Procurement in a Nutshell Procurement Act 2023 Guidance: Breach of Contract

Please click here to read our previous Nutshells on assessing, and publishing supplier performance.

Introduction

The Procurement Act 2023 is expected to come into force on 24^th February 2025.

The Act will, in particular, revoke the following:

• Public Contracts Regulations 2015 (PCR)
• Concession Contracts Regulations 2016
• Utilities Contracts Regulations 2016

Breach of Contract

As mentioned in our previous Nutshell, Section 71(4) requires contracting authorities to publish a Contract Performance Notice, under Section 71(5), if a supplier is performing poorly and, after being given an opportunity to improve, has failed to do so. Section 71(3) also requires that the Contract Performance Notice (again under Section 71(5)) be utilised when a supplier has committed a breach of contract which then results in:

1. the termination or partial termination of the contract;
2. the award of damages; or
3. a settlement agreement.

Contracting authorities should note that, despite the wording of the Act at Section 71(3)(i), where a breach leads to a contract being terminated in full, the guidance states that a Contract Termination Notice can be published instead of a Contract Performance Notice to avoid the need for two notices to be published in respect of the same event.

The Contract Performance Notice must be published within 30 days of the day on which section 71(5) first applies in relation to the breach of contract. If a contract is partially terminated prior to an award of damages, or before a settlement agreement has been reached, the Contract Performance Notice must still be published. In this instance the information provided in the notice will be limited to what is available at the time of publication. There is no requirement under the Act for the contracting authority to update the notice with additional information when it becomes available, although the contracting authority can choose (and it would be good practice) to do so.

Contracting authorities should note that Section 71(5) applies to most public contracts (not just those above £5 million, as is the case with Section 71(2)) including frameworks and concession contracts.

What does this mean?

Section 71(5) increases transparency within public procurement. The consequences of a breach of contract will now be accessible in the public domain, emphasizing the necessity to build and maintain a strong relationship between the supplier and contracting authority and incentivising suppliers to avoid breaches.

For further information please contact Melanie Pears or Tim Care in our Public Sector Team