How framework agreements will work under the Procurement Act 2023

Framework agreements are an important part of the UK procurement landscape. They provide an efficient and often quicker route for contracting authorities to purchase goods, works and services, where their requirement is for regular purchases over a period (usually capped to a 4-year term) that would otherwise require repetitive tender processes. The Procurement Act 2023 (Act) builds on current rules around framework agreements and introduces some key changes.

What is a framework agreement?

A framework agreement establishes the overarching set of terms and conditions and prices for a defined list of goods, works and services. Suppliers are appointed to the framework (however, this does not guarantee that they will receive a minimum level of work), and the contracting authority “calls off” individual contracts from the framework on the terms and prices already laid down.

What’s changing under the Act?

The Act is introducing changes in an attempt to streamline the procurement process by removing barriers for newer suppliers to enter the market. Contracting authorities and suppliers will need to familiarise themselves with these changes to ensure that they are ready for the Act when it comes into force later this year.

1. Information to be included in a Framework Agreement

At present, there is a requirement to include certain information in a framework agreement, but this does not include a list of those authorities who are entitled to use it to call off contracts.

Although many frameworks do include this, there will now be a new statutory requirement for the framework to include:

• Details of the contracting authorities entitled to award contracts under the framework
• A description of the goods, works or services to be provided
• The price payable, or a mechanism for determining the price payable, under call-off contracts
• The estimated value of the framework
• Any selection process to apply for the award of contracts
• The term of the framework
• Whether the framework is an open framework

2. The duration of frameworks

In line with the current procurement regime, the term of a framework agreement should generally not exceed four years (however, frameworks for defence and security and utilities can run for eight years).

The Act allows for extensions to this term if a contracting authority considers that the nature of the goods or services justifies one. This represents a departure from the "exceptional circumstances duly justified" test under the current regime.

If a contracting authority increases the term of a framework agreement, it must set out its reasons for doing so in the tender notice when it establishes a framework (or in a "transparency notice" where a framework is set up without competition on the basis of a direct award).

3. The award of call-off contracts

The Act introduces a slight change to the “call off” process from a framework agreement. A competitive selection process must be used for appointing a supplier unless (in the case of a multi-supplier framework) the framework agreement sets out the "core terms" of the call-off contract and an objective method for appointing suppliers, in which case direct award under the framework is allowed.

This reference to “core terms” replaces "all the terms governing the provision of the works, services and supplies concerned" in the current procurement regulations. This change represents a flexible approach to procurement, which is more aligned with the way many framework agreements operate in practice with empty service schedules which are completed for each individual call-off.

4. Access to “open” frameworks

Under the current regime, it is not possible to appoint new suppliers to an existing framework agreement. Under the Act, contracting authorities can establish “open” frameworks with an option for new suppliers to join the framework at least twice during the term when the framework reopens for new entrants to join.

Open frameworks should, therefore, provide a more flexible option for contracting authorities looking to put in place a long-term arrangement that can be refreshed periodically, allowing a refresh of pricing and new market entrants to join. The maximum term of an open framework is limited to eight years.

5. The introduction of dynamic markets

Dynamic markets are an updated form of dynamic purchasing systems (DPSs) that exist under the current procurement regime. A DPS is unlike a traditional framework for the supply of goods, works or services. It is an electronic system that sets up a panel of pre-approved suppliers from whom goods, works, and services may be purchased, but it allows new suppliers to join at any time.

However, there is a restriction that generally only "off-the-shelf" goods, works, and services may be purchased in this way. Any bespoke requirement will necessitate the use of another procurement route. Dynamic Purchasing Systems will be replaced by the more flexible Dynamic Markets, which will act as qualification systems for the public sector similar to those that have been used in utility contracts for some time.

Dynamic markets establish a list of pre-qualified suppliers from whom tenders can be sought. Under the Act, a dynamic market may be established for any kind of goods or services. The restriction to commonly used off-the-shelf purchases under the current rules has been removed. By removing this restriction, it is hoped that there will be a greater appeal for dynamic markets to a wider range of contracting authorities.

Any contracting authority, utility or centralised procurement authority may set up a dynamic market for its benefit and/or the benefit of other authorities/utilities. The dynamic markets will allow for authorities to set conditions on membership. However, such conditions must be proportionate and cannot be modified during the term. Together, these changes appear designed to encourage greater use of the streamlined and efficient system offered by a dynamic market.

Light Touch Frameworks

Frameworks for light touch services contracts are not subject to most of the above requirements – there is no requirement to include the information set out in section 1 above and no restriction on their maximum duration. The rules generally on light touch services contracts bring about a much more relaxed regime; please see our Procurement Skills Zone briefing on this topic.

The future looks clearer and more efficient! 

Overall the changes are going to bring about more clarity over the use of frameworks, which is going to be for the benefit of authorities and suppliers alike.  It will be much clearer who can use a framework, for example, without having to dig through archived FTS notices to find what was said when the framework was initially established.  

Dynamic markets and open frameworks will add some much-needed efficiency and flexibility where markets change rapidly and where traditional closed frameworks cannot keep up with changes in technology, innovation, pricing and market participants.  

Are you ready for the Procurement Act 2023? We are here to help. Our procurement team has a range of seminars and training workshops available on the practical implications of the new Act. To discuss how you can prepare, please contact Alison Walton on 0191 211 7850 or email [email protected].