Procurement Policy Note 05/21 – National Procurement Policy Statement
On 3rd June 2021 the Cabinet Office published the much awaited National Procurement Policy Statement (the NPPS) via PPN 05/21. The NPPS was trailed in the Government's Green Paper on "Transforming Public Procurement" published in December 2020, and is the next piece in the jigsaw of upcoming legislative and policy reform.
PPN 05/21 has immediate effect and applies to all contracting authorities in the wider public sector, not just central government departments and their executive agencies. All contracting authorities should become familiar with the NPPS in order to understand what it means for them in practice. In due course, the Government intends to legislate so as to make it a mandatory requirement for contracting authorities to have regard to the NPPS when undertaking procurements.
The NPPS sets out the key priorities for public sector procurement, and demonstrates how contracting authorities can support the delivery of those strategic outcomes, ensuring that the public procurement process drives wider benefits through public spending. The national priorities relate to:
- Social Value;
- Commercial and procurement delivery; and
- Skills and capability for all.
The NPPS is clear that achieving value for money (VFM) entails securing the best mix of quality and effectiveness to deliver requirements for the least outlay. That being said, the message is clear that price isn't everything, and contracting authorities are reminded that they are not required to select the lowest priced tender, but that they should take a broader view of VFM (including the incorporation of social value outcomes).
Of immediate relevance, contracting authorities should consider the following national priority outcomes in the course of their procurements:
- Creating new businesses, new jobs and new skills in the UK (for example, by helping new and/or small businesses grow, increasing employment opportunities where there are barriers or for those located in disadvantaged areas, and offering training opportunities);
- Tackling climate change and reducing waste (such as contributing to the reduction of greenhouse gas emissions to net zero, reducing waste, and prioritising sustainable procurement); and
- Improving supplier diversity, innovation and resilience (so as to better support start-ups, SMEs and VCSEs, to increase innovation, and to modernise delivery and increase productivity).
Contracting authorities are also reminded that they are not limited to the above outcomes, and that they can take into account other, local, social value priorities in their procurements. Nevertheless, central government departments will need to comply with the Social Value Model and PPN 06/20 when considering what other social value priorities they should be considering/including within their procurements.
Commercial and procurement delivery
Contracting authorities are required to consider whether they have the right policies and processes in place to manage the key stages of commercial delivery so as to secure VFM and to ensure that they embed continuous improvement into their procurement practice.
Some of the key stages highlighted in the NPPS include:
- Market health and capability assessments;
- Delivery model assessments;
- The use of "Should Cost Models" (to estimate the total cost of delivering the service and to protect against low bid bias – in other words, knowing the cost of what is being procured before procuring it);
- Pilots (particularly where a service is to be outsourced for the first time); and
The assessment of economic and financial standing (i.e. the risk of a supplier going out of business during the life of a contract).
The NPPS recognises that the suggested stages will not be relevant to all procurements, and some of them are particularly aimed at complex outsourcing projects and may not be relevant to smaller contracting authorities or those with simpler/lower value requirements. Sub-central government contracting authorities will need to navigate a number of these practices and stages, which are more usually found in central government decision-making and procurement processes.
Additionally, under the NPPS there will be requirements for certain contracting authorities to publish procurement pipelines and to benchmark their procurement capability against relevant commercial and procurement operating standards and against other comparable organisations. PPN 05/21 sets out a transitional period for this requirement, with contracting authorities with an annual spend of £200m or more expected to publish pipelines and benchmark their capability from April 2022. For contracting authorities with an annual spend of £100m or more, the requirement is expected to follow in April 2023. At present, PPN 05/21 is silent as to whether this requirement will be extended to organisations with an annual spend which does not exceed that threshold, and further guidance may be needed in respect of contracting authorities with lower annual spend.
The NPPS also highlights the importance of collaborative procurement (where appropriate) with other contracting authorities or Professional Buying Organisations so as to achieve efficiencies and to allow contracting authorities to benefit from economies of scale (such as through shared resourcing).
Skills and capability for procurement
Finally, the NPPS sets out that contracting authorities should consider the capability and capacity in respect of the procurement skills and resources required to deliver VFM across their organisation. Of importance, where contracting authorities identify gaps in capability they should plan now how these can be remedied (either through internal continuous improvement and upskilling, through collaboration with other contracting authorities, or by making use of shared services and/or Professional Buying Organisations).
The NPPS also recommends a process of annual benchmarking against relevant commercial and procurement operating standards, and against other comparable organisations. How this will work in practice is yet to be seen, but contracting authorities should begin to consider what comparable organisations might be suitable benchmarks (perhaps by reference to annual spend, organisation size, and/or the sectors in which organisations operate). It remains to be seen as to whether contracting authorities will be able to choose their own comparator organisations.
As for commercial and procurement operating standards, the NPPS suggest that suitable standards include the Commercial Continuous Improvement Assessment Framework produced by the Government Commercial Function with NHS England and NHS Improvement, or the National Procurement Strategy Toolkit produced by the Local Government Association. Suitable standards for the wider public sector remain to be developed and it will be interesting to see whether there is a role for CIPS, BSI or another national body to homogenise standards across the entire public sector.
As part of the benchmarking process, the NPPS suggests various issues that contracting authorities might want to consider, including whether (amongst others):
- Commercial objectives and relevant policies and organisational objectives are aligned;
- Work is carried out by those with the required capability and capacity;
- Market conditions are sufficiently understood; and
- Contract management capability is sufficient and resources are proportional to complexity and risk.
The National Procurement Policy Statement gives contracting authorities a lot to be getting on with whilst we wait for primary legislation to be drafted and published. It includes a number of well established principles, tools and concepts, but gives them all a much wider sphere of application across the entire public sector.
The novel application of such tools and concepts may put numerous contracting authorities, particularly those outside of central government, to significant time, effort and cost when considering how to incorporate them into every day procurement practice. Nevertheless, contracting authorities should start to consider how the NPPS can be implemented across their organisations and in their future procurements – even while we await further developments and draft legislation.