Frameworks under the Procurement Act 2023 – a more flexible route to market or a new VIP lane?

John Cleverly and Hannah Chapelhow explore some of the issues on frameworks under the new law.

Much has been discussed about the new flexibilities in the Procurement Act 2023 (“PA23”).

The new flexibilities introduced as to how framework call-off contracts are let under PA23 could result in a distortion of competition, if contracts that could be fulfilled by a broad range of suppliers are instead only offered to a limited pool of framework suppliers able to meet a restrictive and unrelated set of conditions under the original framework.

In PA23, the omissions regulating competitions under frameworks are likely to result in frameworks being established that allow the authority ‘calling off’ to have full freedom to design the further competition in a way that could have little connection to the overarching framework.

What is missing from PA23?

Although there is a requirement to set out ‘core terms’ when establishing a framework which permits direct award¹, for frameworks where contracts are awarded by way of a competitive selection process, there is no clear requirement in PA23 to set out the call-off terms to be used in later competitions when establishing the framework.

Whilst there is a requirement when running a competition under a framework to apply “one or more” of the award criteria used when setting up the framework², there is no express requirement to award a call-off contract to the most advantageous tender.

There is also ambiguity around how contract pricing should be established. It is a requirement for every framework to include, “the price payable, or mechanism for determining the price payable” ³. This may encourage use of mechanisms that include, for example, current list price plus X%, which is reflective of the non-compliant neutral vendor style frameworks under the previous regime. Such an approach offers no certainty of price and distorts competition.

Further ambiguity arises because purchasing authorities can now apply new conditions of participation (PSQ stage) as part of a competition under a framework. There is no explicit requirement in PA23 to prohibit the introduction of new conditions which, had they been introduced during the original competition to set up the framework, would have allowed for the admission of alternative suppliers to the framework.

Although the provisions in relation to frameworks are described as ‘broadly similar’ in the Cabinet Office guidance on frameworks, the PA23 drafting gives rise to a number of questions, including:

1. Can new or significantly revised contract terms be introduced for call-off contracts awarded by way of a competition under a framework? The law suggests that this is the case.
2. Can a call-off contract be awarded to a supplier that did not submit the most advantageous tender? 
3. How detailed or specific must a “mechanism for determining the price payable” under a call-off contract be?
4. Can new pre-qualification conditions be introduced as part of a competition under a framework that, if they had been introduced as part of the procurement to appoint suppliers to the framework, would have allowed for different suppliers to be appointed to the framework?

PA23 does not provide clear answers to the above, and therefore overly flexible approaches are likely to give rise to disputes both on framework set up and later call-offs.

Flexible frameworks – risk of a new “VIP Lane”?

This lack of certainty could potentially lead to frameworks (particularly centrally established frameworks designed to appeal to a wide number of purchasing authorities) being set up with a limited number of larger suppliers, more likely to meet the broadest of standards and conditions of participation. Authorities using the frameworks could then introduce less onerous conditions of participation, award criteria and contract terms during the competition, as relevant to the contract in question. Some might view this as an opportunity for a new “VIP Lane”; for frameworks with a wide scope and value, and little certainty over terms and price, to be set up with dominant or favoured suppliers in a particular market. It could lead to growth of the so-called “neutral vendor” models - where there is limited case law or guidance.

Broader obligations under the Procurement Act 

Although there are clear advantages to frameworks retaining some flexibility, authorities should tread carefully around these flexibilities and in particular, be aware of their broader obligations under PA23.

Given that both setting up a framework and a competition under a framework are a ‘covered procurement’ under PA23, authorities making use of frameworks to award a contract must follow the principle of treating suppliers equally during such process. This requirement will, in some circumstances, extend to suppliers who are not on the framework. There are also clear objectives for authorities to have regard, in relation to each covered procurement, to delivering value for money, maximising public benefit, sharing information, acting with integrity, and that SMEs may face particular barriers to participation (including to consider whether such barriers can be removed or reduced). The National Procurement Policy Statement and the relevant procurement Playbooks will also need to be considered as relevant.

If an authority has a requirement that has less onerous conditions or terms attached to it than those imposed by an overarching framework, authorities should consciously consider, in line with their broader obligations under PA23, whether the framework is a suitable mechanism for award or if they are required to open up that contract opportunity to a wider section of the market.

There is a risk that authorities will ‘cherry pick’ a particular framework, not because it is suitable for the authority’s requirements, but because they favour the suppliers on that framework or because the framework permits new conditions of participation, contract terms, and prices to be introduced during the competitive process. This could unfairly disadvantage suppliers who were unable to meet the more onerous requirements used in the original framework procurement, but who can perfectly well fulfil the conditions of participation and contract requirements of the authority using the framework.

Likely areas of challenge

The definition of a framework under PA23 is (our underline), "a contract between a contracting authority and one or more suppliers that provides for the future award of contracts by a contracting authority to the supplier or suppliers." ⁴

It is unclear how, practically, a framework can provide for the future award of contracts unless there is certainty on the terms, price, and scope of such a contract. This could mean that frameworks set up without clear terms, pricing and scope governing all future call-off contracts are not a ‘framework’ under PA23 at all.

Authorities using such a mechanism to award a contract could be at risk of those contracts being set aside for breach of PA23. Consideration should also be given to the modification conditions set out in section 74 PA23, which may apply to any changes introduced during a competition under a framework.

Contracting authorities using PA23 frameworks to award contracts should be wary of overly flexible frameworks. Frameworks marketed by framework providers on the basis of, ‘you can do what you like’ may seem tempting, but care should be taken to assess whether the framework is suitable for the authority’s requirements, has sufficient certainty around terms, scope, and price, and allows the authority to comply with its legal obligations under PA23. This should include, for each framework competition, a consideration of the objectives in section 12 PA23 and a conflicts assessment. A failure to get this right will ordinarily fall on the purchasing authority, with no general impact in terms of legal risk on the framework provider once the framework has been set up.

This is key area of procurement law compliance and it will be interesting to how these issues develop in practice. It may be that further guidance or amendment to PA23 are needed particularly as the inevitable case law develops.

For more information or advice please contact a member of the Clyde & Co Procurement law team: David Hansom, Hannah Chapelhow, or John Cleverly.

1. s45(4)(b)(i)
2. s46(8)
3. s45(5)(b) PA23
4. s45(2) PA23