Procurement Act 2023 guidance documents - Manage phase · first published 1 August 2024
The Procurement Act 2023 (PA 2023) introduces two key changes to how public contracts can be ended. First, it implies three automatic termination rights into every public contract, allowing a buyer to exit if the contract was awarded in material breach of the Act, if the supplier or a sub-contractor becomes an 'excluded' or 'excludable' party (e.g. due to poor performance, misconduct, or national security concerns), or if a relevant sub-contractor was already excluded at award but the buyer didn't know. Second, every time any public contract ends — for any reason, including normal expiry or mutual agreement — the contracting authority must publish a 'contract termination notice' on the central digital platform within 30 days. This notice is public and may include details of any breach, poor performance, and damages paid. For small businesses bidding for or delivering public contracts, this means your past contract endings — including terminations for poor performance — can become part of a permanent public record that future buyers may use to exclude you from future bids.
WHO THIS APPLIES TO
THE ENKII VIEW
The mandatory public termination notice is the key risk for SMEs: details of any breach, failure to perform, and damages can be published and used as evidence to exclude you from future procurements under the discretionary exclusion ground for poor performance. On the upside, the same transparency rules mean you can monitor what happens to incumbent suppliers on contracts you want to bid for — publicly available termination notices will reveal early exits, performance failures, and contract extensions, giving you better market intelligence. The requirement that buyers must give suppliers a reasonable opportunity to respond before terminating, and a chance to replace a problematic sub-contractor, provides meaningful procedural protection for SMEs.
1. Review your sub-contractor arrangements now: check that none of your sub-contractors appear on the government's debarment list. If one does, proactively raise this with your buyer before they raise it with you — the Act gives you a chance to replace a problematic sub-contractor, but only if you act promptly.
All SMEs currently delivering public contracts — The Act implies a termination right where a sub-contractor is an excluded or excludable supplier, and buyers must give suppliers a reasonable opportunity to find a replacement — but this protection only works if you identify the issue and engage early.
2. Keep contemporaneous records of every performance issue, warning notice received, and remediation step you take during a contract. If your contract is ever terminated for breach, the public termination notice will include what you did to mitigate — make sure that record is strong.
All SMEs currently delivering public contracts — The termination notice must include 'what steps the supplier took to mitigate the impact of the breach and why these were not sufficient' — a well-documented mitigation trail is your best defence against a damaging public record.
3. When negotiating or reviewing contract terms, ensure your contract clearly sets out what happens on termination: notice periods, asset and data transfer, payment of money owed, and any 'breakage costs' for early exit. The Act's implied terms are silent on these practical matters.
All SMEs currently delivering public contracts — The guidance explicitly states that 'the Act does not imply terms relating to restitution and other ancillary matters' and advises contracting authorities to include these as express terms — but you as the supplier should also push for clarity to protect your position.
4. Use publicly available contract termination notices on the central digital platform to research incumbent suppliers on contracts you want to bid for. Look for early terminations, performance failures, extensions beyond planned term, and breach details to sharpen your bid intelligence.
SMEs bidding for new public contracts — The guidance states that termination notices 'will allow greater scrutiny of what has happened during the life of a contract, enabling interested parties to see...if the value and term of the contract has increased since it was awarded, or the reasons behind an early termination' — this is free, public market intelligence.
5. Be aware that a published contract termination notice detailing breach or poor performance can be used by any contracting authority to apply a discretionary exclusion against you in future bids. If you have past contract endings that may be recorded this way, prepare a 'self-cleaning' statement explaining what went wrong and what you have changed.
All SMEs currently delivering or having previously delivered public contracts — The document states that 'information published in contract termination notices serves to provide evidence to enable authorities to apply the [discretionary exclusion] ground' — self-cleaning is the recognised route to overcome this under the Act.
6. If you receive a notice of intention to terminate from a buyer, respond formally and in writing within the reasonable opportunity window provided. Contest whether the stated termination ground applies and set out your position clearly — this response may be relevant to any future exclusion assessment.
All SMEs currently delivering public contracts — Section 78(7) requires buyers to 'give the supplier reasonable opportunity to respond to the contracting authority on whether a termination ground applies and its decision to terminate' — this is a formal right; use it.
Every rule below quotes the official document verbatim.
Three termination grounds are implied into every public contract: (a) contract awarded or modified in material breach of the Act; (b) supplier/associated person becomes excluded or excludable after award; (c) a sub-contractor (other than an associated person) is an excluded or excludable supplier. (All public contracts, all contracting authorities, all values and sectors)
“The three implied contract termination grounds, as set out in section 78(2) are: a. the contracting authority considers that the contract was awarded, or modified, in material breach of the Act or regulations made under it; b. since the contract was awarded, the supplier has become an excluded or excludable supplier (including by reference to an associated person); c. a sub-contractor (other than an associated person) is an excluded or excludable supplier.”
A material breach means a breach the contracting authority considers could reasonably result in a successful legal challenge under Part 9 or otherwise. (All public contracts — implied termination ground (a))
“Section 78 defines a 'material breach' as a breach that the contracting authority considers could reasonably result in a successful legal challenge under Part 9 or otherwise.”
Before terminating under any implied ground, the buyer must notify the supplier of its intention to terminate, specify which ground applies and why, and give the supplier a reasonable opportunity to respond. (All public contracts, all contracting authorities)
“before terminating a contract by reference to the implied term, section 78(7) requires that a contracting authority must: a. notify the supplier of its intention to terminate; b. specify which of the grounds in 78(2)(a-c) applies and why it has decided to terminate the contract; and c. give the supplier reasonable opportunity to respond to the contracting authority on whether a termination ground applies and its decision to terminate.”
Where termination is on the ground of a sub-contractor being excluded or excludable, the buyer must give the supplier a reasonable opportunity to end its arrangement with that sub-contractor and, if necessary, find a replacement. (All public contracts — implied termination ground (c), and section 78(2)(b) where sub-contractors are involved)
“the contracting authority must give the supplier a reasonable opportunity to cease its arrangement with that sub-contractor and, if necessary, find a replacement.”
The implied sub-contractor termination ground (c) can only be used if the buyer previously requested information about sub-contractors under section 28(1)(a) and at least one of three conditions is met: buyer was unaware of the sub-contracting intention, buyer checked the debarment list but didn't know the sub-contractor was on it, or buyer requested information during the tender but didn't know the sub-contractor was excluded. (All public contracts — implied termination ground (c))
“contracting authorities may only rely on this implied term if they requested information about sub-contractors under section 28(1)(a) (information about subcontractors). It also provides that one of the following conditions must be met (section 78(3))”
A contract termination notice must be published within 30 days of the contract ending. (All public contracts, all contracting authorities, all values and sectors (except private utilities and directly-awarded user choice services))
“The notice must be published before the end of the period of 30 days beginning with the day on which the public contract is terminated (section 80(1)).”
'Termination' for notice purposes covers all ways a contract can end: discharge, expiry, termination by a party, rescission, or being set aside by court order. (All public contracts, all contracting authorities)
“the Act provides, at section 80(3), that 'termination' for the purpose of the publication of a contract termination notice encompasses all of the circumstances in which a contract may come to an end”
Contract termination notices are not required for contracts entered into by private utilities or for user choice services directly awarded under Schedule 5, paragraph 15. (Exception to the notice requirement)
“contracting authorities to publish a contract termination notice following 'termination'...of all public contracts with the exception of: a. contracts entered into by private utilities; and b. contracts for 'user choice services' that have been directly awarded under Schedule 5, paragraph 15.”
Where termination follows a supplier breach, the termination notice must include: a statement that section 71(5) applies, the date the buyer considered the supplier failed to improve, and an explanation of the nature, impact and duration of the breach, steps taken by the buyer, and steps the supplier took to mitigate. (All public contracts terminated following a supplier breach, all contracting authorities)
“regulation 41(2)(h) provides that the contract termination notice must include the following information: a. a statement that section 71(5) of the Act applies because the supplier breached the contract; b. in cases where the supplier did not perform to the contracting authority's satisfaction, the date when the contracting authority considered the supplier had failed to improve performance; and c. an explanation of the nature of the breach or failure to perform, the impact and duration of the breach or failure to perform, any steps taken by the contracting authority to notify the supplier of the breach/failure to perform and encourage them to improve the situation...and what steps the supplier took to mitigate the impact of the breach and why these were not sufficient.”
Where damages were awarded before the notice deadline, the notice must include confirmation, the amount paid, the basis for the award, and — if a court or tribunal made a finding — a link to or copy of that decision. (All public contracts terminated following a breach where damages were awarded before the notice deadline)
“the contract termination notice must include confirmation that this is the case, the amount of damages or other monies paid, the basis on which damages were awarded...Where there is a recorded decision of a court or tribunal finding that there is a breach, contracting authorities must also include a link to the web page where the decision can be accessed or a copy of the decision.”
Information published in contract termination notices about breach or poor performance can be used as evidence to apply the discretionary exclusion ground (Schedule 7, paragraph 12) in future procurements. (All suppliers; relevant to all future procurement exercises by any contracting authority)
“Contracting authorities have the discretion to exclude suppliers for breach or poor performance (on the ground in Schedule 7, paragraph 12) where it can be demonstrated that they have not performed one or more contracts to a satisfactory level, and have failed to improve their performance (subject to self-cleaning). Information published in contract termination notices serves to provide evidence to enable authorities to apply the ground.”
Any contractual term that purports to restrict or override the implied termination rights has no effect; the implied term remains valid regardless. (All public contracts)
“If the contracting authority and the supplier include a term in the public contract that purports to restrict or override the implied term, this will have no effect and the implied term will remain valid (section 78(10))”
Relevant contracting authorities (i.e. all except Ministers of the Crown, government departments, and the Corporate Officers of the two Houses of Parliament) must notify a Minister of the Crown and obtain ministerial agreement before terminating on national security discretionary exclusion grounds. (Relevant contracting authorities (all except Ministers of the Crown, government departments, and Corporate Officers of both Houses of Parliament))
“a relevant contracting authority may not terminate a contract by reference to the implied term in section 78 on the discretionary exclusion ground of the threat to national security (Schedule 7, paragraph 14) unless: a. the contracting authority has notified a Minister of the Crown of its intention; and b. the Minister agrees that the supplier or sub-contractor is an excludable supplier under Schedule 7, paragraph 14 and that the contract should be terminated.”
Where a light touch contract is terminated before a contract details notice has been published (buyers have 120 days for light touch contracts vs 30 days for others), both the contract details notice and the termination notice must be published within the 30-day termination notice deadline. (Light touch contracts terminated before a contract details notice is published)
“contracting authorities should publish both the contract details notice and then the contract termination notice before the end of the 30 day period required for publication of a contract termination notice.”
This briefing is enkii's interpretation of the official document — the official text always governs.
Source document © Crown copyright, reused under the Open Government Licence v3.0 via the GOV.UK Content API. enkii tracks every Procurement Policy Note and briefs changes the day they land — see all briefings.