Defence and security contracts under the Procurement Act 2023: derogations, flexibility and the rules that still apply

The key facts

• Contracting authorities awarding defence and security contracts are generally governed by the provisions in the Act, just like any other contracting authority.
• The specific defence and security provisions provide derogations and flexibility for the limited differences in how these authorities need to operate.
• Some provisions on equal treatment of suppliers and greater openness might not be practical where the nature of the defence market limits the scope for competition.
• Other general provisions may put at risk the UK's defence and security interests, such as maintaining security of supply for critical defence supplies.
• The legal framework is section 7 of the Act.
• Authorities awarding defence and security contracts need to understand the whole of the Act, because the same provisions apply as for other contracts.
• Competitive tendering procedures, conditions of participation and award criteria are given as examples of provisions that apply in the same way.
• The guidance flags mixed procurement, valuation of contracts, exempted contracts and thresholds as particularly relevant reading.

What this guidance is and who it applies to

This document is part of the technical guidance series supporting the Procurement Act 2023. It explains how the Act treats defence and security contracts, and it is aimed at procurement practitioners and commercial policy leads in contracting authorities. Like the rest of the series it is intended to aid interpretation and understanding, and it should be read in conjunction with the Act and its associated regulations.

It applies to any contracting authority awarding defence and security contracts, which is a wider group than the defence department alone. Security related requirements arise across government and beyond, and the question of whether a particular contract falls within the defence and security provisions is one that non specialist teams also have to answer.

Suppliers have a direct interest too. The derogations affect how competitions are structured and how much information is published, so understanding where the flexibilities apply helps bidders read the market accurately.

The starting point: the general regime applies

The guidance opens with a statement that is easy to skim past and important to absorb. Contracting authorities awarding defence and security contracts are generally governed by the provisions in the Act, just like any other contracting authority. Defence is not a parallel regime. It is the same regime with specific adjustments.

The guidance reinforces this later. It says that authorities awarding defence and security contracts will need to understand the whole of the Act, because the same provisions apply as apply to other contracting authorities. It gives three examples: competitive tendering procedures, conditions of participation and award criteria. These are core mechanics, and they are not modified simply because a contract is defence related.

The practical consequence is that a defence commercial team cannot treat the section 7 provisions as a self contained rulebook. Those provisions describe the differences. Everything not described as different is the same, and the volume of the same is far larger than the volume of the different.

Why derogations exist and what they respond to

The guidance is precise about the purpose of the specific defence and security provisions. They provide derogations and flexibility to cater for the limited differences in the way that contracting authorities awarding defence and security contracts need to operate compared to those awarding other contracts. The word limited is doing deliberate work.

Two reasons are given. The first is market structure. Some provisions in the Act relating to equal treatment of suppliers and greater openness in the conduct of procurement procedures might not be practical where the nature of the defence market limits the scope for competition. Where there are very few capable suppliers, or only one, rules designed around open competitive conditions can produce process without benefit.

The second is national interest. Other provisions may put at risk the UK's defence and security interests, and the guidance gives the example of maintaining security of supply for critical defence supplies. Full transparency about certain requirements, sources and dependencies can itself create risk, which is why the Act allows adjustments rather than requiring identical treatment across all markets.

The legal framework for these provisions is section 7 of the Act, and that is where teams should work from when identifying which flexibilities are available and in what circumstances.

Applying it in practice

The first practical question is classification. Whether a contract falls within the defence and security provisions has to be determined before the route to market is chosen, and it needs to be recorded with reasons. The guidance points to related material that helps: mixed procurement, valuation of contracts, exempted contracts and thresholds. Those four documents cover the situations where classification is least obvious.

Mixed procurement is the most common source of difficulty. Requirements that combine defence and non defence elements, or that mix goods, services and works, need a considered decision about which rules govern the whole. That decision, and the reasoning behind it, is exactly what a challenger or an auditor will ask to see.

The second discipline is to use derogations deliberately rather than by default. A derogation exists to solve a specific problem, whether that is a market with limited competition or a genuine security of supply risk. Applying flexibility because it is available, rather than because the circumstances the guidance describes are present, weakens the position if the award is questioned. Record which flexibility is being used, on what basis, and for which part of the requirement.

How eSourcing Data helps

Because the general regime applies to defence and security contracts with specific adjustments, the practical need is a process that runs the standard steps by default and records departures explicitly. eSourcing Data supports exactly that shape: standard workflows for competitive tendering, conditions of participation and award criteria, with the ability to capture a documented decision where a specific flexibility is being relied on.

Classification decisions are captured at the point they are made. Where a requirement mixes defence and non defence elements, or sits near a threshold or exemption boundary, the platform holds the assessment, the valuation basis and the reasoning in the procurement record so the route taken can be explained later without reconstructing it from memory.

Controlled access matters more in this area than most. eSourcing Data provides role based access to procurement records and supplier information, so that sensitive requirements are visible to the people who need them while the audit trail of who saw what, and when, is preserved for assurance purposes.

What to do about it

1. 1Classify each requirement as defence and security or not before selecting a route to market, and record the reasoning.
2. 2Read the mixed procurement guidance where a requirement combines defence and non defence elements.
3. 3Work from section 7 of the Act when identifying which derogations are available.
4. 4Train commercial teams on the whole Act, not just the defence provisions, since the general rules still apply.
5. 5Document the specific basis for each derogation used, whether limited competition in the market or a security of supply risk.
6. 6Check valuation, thresholds and exemptions guidance where classification or scope is uncertain.
7. 7Apply role based access controls to sensitive procurement records while keeping a complete audit trail.