The Procurement Act 2023: contract management

This is the fourth in our series of cross-sector articles considering the impact of the Procurement Act 2023 (the Procurement Act), which came into force on 24 February 2025 and introduces changes to how public procurements are awarded, managed and investigated. This article examines the impact of the Procurement Act on contract management.

What’s the issue?

In introducing the new procurement regime, the Procurement Act places a greater emphasis on transparency, the provision of information and notices, and the need to publish such information on a central digital platform. 

One of the notable changes to the current regime is the introduction of a range of reporting and monitoring of the on-going performance of the awarded contract during its life cycle.

What's new?

One of the new requirements under the Procurement Act for contracts with an estimated value above £5 million is that at least three key performance indicators (KPIs) will need to be set up and published in the Contract Details Notice. The KPIs should reflect the most material aspects of performance throughout the life of the contract. Given that contracting authorities will need to monitor and report on performance against these KPIs using a Contract Performance Notice, these KPIs will need to be sufficiently well defined and be capable of measurement. Measurement of performance is stark, with ratings against "Good", "Approaching target", "Requires improvement", "Inadequate", and "other" (if performance cannot be described as one of the previous categories).

Contract Performance Notices will also be used where the Contacting Authority considers that a supplier is not performing to its satisfaction; or where a supplier has breached the contract and the breach results in a contract termination or partial contract termination, an award of damages or a settlement agreement.

In addition, the Procurement Act introduces new grounds to enable contracts to be modified in cases of urgency or protection of life; or where a risk was known about prior to contract award, but could not be mitigated in advance. Modifications will now require a Contract Change Notice detailing the modification. The publication of the Contract Change Notice will start the eight working day voluntary standstill period which should be observed prior to the change being made.

In addition, when a contract comes to an end by termination, expiry or otherwise, contracting authorities will need to publish a Contract Termination Notice. The right to terminate due to the supplier becoming excluded applies throughout the terms of the contract.

How does this affect suppliers?

Performance against KPIs will be published and reviewable by other suppliers and competitors alike. The nature of the KPIs that contracting authorities will seek to use and assess against is a space to watch; their intention is to ensure proper contract management and performance of public contracts. However, with every decision that is made by a contracting authority, a possible challenge arises. Therefore, suppliers and contracting authorities will be alive to the obligatory transparency (including publishing on the central digital platform) and consequences of these ratings. Suppliers will be conscious of reputational risks; while contracting authorities will be wary of making assessments which are challengeable either by the suppliers, or open themselves up for criticism in their initial procurement if suppliers are failing to perform against ratings. This will be an important area to keep an eye on.

The importance of preliminary market engagement comes into focus (see our article) as both supplier and contracting authorities will want to understand and define KPIs for upcoming contracts. 

Additionally, a failure to perform could lead to debarment from procurement since failure to perform is one of the discretionary exclusion grounds which enable suppliers to be excluded from bidding for public contracts for a period of up to five years (see our article).

Our public procurement article series also explores other considerations in more detail. Please contact Matt Evans or a member of our team if you want to discuss this or any other issue.