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Each year the public sector spends £300 billion on procurement – that’s a lot of public money, and so it’s vital it is spent fairly, with utter transparency. With that ideal in mind, the Procurement Act 2023 was announced.
What is the Procurement Act 2023?
The Procurement Act is designed to improve and streamline the way procurement is done, benefitting suppliers and buyers alike. It intends to create a more transparent public procurement process and therefore applies to public sector organisations and those who supply them.
Several changes will come into effect from the 24th of February. According to the Government, there will be further visibility of pipelines and notices, more flexibility in procurement procedures, direct awards for tenders in urgent cases, a strengthened approach to exclusions and a requirement for supplier feedback.
Key among these changes are:
- To move from ‘Most Economically Advantageous Tender’ to ‘Most Advantageous Tender’.
- In-life Contract Change provisions – e.g. more grounds for change.
- Publication of Key Performance Indicators (for contracts over £5m). These KPIs are set out in the Cabinet Office’s Commercial Playbooks and their accompanying guidance notes.
- Prompt payments within 30 days
The Government also aims to deliver a central digital platform to facilitate publishing notices and documents in accordance with the new regulations.
As a further measure for higher levels of oversight and equality, The Procurement Review Unit will oversee three services:
- Public procurement review service – Maintaining fairness within public sector procurement. This is an existing service.
- Procurement compliance service – Reviewing compliance to the new legislation. This is a new service.
- Debarment review service – Considering and investigation which suppliers should not be allowed to participate in covered procurements or be awarded public contracts. This is a new service.
Who does it apply to?
The legislation applies to public organisations including central Government departments and their associated arm’s length bodies, NHS, local authorities, universities, schools, social housing organisations, police, fire brigades and utility companies. It also applies to organisations who bid for public contracts to supply or provide services to these organisations.
How does the Procurement Act apply to public sector P2P and accounts payable?
Contracting authorities will need to follow the new procedure for running a competitive tendering process, publish notices including planned procurement, tender and transparency notices, and provide information about supplier performance. If a contract is valued at over £5 million, the contracting authority must set out and publish at least 3 KPIs to evaluate contract performance. Examples of this could be lead time, purchase order cycle time or emergency purchase ratio. In your organisation, more emphasis may be placed on accurate reporting, higher spend visibility and supplier onboarding as a result.
The 30-day payment terms will affect public sector buyers, who ‘must incorporate 30-day payment terms in new public sector contracts’ and ensure the payment term ‘is passed down their supply chain’.
In accounts payable, there will be further emphasis to pay suppliers on time. Section 38 of the legislation implies that any sum due to be paid under the public contract by the contracting authority must be paid before the end of 30 days after receiving a valid, undisputed invoice, even in instances where longer payment terms have been pre-agreed.
The Government website states that ‘90% of undisputed and valid invoices from small and medium-sized enterprises (SMEs)’ should be paid within 5 days. With an additional ‘100% of all undisputed and valid invoices’ paid within 30 days.
Government organisations are required to report payment performance annually and will be measured against these targets. This may result in a change in strategy and process to deal with demand, depending on how many suppliers you have on file and how many invoices you receive.
You may need to consider creating new KPIs to monitor this or put further emphasis on existing KPIs such as Days to Pay to keep compliant and ensure accurate reports.
To ensure compliance, accurate audit trails will also be critical.
What FISCAL can do to help you as a public organisation
With an increased pressure to provide reports on supplier performance, and in prompt payment, it’s never been more important to have your processes as streamlined as possible. Smoother processes mean more time for KPI measurement, and more notice to accurately process payments.
Our software can help with both aspects.
Finding errors faster to reduce payment processing times
Our software finds errors and issues promptly, as soon as transactions enter your ERP. With those issues being found as quickly as possible, your team can investigate in a timely manner, thereby increasing the probability of prompt payment.
KPI reports
Alongside this, we also provide a custom reporting module where you can create your own reports and measure the KPIs you need to measure prompt payments. Not only does this allow you to keep compliant, but it also means your team can analyse the data and discover opportunities for cost efficiencies and process improvement.
