Nottingham University Public Procurement Course

Government issues procurement policy note on using standard contracts

The Government Commercial Function and Government Legal Department have unveiled three standard contracts for use by Government Departments, “and many other public sector organisations”, as part of their commercial activity.

The contents of the Procurement Policy Note (PPN), Using Standard Contracts, apply to all Central Government Departments, their Executive Agencies and Non-Departmental Public Bodies.

The PPN says: “Where In-Scope Organisations are purchasing bespoke goods or services, or goods or services that cannot be facilitated by a suitable government framework, such as a Crown Commercial Service Framework, Dynamic Purchasing System, or Low Value Purchase System, they should adopt one of the Standard Contracts as the basis for all relevant procurements, rather than creating bespoke contracts.”

The three Standard Contracts in the suite are:

  • The Model Services Contract (“MSC”): “This is designed as a template for complex services / services procurements which will typically require some form of formal dialogue or negotiation with potential suppliers, for example clarifying the scope of existing arrangements or desired service outcomes, or ensuring that there is an appropriate balance of risk and reward. It is particularly suitable for Business Process Outsourcing (BPO) and/or ICT delivery services. Use of the MSC is encouraged where the likely contract value (over the whole of the intended contract term) is £20m or more, or where a contract is rated ‘Gold’ using the Cabinet Office Contract Tiering Tool. The MSC is available on Gov.uk: https://www.gov.uk/government/collections/model-services-contract”
  • The Mid-Tier Contract: “This is designed as a template for goods and/or services procurements which are not particularly complex and do not require formal dialogue or negotiation with potential suppliers. The Mid-Tier Contract may be used where the likely contract value (over the whole of the intended contract term) is above the relevant procurement thresholds, but falls below approximately £20m. It may also be used if a contract is more complex or critical, but below the relevant procurement thresholds. The Mid-Tier Contract is available on Gov.uk: The Mid-Tier Contract.”
  • The Short Form Contract: “This is designed as a template for low value goods and/or services procurements. The Short Form Contract should be used where the likely contract value is below the relevant procurement thresholds, unless the contract is more complex or critical, in which case, another contract, such as the Mid-Tier Contract may be used. It should not be used for above-threshold procurements. The Short Form Contract is available on Gov.uk: The Short Form Contract.”

The PPN stresses that these standard contracts need not be used where a more suitable form of contract is available – “for example, Departmental terms and conditions attached to purchase orders for very low value procurements, a government framework, or an industry-specific contract, such as those available for construction”.

It adds that In-Scope Organisations should always seek appropriate legal advice, “as these template Standard Contracts will need to be tailored to specific procurements and any Department-specific needs”.

Organisations which are not in scope of this PPN, such as NHS bodies, should consider having regard to these Standard Contracts when updating their own terms and conditions, the PPN says.

The PPN, which replaces PPN 04/14 and PPN 06/14, says other public sector bodies may wish to apply the approach set out.

The policy note calls on ‘In-scope Organisations’ to apply the PPN as soon as practicable after its publication date. “It is understood that different In-Scope Organisations are at different levels of maturity and may have complex operating environments in terms of adopting the Standard Contracts, and adoption may take longer for some organisations than others.”