Rules and Regulations for Public Sector Contractors

18 July 2023

In the public sector, there is a defined and detailed procurement process that is applied to the purchase of services, goods and work by any government department, public sector body or even central government. It could be local authorities, organisations and hospitals, schools and universities – the public sector in the UK is huge – that need equipment, building and maintenance work or telecommunications. It also includes social care, waste management and even IT development, like the recent Covid app.

When government, local authorities or a public sector organisation makes a purchase of goods, services or work, they have to put out a tender, or contract, and invite suppliers to bid for the right to supply them. However bidding for a public sector tender, or contract, is a complex process. As well as certain criteria to be met, there are a range of rules and regulations that both the public sector and the supplier have to abide by.

What are public sector tenders?

When we talk about public sector tenders, what do we mean? The term refers to the procurement (buying) process for public sector organisations and bodies, including the government and government departments. When they need to purchase anything over a minimum monetary limit, be it equipment, goods or services, they must publish a ‘tender’ on the Government’s portal, public notice boards and tender websites. The current limits are:

  • Central government tenders – any requirement over £12,000 (including VAT) has to be advertised.
  • Sub-central government tenders – any requirement over £30,000 (including VAT) has to be advertised.

The ‘tender’, which is also known as a contract or an ‘Invitation to Tender’ (ITT), is an invitation to companies outside the public sector to bid on the opportunity to supply the organisation, body or government entity with the relevant supplies. The reason for a public tender is because the government has a duty to buy goods and services in a manner that is transparent and fair. This also means that the cheapest bid is not necessarily the bid that wins the contract. The public entity will evaluate the bid based on price, quality and overall match to their requirements.

There are several different types of tender to be aware of:

  • High value tenders.

Also known as Above Threshold Tenders, these types of tenders are of a high value and often lead to multiple contracts for a business.

  • Low value tenders.

Also called Below Threshold Tenders, they are usually of a value below the public procurement threshold and, therefore, smaller in value. These types of tenders are a great entry point for businesses that haven’t bid on tenders in the past as the bidding process is often simpler.

  • OJEU tenders.

These types of tenders are high in value and for EU contracts. Although the UK is no longer in the EU, some tenders are still open to UK businesses.

  • Framework agreements.

This refers to umbrella agreements which detail all the terms of individual contracts that are awarded at any time during the lifetime of the framework. In most cases, these types of tenders do not have a specific time frame because the public sector body or government entity do not know when the contract may end. Whilst framework agreements can mean ongoing work, it must be remembered there is no guarantee.

  • Dynamic Purchasing Systems (DPSs). These agreements are similar to the framework format but there are differences. Unlike frameworks, new bids, and therefore suppliers, are allowed to join the suppliers list during the DPS’s lifetime. In addition, a DPS has to follow the restricted procedure and the process is only electronic to streamline the buying process for the buyer and the suppliers.

Any private company, no matter their size, can bid for a public sector contract but there are very specific rules and regulations that must be followed. The Public Contracts Regulations 2015 governs the whole public sector procurement process for buyers and suppliers.

The public sector tender rules and regulations

Currently, the public sector procurement process is governed by the Public Contracts Regulations 2015 (PCR), which was implemented with effect from 26th February 2015. The PCR sets out the rules and regulations around the procurement process for public sector organisations, government departments and bodies. This includes buying supplies, works and services for central government, a non-ministerial department, a non-departmental public body or executive agency.

All must follow the PCR, with the exception of the defence and security sectors. Their procurement process is governed by the Defence and Security Public Contracts Regulations (DSPCR) 2011. For local authorities, local government, health and education, the PCR is applicable but the monetary threshold is higher. They also need to be aware of the Local Government (Transparency Requirements) (England) Regulations 2015, which need extra contracting information published over and above PCR’s requirements. Local authorities and governments have to be mindful of Crown Commercial Service (CCS) guidance when choosing suppliers and awarding contracts, including paying subcontractors within 30 days.

Within the PCR, there are regulations regarding EU thresholds, or sub-threshold contracts, particularly about publishing and awarding contracts with a value below the EU threshold. There are also regulations surrounding utilities contracts and concession contracts.

There are a plethora of handbooks, guidance documents and training materials on the government website to help you understand the PCR in full.

The legal framework for publishing tenders

When publishing public sector tenders, there are several legal requirements that must be adhered to:

  • The Small Business Enterprise and Employment (SBEE) Act 2015.
  • The Late Payment of Commercial Debts Regulations 2013.
  • The Energy Efficiency Directive Article 6.
  • The Equality Act 2010.
  • The Public Services (Social Value) Act 2012.
  • The Local Government (Transparency Requirements) (England) Regulations 2015.

This is to ensure that the seven core principles of the public procurement process are followed. The principles are:

  • Open and transparent bidding.
  • Fairness.
  • Integrity.
  • Efficiency.
  • Good governance.
  • Partnership.
  • Human rights.

The PCR combined with the legal framework is designed to encourage transparent and open competition, as well as value for money.

Changes to the UK’s public procurement rules

On 25th May 2023, several changes to the PCR came into force which were implemented to reflect the UK’s recent new free trade deals with New Zealand and Australia. There are three main amendments that public sector organisations, government bodies and departments, local authorities, health and education need to be aware of. Made under the Public Procurement (International Trade Agreements) (Amendment) Regulations 2023, these are:

  • Contract valuation. If a buyer is not able to put a value on a contract, it will be valued at the relevant threshold in order to trigger compliance with the Public Contracts Regulations 2015.
  • Contract termination. Contracts can no longer be terminated as a way to ‘circumvent’ the PCR’s Parts 2 and 3 procurement rules. This is a new provision to the procurement process, despite the existing principles of equality, transparency and non-discrimination. However, this new addition makes compliance with the PCR a specific requirement when terminating contracts.
  • Prior Information Notices (PIN). No longer will public procurement buyers be able to use a PIN as a ‘call’ to the competition when publishing a tender contract. Although this tactic was rarely used, this amendment is valid for all procurements, even those published using the ‘light touch regime’.

It must be noted that these changes are not applied to the procurement process for devolved Welsh authorities at the moment.

The new Procurement Bill

The recent amendments to the PCR have been implemented as part of the Cabinet Office’s new Procurement Bill. The new Bill, which has already passed through the House of Lords, is set to replace both the Public Contracts Regulations 2015 and the Defence and Security Public Contracts Regulations 2011.

The aim of the new Procurement Bill is to improve the current public procurement process by:

  • Creating a simpler, more flexible and commercial system to better meet the UK’s needs, but also ensuring we remain compliant with international obligations.
  • Opening up public procurement to new companies, including small businesses and social enterprises, to enable them to compete for and secure more public tender contracts.
  • Embedding transparency throughout the commercial lifecycle so the spending of taxpayer’s money is properly monitored and scrutinised.

So far, the latest notable changes to the current PCR include:

  • A duty for public sector buyers to have a regard for small and medium enterprises (SMEs), including a prohibition on requiring insurance to be in place before awarding a contract.
  • When a contracting authority undertakes preliminary market engagement, it will be mandatory for them to publish a notice prior to this, which is currently optional.
  • A voluntary standstill period relating to contract modifications must not be less than eight working days.
  • Open frameworks relating to ‘light touch services’ will no longer be limited in terms of length.
  • The threshold for publishing KPI (Key Performance Indicator) information will be increased for contracts valued at £5 million or more (this was previously set at £2 million).

The Bill is set to be considered by the House of Commons and subsequently Royal Assent shortly before it becomes a new Act of Parliament, provisionally 2023/24.

Bidding for a public sector tender

The process, although involving multiple steps, is very structured and therefore can take some time to understand. The good news is that almost any business, no matter its size, can apply for public sector tenders or contracts.

If you have not bid for a public sector tender before, or you have but were not successful and want to improve your chances, we’ve set out a process for bidding on public sector tenders.

  • Step 1 – Source relevant tender opportunities

Public sector organisations, like the NHS, government bodies and departments must publish tender contracts on the Government Contracts Finder tender portal, as well as via the Department for Education portal and their Find a Tender Service (FTS). They also publish them on a variety of different independent tender portals. So, go through these and source the tenders of interest to you.

  • Step 2 – Check you fulfil the tender requirements

Once you’ve found a tender you’re interested in, check the buyer’s requirements and make sure you are able to fulfil them completely before you submit a bid.

  • Step 3 – Download or request full tender documentation

The next stage, if you’re confident you match the buyer’s needs, is to ‘express an interest’ to the buyer and request the full tender documentation. In some cases, these may have been added to the tender contract listing already and you simply need to download them.

  • Step 4 – Complete the buyer’s Selection Questionnaire

Read through the documentation thoroughly to be particularly certain you can fulfil the contract and if you can, complete the buyer’s Selection Questionnaire (SQ) and submit it to the buyer. Sometimes this may come with the tender documentation if the buyer is using an Open procedure.

  • Step 5 – Receive Invitation to Tender (ITT)

If the buyer accepts your SQ and feels you are a good match for them, you will be sent an Invitation to Tender (ITT) by the buyer and added to their shortlist of potential suppliers.

  • Step 6 – Submit a tender response

It’s at this stage a tender bid is lost or won so, it’s worthwhile spending the time and resources on your tender response so that it stands out from the competition. Most tenders are awarded to companies that not only match the buyer’s requirements, but are also the strongest contract bid response. You will normally hear back from the buyer in 4 to 6 weeks.

Advantages of bidding on public sector tenders

It might seem like it’s a lot of trouble to bid on public tender contracts and whether it’s worth the time and effort. However there are plenty of advantages too, particularly for SMEs. Here are six benefits we think you should consider before you say no.

  • Regular, long-term work.

We hesitate in using the word ‘guarantee’ however public sector contracts do generate long-term work that often lasts over a number of years. With the buyer not being allowed to terminate the contract mid-term without just cause, you can feel confident that you have a ‘secure’ income for a while.

  • The buyer won’t go bust.

Working for a public sector organisation, authority, government body or department means you won’t suffer from them going bust. With an annual billion-pound budget for goods and services to be spent with external suppliers, the risks can be lower with the public sector.

  • Better payment terms.

Public sector organisations are committed to paying 100% to subcontractors within 30 days, or 95% within 60 days for government contracts of £5 million and over. In Scotland, the payments have to be made within 60 days however organisations are encouraged to settle within 30 days. These payment terms mean smaller businesses can be safe in the knowledge they won’t be waiting months on end for payment.

  • Boosts business growth.

Winning a public sector contract is a really positive way to boost business growth as well as your reputation. With medium and long-term contracts for years almost guaranteeing your income and 30 day payment terms, you’re putting your business in a good position for success.

  • Easier to attract and retain staff.

Long-term contracts, regular payment of invoices, guaranteed work and developing partnerships attract top talent and helps to retain existing staff.

  • A fair and transparent procurement process.

The public sector procurement process eliminates the potential of buyers awarding contracts to favoured suppliers as they must adhere to the PCR, which promotes a fair and transparent process.

Find your next public sector contract

At Public Sector Tenders, we deliver quick and easy access to the latest public sector tenders. Our daily email alerts will notify you of new published tenders, giving you the opportunity to bid ahead of the competition. We also offer a treasure trove of useful information and resources at your fingertips, with access to more than 270,000 public sector contracts across the UK. Get started now with our 14-day free trial or get in touch with us if you have any questions