The Procurement Act 2023: What does it mean for public sector buyers?

Price or profit Mr/Mrs buyer? Price last for a moment, profit lasts for a lifetime. Which would you prefer?[1]

In recent years, some public sector buyers have gained a reputation for confusing the lowest price with the best value. The problem with this short-sighted approach is that when contracts are awarded solely to the lowest bidder, buyers often find themselves shortchanged. Suppliers willing to simply undercut their competition to win business have often spent little to no time seeking to understand, let alone improve upon, their unique value proposition.

Value is defined as a tangible benefit to the buyer over the medium to long term. The role of the supplier is to maximise the value they provide in a way that is difficult to replicate. This creates a positive feedback loop: greater profits for the supplier lead to reinvestment in the product or service, which, in turn, benefits the buyer with a superior offering. Buyer beware—if a supplier is quick to undercut, it might be because they have no real value proposition.

However, the opposing attitude—assuming that the most expensive option is always the best—can be just as misguided. Would EPIC have achieved its recent success in winning a significant number of EPR/EHR contracts if it had price-matched offerings from SystemC or Nervecentre?

The association between price and perceived quality has been extensively researched and linked to cognitive biases such as the placebo effect and confirmation bias. These biases can lead people to justify their purchase decisions by perceiving higher quality where none exists[2]. Reducing the association between price and quality is one of the many efficiencies The Procurement Act 2023[3] seeks to implement as it came into force on Monday 24th February 2025.

What does this new legislation mean for buyers? Not great news I’m afraid. More red-tape and a greater administrative burden.

Buyers are now required to implement a standstill period for all call-off contracts of eight working days and submit feedback to all unsuccessful bidders, even those that didn’t request it. Additionally, buyers must issue several new notices, including a Pipeline Notice, a Contract Award Notice, and a Contract Change Notice[4] before during and after the contract award.

The good news is that this legislation should make it easier for buyers to remove underperforming suppliers, even mid-contract, as it now covers both contract award and management. Serial underperformers also face a greater risk of being barred from bidding on future public sector contracts for up to five years[5].

The great news is free market capitalism still prevails! It’s just slightly more bureaucratic than before. Yes, Direct Awards remain possible under this new legislation, but buyers must now submit a Transparency Notice[6] alongside their Contract Award Notice.

The Procurement Act 2023 is the latest in a series of statutes designed to put the necessary checks and balances in place on free market capitalism—at least within the significant portion of the UK economy reliant on public sector spending (44.5% of GDP was spent on public services last year[7]).

This legislation aims to help procurement teams prevent fraud, corruption, and waste while ensuring fair competition and a long-term focus on efficacy. The Act should also help ensure that public funds are spent ethically, transparently, and under appropriate scrutiny. Much has been said about how this change will make it easier for SMEs to compete via the new Central Digital Platform. Additionally, we’ve already seen requirements for adherence to Environmental, Social, and Governance (ESG) factors (plug for our Carbon Reduction Plan) as well as support for initiatives like apprenticeships, diversity, and ethical supply chains.

Important work. History teaches us that unchecked free market capitalism can become as oppressive as any government. The East India Company (EIC) provides a stark example. Between the 17th and early 19th centuries, the Leadenhall Street-based EIC established a state-backed monopoly to extract resources from the subcontinent. Like many contemporary autocratic regimes, it wielded power through political coercion and a large private army. The EIC was accountable only to its shareholders, leading to famine and severe economic deprivation for native Indian populations subjected to its rule[8].

Fast-forward to the present, and we see a new challenge: the difficult to regulate (and tax) Big Tech and AI Corporations known as the Magnificent Seven (Mag 7)—comprising Apple, Microsoft, Amazon, Alphabet, Nvidia, Meta Platforms, and Tesla. Collectively account for approximately 31% of the S&P 500’s total market capitalisation[9]. To put in another way, this means that the theoretical value (market capitalisation) of this group of corporations is slightly higher than the Gross Domestic Product of China[10][11], the world’s second-largest economy.

From the examples of the EIC and the Mag 7, we might reasonably hypothesise that a lack of regulation—or the inability of governments to legislate—creates opportunities that capitalists can exploit. Conversely, regulation, by definition, increases state power by centralising wealth. Striking the right balance between these opposing forces is the role of legislators and their enforcers. In this context, the role of the enforcer falls to public sector procurement departments—an unenviable job.

We hope this new legislation makes it easier for all parties to profit. The first quarterly estimate of GDP in 2025 will be published by the ONS on 15th May. Let’s see what it brings.

Alex is a director of Penpole Consulting, a Digital Transformation and Cyber Security service provider. Penpole helps clients increase productivity and reduce organisational risk with their expert CISOs, programme and project managers, change specialists, data migration experts, and technical specialists in testing, training, integration, and configuration.

Want to connect? Reach out to Alex directly at md@penpole.co.uk.