Procurement Act 2023 — modification provisions for public contracts explained

With the Procurement Act 2023 (the Act) now governing public procurement, any procurements — as well as their resulting contracts — that were started on or after 24 February 2025 must see contracting authorities complying with the new regime. This includes adhering to the requirements around modifications to public contracts — and here, Andreas Petrou and Michael Winder explain what’s changed in the new Act.

Transition period

Before we get into it, it’s important to note that for many existing public contracts any required modifications will be subject to the previous public procurement law regime. 

The Public Contracts Regulations 2015 (the 2015 Regulations) provided a framework for varying public contracts under Regulation 72. This allowed for modifications to be made under specific conditions without triggering a new procurement process and will continue to apply to any contracts where the procurement process started before 24 February 2025. 

Any modification that isn’t permitted by Regulation 72 will in effect be a new procurement, governed by the new Act.

Grounds for variation & safe harbours

The new regime is set out in Section 74 of the new Act and largely follows the same framework of modifications as per the 2015 Regulations, with variations needing to satisfy one or more ‘safe harbours’ to avoid the need for a new procurement. 

However, there are some key additional concepts and clarifications, as well as updates to the language used. 

Section 74(1) confirms that such variations can only be made in one of four circumstances:

1. The modification is a ‘permitted modification’.
2. The modification isn’t a ‘substantial modification’.
3. The modification is a ‘below-threshold modification’.
4. The contract is a light-touch contract.

It should be noted that contracting authorities aren’t permitted to separate modifications to take advantage of each of these safe harbours. 

Variations that fall under one of the safe harbours won’t trigger a new procurement process. However, generally (other than in limited circumstances) contracting authorities must publish a contract change notice in relation to the permitted modification under section 75 of the Act.

Permitted modifications

While the modifications permitted under section 74 of the Act should be familiar to contracting authorities — since they broadly reflect the grounds under the previous procurement regime under regulation 72 of the 2015 Regulations — two additional grounds for variation have been added. 

The grounds for permitted modifications are set out in Schedule 8 of the Act. 

Those that broadly follow the previous regime are:

Provided for in the contract 

Where the possibility of modification is unambiguously provided for in the contract as awarded, as well as in the tender or transparency notice for the award of the contract and where such modification wouldn’t change the overall nature of the contract.

Unforeseeable circumstances

Where the circumstances giving rise to the modification couldn’t reasonably have been foreseen by the contracting authority before the award of the contract and where the modification wouldn’t change the overall nature of the contract nor increase the estimated contract value by more than 50% (though this 50% condition doesn’t apply to utilities contracts).

Additional goods, services or works

Where the modification is for the additional supply of goods, services or works not already provided for in the contract and where using a different supplier would result in supplies of goods, services or works that are different from (or incompatible with) the supplies already provided for in the contract. 

The contracting authority must also consider that the difference or incompatibility would result in disproportionate technical difficulties in operation or maintenance (or other significant inconvenience) and substantial duplication of the contracting authority’s costs. 

Any modification under this ground must also not increase the estimated contract value by more than 50% (though this 50% condition doesn’t apply to utilities contracts).

Transfer on corporate restructuring

Where a novation or assignment to a supplier (that isn’t an excluded supplier) is required following corporate restructuring or similar circumstance (such as the sale of a business). 

The new regime doesn’t expressly require the new supplier to meet the same selection criteria as the original supplier. 

Note that section 74(9) of the Act confirms that a contracting authority is prohibited from changing the identity of a supplier other than in reliance on this ground. 

The two new additions are as follows:

Urgency and the protection of life

Where the purpose of the modification could alternatively be achieved by a direct award of a contract on grounds of extreme and unavoidable urgency or the protection of life, health, public order or safety. 

Materialisation of a known risk 

Where the contracting authority considers that a ‘known risk’ has materialised other than as a result of any fault of the contracting authority or the supplier, which means that the contract can’t be performed to the contracting authority’s satisfaction. 

A ‘known risk’ under this ground is one that the contracting authority has considered could jeopardise the satisfactory performance of the contract but couldn’t be addressed in the contract as awarded and was identified in the tender or transparency notice (together with the possibility for modification). We’ve already seen some contracting authorities flagging a known risk in their initial procurement documentation — potentially setting the stage for use of this safe harbour in the future. 

The contracting authority must also consider that such a modification must go no further than necessary to remedy the issue and that awarding a further contract rather than modifying the original wouldn’t be in the public interest.

The modification must also not increase the estimated contract value (such valuation ignoring the risk that has materialised) by more than 50% (though this 50% condition again doesn’t apply to utilities contracts). 

Substantial modifications

A substantial modification is one that may:

• increase or decrease the term of the contract by more than 10%
• materially change the scope of the contract (for example, by providing for services, works or goods that aren’t already provided for under the contract)
• materially change the economic balance of the contract in favour of the supplier. 

If the proposed modification is a substantial modification, a new procurement process would be triggered.

Below-threshold modifications

Although they’re similar in effect to the previous regime under regulation 72(5) of the 2015 Regulations, below-threshold modifications are new concepts under the Act that allow certain low-value variations where they meet all the following criteria: 

• Contract value isn’t increased or decreased by more than 10% (for goods or services) or 15% (for works).
• Criteria for permitted or non-substantial modifications aren’t met.
• The contract's scope isn’t materially altered.
• Total value of the below-threshold modifications is below the relevant financial threshold for the relevant contract. Contracting authorities will therefore need to understand the cumulative value of such modifications throughout the duration of the contract to ensure that it remains below the relevant financial threshold.

 ‘Convertible contracts’ explained

One area that was often problematic for contracting authorities and wasn’t addressed under the 2015 Regulations is where contracts that weren’t initially subject to the full procurement regime during the tender process (because their value was below-threshold) subsequently became subject to full procurement obligations due to a permitted modification post-award (for example, where a modification took the contract from being below-threshold to above-threshold in value). 

This predicament has been resolved in the Act through the introduction of ‘convertible contracts’ — those that become public contracts under the Act as a result of modification. 

The rules regarding variations to contracts under section 74 of the Act will equally apply to convertible contracts, as well as public contracts.

How do these changes impact you? 

As noted above, the framework of ‘safe harbour’ grounds for variation of a public contract (or convertible contract) under the Act largely reflect the prior regime under the 2015 Regulations — so on the whole they shouldn’t come as a surprise to contracting authorities. 

However, there are some critical changes that contracting authorities should be aware of — and generally speaking, authorities should approach variations with caution and plan ahead where possible — for example, in relation to modifications provided for in the contract or the materialisation of known risks, where each must be identified in the tender or transparency notice or with regards to the cumulative value of below-threshold modifications. 

As a matter of policy, the grounds for permitted variation of awarded contracts continue to be restricted, with the aim of keeping this mechanism for exceptional circumstances and prevent contracting authorities from bypassing the need for a new procurement process through the variation of existing public contracts.

Talk to us 

Our experienced public procurement lawyers are on-hand to assist with any support you may require, including the variation of contracts under the new Act.

Talk to us by sending an email to hello@brabners.com, calling 0333 004 4488 or completing the contact form below.