PPN 05/21 & the National Procurement Policy Statement

UK Government have announced new policies regarding procurement in the public sector. PPN 05/21 outlines the National Procurement Policy Statement.

Last week, The Cabinet Office published the National Procurement Policy Statement (here), alongside the Procurement Policy Note (PPN) 05/21: National Procurement Policy Statement. At around £290 billion every year, public sector procurement accounts for around a third of all public expenditure. Therefore, there is huge scope to ensure that this expenditure is used most effectively and for the benefit of the public. The publication of the National Procurement Policy Statement, ensures that public sector procurement supports the delivery of public sector policy priorities, which include generating economic growth, helping our communities recover from the Covid-19 pandemic, and supporting the transition to net zero carbon.  This blog breaks down the policy statement and what you need to know.

What does it mean?

The new policy requires buyers to consider the national strategic priorities for public procurement. All contracting authorities should consider the following national priority outcomes alongside any additional local priorities in their procurement activities:

• Creating new businesses, new jobs and new skills.
• Tackling climate change and reducing waste.
• Improving supplier diversity, innovation and resilience.

In addition, buyers should consider whether they have the right organisational capability and capacity with regard to the procurement skills and resources required to deliver value for money.

When does it come into action?

PPN 05/21 is effective as of its release. As highlighted in the policy statement, “The importance of efficient, effective public procurement has been underlined by the Covid-19 pandemic and it can play a significant role in this country’s economic recovery.” Therefore, it’s evident why the publication of the PPN is so timely.

Who is it aimed at?

PPN 05/21 is aimed at central government departments, executive agencies, non-departmental public bodies, local authorities, NHS bodies and the wider public sector. Together these are referred to in PPN 05/21 as ‘contracting authorities’. 

The National Procurement Policy Statement

The National Procurement Policy Statement outlines three themes that buyers should consider when exercising procurement related activities:

1. Social Value
2. Commercial and procurement delivery
3. Skills and capability for procurement

1. Social Value

As defined in the policy statement, “Social value refers to the wider financial and non-financial impacts of projects and programmes including the wellbeing of individuals and communities, social capital and the environment.”

The Government intends for public sector commercial and procurement teams to take a broad view of value or money that includes the improvement of social welfare or wellbeing when conducting procurement related activities (for example, when creating their procurement strategy, drafting contract terms and evaluating tenders). This includes incorporating award criteria for comparing final bids and scoring their relative quality, to encourage ways of working and operational delivery that achieve social, economic and environmental benefits.

2. Commercial and procurement delivery

As part of their commercial delivery policies and procedures considerations, buyers should contemplate how the following principles, practices and guidance could be applied in their organisation. Doing so will help secure value for money including delivery of social value outcomes, and ensure that authorities have a solid foundation for continuously improving their procurement practice.

• Publication of procurement pipelines. Contracting authorities should publish annual pipelines of their planned procurements and commercial activity, looking forward at least 18 months but ideally three to five years.
• Market health and capability assessments. Projects should undertake market assessments to determine the health of the relevant market and consider how the commercial strategy and contract design could be set to address potential market weaknesses.
• Project validation review. Complex outsourcing projects should go through an independent review prior to any public commitment being made in order to benefit from cross sector expertise in assuring deliverability, affordability and value for money.
• Delivery model assessments (also known as Make versus Buy). Contracting authorities should conduct a proportionate delivery model assessment before deciding whether to outsource, insource or re-procure a service through evidenced based analysis.
• Should cost model. Complex projects should produce a Should Cost Model as part of the Delivery Model Assessment to estimate the total cost of delivering the service and protect the contracting authority from low bid bias.

3. Skills and capability for procurement

Buyers should consider the procurement and contract management capability across their organisation. What does this mean? Buyers should be confident they have sufficient capacity and capability to ensure tax payers’ money is spent effectively and efficiently. Where buyers identify gaps in their capability, they should plan now how to fill these, whether through developing their own team’s capacity and capability, through collaboration with other contracting authorities or through making use of shared services and professional buying organisations. Assessing whether buyers have the appropriate procurement skills and capability will help to ensure the delivery of value for money.

There are a number of professional standards that contracting authorities can choose to benchmark themselves against, for example the Commercial Continuous Improvement Assessment Framework produced by the Government Commercial Function.