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On 25 March 2024, the Cabinet Office published a procurement policy note on improving transparency of AI use in procurement. The PPN sets out guidance and best practice for identifying and managing the risks and opportunities associated with AI systems, tools and products in the context of generating tenders, but is also relevant to the procurement of AI by contracting authorities. 

The PPN follows various guidance for contracting authorities around AI as a subject area, its appropriate use within the public sector, and how AI should be procured by the public sector.

The approach set out in the PPN applies to all Central Government Departments, their Executive Agencies and Non-Departmental Public Bodies, but may be applied by any public sector contracting authority in supporting commercial teams to understand the use of AI in procurement. 

Assessing the risk of AI use in procurement

The PPN considers the increased adoption of AI in the procurement process, particularly by suppliers. Specifically, it considers the potential benefits for suppliers (and the associated risks for contracting authorities) as a result of suppliers making use of AI to improve bid writing capability and capacity.

The PPN makes clear that the use of AI by suppliers in the procurement process is not prohibited, but notes that AI should be restricted to use cases where risks can be effectively understood and managed, placing the onus on contracting authorities to understand and manage such risks. Recommended steps include:

  • Asking suppliers to disclose their use of AI in the creation of their tender, and also to disclose and explain where AI is likely to be used in the proposed service delivery.
  • Using proportionate controls to ensure suppliers do not train AI using confidential authority information, or any other information that is not publicly available.
  • Undertaking appropriate and proportionate due diligence to ensure suppliers have the capability to fulfil the requirements of the contract, and to establish the accuracy and credibility of tender responses.

The PPN suggests planning for a general increase in volume of tender responses as suppliers make use of AI to streamline and automate their processes in submitting tenders. It is also recommended that contracting authorities factor additional time into procurements for additional due diligence and verification around AI.

The PPN notes that additional considerations and mitigations may be needed for specific contract types. For example, additional due diligence and/or specific contractual arrangements may be required where there are national security concerns in relation to use of AI by suppliers, or where AI is being used to deliver 'non-AI' services.

Example AI disclosure questions

In addition to the various recommendations and sources of guidance referenced within the PPN, the PPN provides optional example AI disclosure questions which contracting authorities could add to the Invitation to Tender. The questions require suppliers to disclose any use of AI, whether in their response to tender questions, or as part of their proposed service delivery. 

The PPN explains that the example questions should not be scored or taken into account in the tender evaluation, but should be used for information only to help inform the authority's wider commercial strategy, defining how to undertake meaningful due diligence and risk management. 

Contracting authorities can however ask and evaluate further questions as part of the award process on the supplier's use and proposed use of AI, provided the questions are specific to the contracting authority's requirements, and are compliant with procurement law. If and how questions are to be scored, will need to be set out within the procurement documents and further questions, and evaluation of further responses, should not discriminate against suppliers.

While the PPN offers general guidance and recommendations, rather than introducing any new statutory requirements for contracting authorities, additional planning and strengthened due diligence processes are likely to be needed in order to identify and manage the risks associated with a supplier's use of AI, and to manage any increased activity that is generated from AI assisted supplier responses. Care will also need to be taken by contracting authorities when introducing AI disclosure questions, with it remaining to be seen how these will be implemented and answered in practice, and the impact these will have on the outcome of procurements. However with the increasing role of AI in both bid submission and service delivery, it is key that contracting authorities consider the implications of this at the outset.

Also see our recent webinar with Localise Think Tank on the governance issues associated with the use of AI in the public sector:  Ahead of the curve and sticking to the track

For further information on this topic please contact Amardeep Gill, National Head of Public Sector or Rebecca Rees, National Head of Public Procurement.