Procurement Act 2023: when is a competitive procurement not required?

The Procurement Act 2023 (Act) came into force on 24 February 2025. This has resulted in a number of significant changes to the public procurement regime.

This update outlines the key situations where a contracting authority can award contracts without running a competitive procurement procedure and the changes the Act has made in this area. This update focuses on two related topics: (i) exempted contracts and (ii) direct awards.

What you need to know

• Certain types of contracts do not need to be procured competitively because of the subject matter of the contract or the identity of the counterparty.
• In certain circumstances, a contracting authority can award a public contract without first running a competitive procurement exercise ("direct award").
• The Act largely maintains the direct award grounds available under the previous regime.
• The Act introduces a new power for Ministers to introduce regulations providing for direct awards to be made in crisis situations where necessary to protect human, animal or plant life or health, or to protect public order or safety.

Background

The Procurement Act 2023 entered into force on 24 February 2025. The Act creates a new public procurement rulebook in England, Wales and Northern Ireland (see our Procurement Act 2023 hub for additional resources).

When a contracting authority is planning to award a contract, one of the first questions will be to understand whether it is required to carry out a competitive procurement in compliance with the open or competitive flexible procedure (see our October 2024 update).

Exempted Contracts

As under the previous regime, certain types of contracts are exempt from the competitive tendering rules prescribed by the Act. These are referred to as "exempted contracts". The Cabinet Office has published guidance on Exempted Contracts. In summary, the main exemptions include:

• "Subject matter" exempted contracts, which includes certain contracts relating to: (i) the acquisition of land and buildings; (ii) the purchase of broadcasting content and broadcasting rights; (iii) the provision, maintenance or use of electronic communications services; (iv) certain legal services (e.g., judicial or dispute resolution proceedings); (v) certain financial services; (vi) employment of individuals appointed to a public office; (vii) certain public passenger transport services; (viii) certain R&D services; and (ix) matters of national security.
• "Counterparty" exempted contracts, which includes: (i) awards to controlled group companies ("vertical arrangements"); and (ii) certain types of collaboration between contracting authorities ("horizontal arrangements").

Direct Award grounds

In most cases, contracting authorities will be required to carry out a competitive procurement. However, if one of the direct award justifications applies, a contracting authority may award a public contract without a competitive procurement. The Cabinet Office has published guidance on the direct award justifications.

The direct award justifications are limited in number and narrowly construed. The justifications include:

• procuring a prototype or other novel good or service;
• the creation or acquisition of a unique work of art or artistic performance;
• where a particular supplier is in possession of intellectual property or other exclusive rights and there are no reasonable alternatives, which means only the supplier with those rights can deliver the goods, services or works;
• where there is an absence of competition for technical reasons and provided there are no reasonable alternatives, only a particular supplier can supply the goods, services or works required;
• where the contracting authority wishes to buy additional goods, services or works which are the same or compatible with existing provisions;
• where a contract has previously been awarded under a competitive tendering procedure and the tender notice or tender documents set out that the intention was to carry out a subsequent procurement of similar goods, services or works by direct award;
• where goods are purchased on a commodity market;
• where advantageous terms are available because a supplier in undergoing insolvency proceedings; and
• where the goods, services or works are strictly necessary for reasons of extreme and unavoidable urgency.

Protection of life

The Act introduces a power for a Minister of the Crown to make regulations so that specified contracts may be awarded on a direct award basis where the Minister considers it necessary to protect (i) human, animal or plant life or health; or (ii) public order or safety.

The change was largely driven by experience of procuring urgent contracts during the COVID-19 pandemic. In particular, Government was of the view that there was ambiguity under the former regime regarding the award of contracts in response to crisis situations, which it considered distinct from extreme urgency due to unforeseeable events. This new power is intended to provide greater certainty to contracting authorities as regards procurements in response to a national or local emergency.

Switching to direct award

The Act has clarified the circumstances in which a contracting authority may negotiate directly with a supplier if it has not received suitable tenders in response to a competitive tendering procedure.

First, this direct award ground may be invoked following a competitive flexible procedure, whereas under the previous regime it could only be invoked where an open or restricted procedure had failed to attract any suitable tenders.

Second, the Act clarifies the circumstances in which a contracting authority may consider a tender to be unsuitable, including where:

• the supplier's tender would be disregarded because it does not satisfy the conditions of participation;
• the supplier is not a United Kingdom or treaty state supplier, or the supplier intends to subcontract the performance of all or part of the contract to a supplier that is not a United Kingdom or treaty state supplier;
• the supplier offers a price that the contracting authority considers to be abnormally low;
• the tender does not satisfy the contracting authority's requirements or award criteria;
• there is evidence of corruption or collusion; and
• the tender materially breaches a procedural requirement set out for all suppliers to comply with in the tender documents.

Comment

As regards exempted contracts, most of the exemptions have been based closely on exemptions available under the previous regime. However, there have been some changes in terminology to make the legislation more appropriate for the United Kingdom. This means that there have been some subtle changes to the scope of some of the exemptions (e.g., the financial services exemption). The availability of exemptions will therefore need to be considered carefully with reference to the statutory guidance.

As regards direct awards, there is arguably increased flexibility to make direct awards. However, this greater flexibility is subject to enhanced transparency obligations relating to direct awards. In particular, transparency notices must be published in most cases before making a direct award and a mandatory standstill period of eight working days will be required in most cases. The benefits of this increased flexibility may therefore be partly offset by the additional transparency obligations.