano 2023); upholding the rule of law (Manunza 2023); addressing gender injustice (Williams 2024); supporting the green and digital transitions by fostering sustainability and innovation (e.g. Janssen and Caranta 2023; but see Halonen 2021; Sanchez-Graells 2024); promoting social value (Selviaridis, Luzzini and Mena 2023); supporting the development of micro-, small-, and medium-sized enterprises (SMEs) (McEvoy 2020), as well as third sector and alternative business models (Boeger 2024); industrial policy goals (Uyarra et al 2020); or geopolitical and national security goals (Kania and Andhov 2023).
The goals of public procurement have been contentious for a long time, but it seems fair to say that there never have been so many contenders. The longer the list of public procurement goals, the more difficult it is for procurement to achieve them (all, meaningfully) and the higher the risk that performance of its ‘core function’ (to the extent that we can agree on it) is eroded—both due to goal dispersion and to the related increase in red tape and compliance checks (Telles and Ølykke 2017). However, the current trend is one of expansion of the ‘relevant considerations’ that need to be taken into account in procurement decision-making, with limited attention paid to its impact on the functioning and effectiveness of procurement (albeit with notable exceptions, such as in recent reports by the National Audit Office or the European Court of Auditors).
Identifying ‘the’ relevant public interest and how to foster it through the award of public contracts is, thus, far from straightforward. The practical difficulties and normative clashes on the conceptualisation and operationalisation of the public interest are visible in relation to several dimensions of procurement regulation and decision-making. And those difficulties and clashes are exacerbated by several layers of multi-level governance and decision-making in public procurement, which create additional scope for conflict and contestation in the process of translating general legislative and policy goals into decisions on the design of public tenders and public contracts.
In this context, accountability for and review of decisions on ‘what the public interest looks like’ in relation to the award of a specific public contract are also not necessarily straightforward. Despite increasing regulation concerning the goals and considerations to which contracting authorities must have regard to in making procurement decisions, it is unclear that contracting authorities’ discretion can be bound in a way that supports the goals established at higher levels of legislative and policymaking processes. Using the formulation of objectives in the Procurement Act 2023, this blogpost reflects on its kaleidoscopic view of the public interest.
Objectives in the Procurement Act 2023
The Procurement Act 2023 (PA23) represents one of the UK’s attempts at ‘doing things differently’ post-Brexit. From February 2025, it will introduce a new system of procurement regulation that is meant, among other goals, to create flexibility and to allow for a different balancing of competing considerations in guiding procurement in the public interest. It is thus interesting to see how the PA23 has articulated its view of the public interest.
Section 12 PA23 contains the explicit objectives of procurement:
(1) In carrying out a covered procurement, a contracting authority must have regard to the importance of—
(a) delivering value for money;
(b) maximising public benefit;
(c) sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions;
(d) acting, and being seen to act, with integrity.
(2) In carrying out a covered procurement, a contracting authority must treat suppliers the same unless a difference between the suppliers justifies different treatment.
(3) If a contracting authority considers that different treatment is justified in a particular case, the authority must take all reasonable steps to ensure it does not put a supplier at an unfair advantage or disadvantage.
(4) In carrying out a covered procurement, a contracting authority must—
(a) have regard to the fact that small and medium-sized enterprises may face particular barriers to participation, and
(b) consider whether such barriers can be removed or reduced.
At first look, s.12(1) PA23 seems to present a variation of the simplified formulation of the goals of procurement by including value for money, public benefit, transparency and integrity. However, the distinction between value for money and public benefit is already a marked deviation from that simplified understanding. Equally, in ss. 12(2) and 12(3) the principles of non-discrimination and fair treatment are relatively uncontroversial (although the substitution of proportionality for fairness as a post-Brexit relabelling has raised some eyebrows), but the explicit inclusion of a pro-SME goal in s.12(4) is also a notable deviation from the simplified understanding of procurement goals. Of these, the most interesting deviation is the inclusion of the duty to have regard to the importance of maximising public benefit.
Although the Explanatory Notes to the PA23 do not offer any further clarification on its meaning, it is worth noting that this stems from the initial proposal in the green paper Transforming Public Procurement, which foresaw the inclusion of “public good” as one of a closed list of interdependent principles, highlighting that ‘procurement should support the delivery of strategic national priorities including economic, social, ethical, environmental and public safety’. Following the green paper’s public consultation the Government clarified that ‘The concept of “public good” will be framed [in the future Act] as an objective of maximising the “public benefit” to support wider consideration of social value benefits, and address concerns about any potential conflict with local priorities.’ This could seem to point to a focus on ‘local’ public interest as opposed to ‘national’ public interest—perhaps on the view that local priorities could be markedly different from national ones, even if the latter are arguably a mere aggregation of local ones. In any case, the overall picture is more complicated than that.
In addition to those explicit, albeit unclear objectives, Section 13(9) PA23 states that ‘A contracting authority must have regard to the national procurement policy statement’ (and the equivalent duty is imposed in relation to the Wales procurement policy statement for procurement by a devolved Welsh authority, with caveats, in s.14(8)PA23). This effectively expands the list of procurement objectives by reference to the national procurement policy statement (NPPS). Its current version (under review after the new Labour Government pushed back the entry into force of the PA23 to allow for a new formulation that makes UK procurement mission-oriented), the NPPS sets out three groups of national priorities for public procurement around social value, commercial and procurement delivery, and skills and capability for procurement.
This already creates some complexities, in particular in relation to the interaction between s.12 goals of value for money and public benefit and s.13 goals of value for money and social value—with statutory guidance implausible seeking to distinguish them (as explored in detail in the full paper).
Finally, the PA23 also includes a series of implicit procurement goals or objectives, for example in relation to the grounds for the exclusion of economic operators in relation to national security, or a broad range of mandatory and discretionary exclusion grounds related to eg terrorism, organised crime, labour market, slavery and human trafficking offences, tax offences, anti-competitive offences, environmental misconduct, breach of contract or poor performance, etc (see s.57 and schedules 6 and 7 PA23).
Trading-Off and Operationalising Competing Goals
The PA23 thus establishes its objectives explicitly, by reference, and implicitly. In itself, this regulatory technique adds complexity to the identification of the public interest it seeks to mobilise and foster, as well as obfuscating accountability for the relevant decisions. For example, a Minister of the Crown is responsible for the formulation of the NPPS, which should be preceded by consultation, and must lay it before Parliament. The NPPS must be withdrawn if either House of Parliament resolves not to approve it within 40 days. This seems to subject the NPPS to high levels of scrutiny and to the opportunity for stakeholder input and political deliberation of its content. However, these are bound to be narrow and relatively technical exercises (as the current process of review indicates, where views are collected through by-invitation virtual workshops and forms emailed to a closed distribution list) and it seems unlikely that Parliament will spend much time discussing the NPPS. Moreover, the NPPS is not the ‘ultimate word’ on what procurement is in the public interest.
The NPPS is not the ‘last word’ for two reasons. First, because the duty for a contracting authority to have regard to the priorities in the NPPS ranks at the same level as its duty to have regard to the importance of delivering value for money and maximising public benefit, as well as removing or reducing barriers to SME access (as explicit goals of the PA23). Second, because even if the NPPS was to be given some (pragmatic) normative hierarchical preference despite the PA23’s failure to do so, a contracting authority will be tasked with trading-off goals and aims that are very difficult to measure and that relate to very different timescales, potential costs, and operational impacts. The contracting authority’s views—usually not open to contestation or consultation—will determine ‘what the public interest in a given contract looks like’.
And it is hard to see how the assessment carried out by the contracting authority will be the subject of challenge. Could eg a decision to prioritise net zero to the exclusion of creating new businesses and jobs be open to judicial review on those grounds? Could a decision to award contracts on the basis of lowest price only, disregarding environmental and social impacts, be justifiable in the case of an (about to go) bankrupt local authority? A newly created Procurement Review Unit within the Cabinet Office is unlikely to challenge such decisions, as its main task will be to improve compliance with the PA23 and its ‘main focus will be on addressing systemic or institutional breaches of the procurement regulations (i.e. breaches common across contracting authorities or regularly being made by a particular contracting authority).’ Further, given the courts’ deference to the exercise of technical discretion in the judicial review of procurement decisions (see eg Siemens Mobility Limited v High Speed Two (HS2) Limited [2023] EWHC 2768 (TCC) at [146]), in the absence of a significant change in approach, there seems to be limited scope for a review of the decisions on what to prioritise in the design of the tender procedure and future contract, even under judicial review (which is also explored in more detail in the full paper).
Final Thoughts
The complicated identification of procurement goals in the PA23 serves as an example of the difficulties in determining and operationalising ‘the’ public interest in the expenditure of public funds—which can be further complicated when the implicit goals and objectives are added to the analysis. Ultimately, it seems that contracting authorities retain most discretion to determine ‘what the public interest looks like’ in relation to each of the contracts they seek to award. While this could create flexibility and, potentially, responsiveness to local needs (as well as accountability), it also encapsulates a danger of abuse of discretion for the promotion of (perceived) public interests in ways that run contrary to the main (in my view) goals of procurement regulation, such as competition and integrity. It is not hard to imagine how a disproportionate focus on eg local social value or minimal carbon footprint could be used to disguise favouritism, or provide the contracting authority with unlimited discretion on decisions involving the expenditure of public funds. Or how arguments based on national security and supply chain resilience could be mobilised to disguise protectionist industrial policy instrumentalisations of procurement. Whether this regulatory approach is in itself in the public interest is also susceptible of further discussion.
(*) I am grateful to Margherita Pieraccini, John Coggon and Ed Kirton-Darling for comments to an earlier version of this draft, and to all participants in the workshop where this and all blogs in the public interest series were discussed. The standard disclaimer applies. Further comments welcome.