On 11 April 2023, the Cabinet Office published a new Procurement Policy Note on Procuring Steel in Government Contracts. This policy update is accompanied by the Revised Guidance on Procuring Steel in Government Contracts (the Guidance), as well as a set of FAQs, an example contract clause and a data returns template.
Procurement Policy Note 04/23 (PPN 04/23) supersedes the previous Procurement Policy Note 11/16, to reflect updates in commercial best practice, policy modifications, and changes to business case evaluations since 2016. It also provides clarification on the extent of reporting obligations concerning the origin of steel.
This policy development was predicated on a report issued in February 2022 by the Government-initiated Steel Procurement Task Force. This collaborative enterprise unites representatives from the Government, the six leading steel corporations, UK Steel, the relevant trade association, trade unions, and the devolved Administrations, collectively referred to as "the In-scope Organisations”. The primary objective of the Steel Procurement Task Force is to delineate strategic avenues that can bolster the competitiveness of the UK steel industry within an open, transparent, public procurement marketplace.
Scope
PPN 04/24 applies to all Central Government Departments, Executive Agencies, and Non-Departmental Public Bodies, and extends to procurements that fall under Part 2 of the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Defence and Security Public Contracts Regulations 2011, as well as the Concessions Contracts Regulations 2016.
Key changes: project appraisal and commercial policy landscape
Since the introduction of PPN 11/16, substantial modifications have transpired within the realms of steel project appraisal and commercial policy. PPN 04/23 encourages In-Scope Organisations to consider these pivotal changes when devising relevant steel procurements, and to adhere to the corresponding directives delineated in each case. PPN 04/23 translates these key changes into the following actionable items for In-Scope Organisations to follow:
a. developing strong business cases that are aligned with government policy objectives in relation to social value and organisational strategies and objectives;
b. driving the key objectives from the business case (including the strategic and economic case) through all subsequent policy and procurement design;
c. ensuring that public procurements deliver best value over the life of the asset being procured;
d. adopting commercial best practice and a suitable delivery model;
e. undertaking pre-market engagement, involving the whole supply chain, to combine both an understanding of the capability and capacity of the market and to make suppliers aware of future opportunities;
f. taking account of the wider social, economic and environmental considerations, using policy outcomes aligned with the Government’s priorities;
g. ensuring a level playing field for all suppliers; and
h. ensuring value for money for the taxpayer.
The Guidance offers more detailed insights on what In-scope Organisations should consider throughout the commercial lifecycle of a relevant steel procurement in order to achieve the above, and it encapsulates the requirements, advice, and guidelines incorporated in other policies, tools, and methodologies.
For instance, in relation to the Business Case for steel procurement, reference should be made to the National Procurement Policy Statement (PPN 05/21). This policy underscores that In-scope Organisations subject to PPN 05/21 should consider national priority outcomes alongside any additional local priorities in their procurement activities. These national priorities include creating new businesses, jobs, and skills; addressing climate change and reducing waste; and enhancing supplier diversity, innovation, and resilience. Our analysis of PPN 05/21 can be found here.
Compliance and Monitoring
Compliance and monitoring of PPN 04/23 will be conducted via an annual steel data return.
Under PPN 11/16, In-scope Organisations are already obliged to submit an annual steel data return to the Department for Business and Trade. This reporting requirement currently includes data on two elements:
a) pipelines of projected demand for steel procurement for future projects/programmes; and
b) actuals data on steel procured in the previous financial year, including:
a. how much steel they have procured (directly or indirectly) over the previous
b. financial year;
c. the steel product type;
d. the origin of the procured steel; ande. how they have applied steel public procurement guidance.
These reporting obligations are maintained in PPN 04/23 (and a template for data returns is appended to PPN 04/23). To streamline data capture for element (b), PPN 04/23 clarifies that the requirement applies to
- projects/programmes valued at £10 million or more; and
- projects/programmes valued at less than £10 million but anticipated to require over 500 tonnes of steel.
The Guidance outlines the complete reporting obligation, including the types of steel products covered by the requirement.
Regarding the data stipulated in element b), it is incumbent upon the In-scope Organisations to ascertain that their contractual terms and conditions incorporate provisions mandating suppliers to furnish the relevant data in the contracts. The Guidance offers an example clause designed to reinforce the transference of data requirements to suppliers through these contractual stipulations. It is strongly recommended that subcontractors are apprised of these requirements at the contract award stage and are encouraged to document the steel origin concurrently with ‘on-site’ delivery.
In-scope Organisations bear the responsibility of submitting the requested data to the Department for Business and Trade (the DBT) within a timeframe of 10 weeks of the end of the financial year. The origin of the steel should be documented as set out in the in the Inspection Certificate. The Guidance also emphasises that from April 2023, contractors should denote whether the origin as indicated in the certificate aligns with the location where the steel was melted and poured. In-scope Organisations are also obligated to compile the data from all qualifying projects/programmes and submit this compilation to the DBT as a component of the annual steel data return.
Whilst PPN 04/23 does not apply to the wider public sector, other contracting authorities are encouraged to consider applying the PPN where relevant and appropriate (although local authorities should remain mindful of wider obligations when considering applying the PPN, including s17 of the Local Government Act 1988, and their Best Value Duty).
