Direct award under the Procurement Act 2023: the official guidance, explained

The key facts

• Direct award is where a public contract is awarded without a competitive tendering procedure and placed directly with the supplier of the contracting authority's choosing.
• Competitive tendering is the default. A direct award needs a justification under section 41, section 42 or section 43 of the Procurement Act 2023, or the sub-contracting position in section 25.
• Section 41 works through the justifications listed in Schedule 5, covering prototypes, single suppliers, additional or repeat requirements, commodities, insolvency, extreme and unavoidable urgency, user choice contracts and defence and security cases.
• A contract cannot normally be directly awarded to an excluded supplier under section 57(1) unless there is an overriding public interest, as set out in section 41(2).
• A transparency notice must be published before a public contract is directly awarded under section 44, with the content set out in regulation 26.
• A mandatory 8 day standstill applies in most direct award cases following publication of the contract award notice, with exceptions including Schedule 5 paragraph 13 extreme urgency, section 42 regulations and private utilities.
• Repeat procurement by direct award relies on the intention being set out in the original tender notice or tender documents and, broadly speaking, taking place within 5 years of the original award under Schedule 5, paragraph 8(a).
• Suppliers have 30 days under section 106 to bring a claim from the point of knowledge, which is why the guidance encourages early publication of notices.

What this guidance is and who it applies to

The guidance is one of the technical guidance documents published to support the Procurement Act 2023, and it deals with direct award: the award of a public contract without a competitive tendering procedure, placed directly with the supplier of the contracting authority's choosing. It is written for contracting authorities and their commercial and legal advisers, and it aids interpretation of the Act rather than replacing it.

Its starting point is that competitive tendering is the default. A contracting authority may only depart from it where a specific statutory condition applies, namely a justification under section 41, regulations made under section 42, the switching provision in section 43, or the position on specified sub-contractors in section 25. The document also addresses defence authorities, defined in regulation 46, and private utilities, whose obligations are modified in places. Two supplier categories run through it: an excluded supplier under section 57(1), to whom a direct award is prohibited unless there is an overriding public interest under section 41(2), and an excludable supplier under section 57(2), whose suitability must be assessed before award.

The Schedule 5 justifications

Section 41 operates by reference to the list of justifications in Schedule 5. Prototypes and development cover a prototype or other novel good or service designed or developed at the request of the contracting authority, limited to the early stages of design and development and excluding quantity production beyond testing purposes.

The single supplier grounds cover three situations: a unique work of art or artistic performance, where the identity of the artist intrinsically determines the unique character and value; possession of intellectual property or other exclusive rights with no reasonable alternatives, for example proprietary software or exclusive distribution rights; and technical exclusivity, where due to an absence of competition for technical reasons only a particular supplier can supply what is required. In each case the authority must satisfy itself that no reasonable alternative exists, including whether a competitor could licence the rights or the authority could acquire a sublicence.

Additional or repeat requirements offer two routes. One is compatibility, where a change of supplier would produce goods, services or works that are different from, or incompatible with, the existing ones, causing disproportionate technical difficulties in operation or maintenance. The other is pre announced repeat procurement, where the contract was previously awarded under a competitive tendering procedure and the tender notice or tender documents set out an intention to carry out a subsequent procurement of similar goods, services or works by direct award, taking place broadly speaking within 5 years of the original award under Schedule 5, paragraph 8(a).

The remaining grounds cover commodities purchased on a commodity market, for example fuel bought at port locations on short term quotations; advantageous terms where a supplier is undergoing insolvency proceedings; extreme and unavoidable urgency at paragraph 13, where the urgency must not be attributable to the authority's own acts or omissions and must have been unforeseeable; user choice contracts at paragraph 15, where an individual or carer has legal rights over supplier selection, for example under the Care Act 2014; and defence and security grounds at paragraphs 16 to 18, including air or maritime transport for armed forces deployed outside the United Kingdom where suppliers cannot guarantee 10 day offers.

Sections 42 and 43: protecting life and switching to direct award

Section 42 allows Ministers to make secondary legislation permitting direct awards where necessary to protect human, animal or plant life or health, or public order or safety. Those regulations then operate as a justification under section 41, and authorities are alerted to them through a Procurement Policy Note.

Section 43 covers a competition that has run but produced nothing usable. It permits switching to direct award where no suitable tenders were received and award using a competitive tendering procedure under section 19 is not possible. A tender may be unsuitable because it was disregarded under section 19(3)(a) to (c), because it fails the requirements or the award criteria, because there is evidence of corruption or collusion, or because it materially breaches procedural requirements. Even here the authority must assess the suppliers who submitted unsuitable tenders before award, though they are not absolutely barred, and must inform them in writing why their tender was unsuitable, supporting the objective in section 12(1)(c).

Notices, standstill and practical application

Transparency is the counterweight to the loss of competition. A transparency notice must be published before a public contract is directly awarded under section 44, and regulation 26 sets out the content: supplier information where known, excluded supplier status and grounds, the grounds relied on and the rationale, any overriding public interest explanation, the title and registration number of any section 42 regulations, the section 43 reasoning on unsuitable tenders, and known risks where the authority relies on the modification ground in Schedule 8, paragraph 5. User choice contracts under Schedule 5, paragraph 15 are exempt.

A contract award notice must be published before the contract is entered into, and the guidance encourages publishing early. The notice must accurately reflect the contract awarded; if it does not, the authority must republish and run a new standstill. A mandatory 8 day standstill applies in most direct award cases following publication, and the authority cannot enter into the contract during standstill under section 51(1). Exceptions apply to Schedule 5, paragraph 13 extreme urgency, to section 42 regulations and to private utilities, and a voluntary standstill is permitted where a mandatory one is not required. A contract details notice is required after entry, except for user choice contracts and private utility direct awards.

In practice the discipline is evidential: each justification carries a test to be satisfied and documented at the time. Direct award does not switch off the wider rules either, since section 90 prevents discrimination against treaty state suppliers and section 56 technical specification rules still apply. With a 30 day claim period under section 106, publishing promptly limits the disruption a challenge can cause.

How eSourcing Data helps

Direct award is the part of the regime where the paperwork carries the whole defence. eSourcing Data lets a team record the justification relied on, the Schedule 5 paragraph or the section 42 or 43 route, and the evidence behind it, at the time the decision is taken rather than when a challenge arrives.

The platform also handles the notice sequence direct award depends on: the transparency notice with the content regulation 26 expects, the contract award notice before entering into the contract, the 8 day standstill where it is mandatory, and the contract details notice afterwards. Where an exception applies, the reason is recorded alongside the notice history.

For section 43 cases, tender records, disregard decisions, scoring and the written explanations sent to suppliers whose tenders were unsuitable sit in one place, making it straightforward to show why a section 19 procedure was not possible. Reporting then shows how often direct award is used and on what grounds.

What to do about it

1. 1Identify the exact justification before anything else: the Schedule 5 paragraph, the section 42 regulations, or the section 43 switching route.
2. 2Document the underlying test, for example that there is no reasonable alternative supplier, or that the urgency was unforeseeable and not caused by your own delay.
3. 3Check the supplier against section 57(1) and section 57(2), and record any overriding public interest reasoning required by section 41(2).
4. 4Publish the transparency notice before award, covering everything regulation 26 requires, and publish the contract award notice before entering into the contract.
5. 5Apply the 8 day standstill unless a stated exception applies, and consider a voluntary standstill where it does not.
6. 6Where you plan to repeat a requirement by direct award later, say so in the original tender notice or tender documents and keep within the 5 year window.
7. 7For section 43 awards, write to suppliers whose tenders were unsuitable explaining why, and record why a section 19 procedure was not possible.