In this Procurement UnpACked, we explore how contracting authorities should approach modifying public contracts following the Procurement Act 2023 (PA 2023) coming into force.

Two regimes - long live Regulation 72

The contract modification rules under the Public Contracts Regulations 2015 (PCR 2015) remain applicable to public contracts entered into before 24 February 2025 or where the procurement process started before this date. 

For public contracts awarded under procurement processes commenced on or after 24 February 2025, Sections 74-77 and Schedule 8 of the PA 2023 apply.

Given the volume of public contracts that still fall under the PCR 2015 and the flurry of activity on Find a Tender in the run up to 24 February, the Regulation 72, PCR 2015 regime for modifications is likely to be the law that most contracting authorities will refer to for some time.

It will be important when a modification arises to be alert as to which regime applies.

PA 2023 – covered procurement

The definition of ‘covered procurement’ under the PA 2023 includes management of public contracts. When considering modifications, contracting authorities must have regard to the objectives set out in Section 12 of the PA 2023 and the National Procurement Policy Statement (in force at the time). This regard will need to be evidenced in the decision making around the modification.

PA 2023 – the new rules regulating contract modifications

The Cabinet Office considers that the PA 2023 provides greater flexibility to modify public contracts but in exchange for much greater transparency.

The rules apply to all public contracts except light touch regime contracts, which can be modified freely. Whilst the rules do not – as general rule – apply to below threshold contracts they do apply to ‘convertible contracts’. These are any below threshold contracts that become public contracts because of the modification – i.e. they go above threshold. 

Modifications can be made to a public contract without the need for a new procurement process when one or more of the following are applicable:

• there is a permitted modification under Schedule 8 – we discuss these further below; or
• there is a non-substantial modification - modification is permitted if it does not: (a) increase or decrease the maximum term (on award) by more than 10%; (b) materially change the scope of the contract; or materially change the economic balance of the contract in favour of the supplier. This route adopts broadly the PCR 2015 approach to non-substantial modifications save that the reference to impact on the original procurement process has been removed; or
• there is a below-threshold modification - modification is permitted if it does not: (a) increase or decrease the estimated value of the goods or services contract by more than 10%, or a works contract by more than 15%; (b) exceed the relevant PA 2023 threshold when aggregated with all other below threshold modifications; and (c) materially change the scope. Lastly, to use this route, the modification must not fall within using either the non-substantial modification or the permitted modifications routes. This route is equivalent to the de-minimis exemption under the PCR 2015. 

PA 2023 - what are the Schedule 8 permitted modifications?

The PA 2023 adopts the approach under the PCR 2015 of prescribing certain scenarios as permitted modifications. For non-defence public contracts, there are four permitted modifications that have been adapted (with some changes) from the PCR 2015 and two new permitted modifications. 

Where we refer to estimated value below, that is not the value at the time of the original procurement, but the estimated value before the modification.

PA 2023 - transparency

In most cases, before a contracting authority can modify the public contract it must publish a contract change notice and may apply a voluntary standstill period (which cannot be less than 8 working days). Exceptions to the need to publish a contract change notice include modifications to light touch regime contracts and certain smaller changes.

Where the modification results in a public contract with an estimated value of over £5 million and a contract change notice had to be published, the modified contract or the modification itself must be published within 90 days of the modification. 

How different will it be compared to the PCR 2015?

Many of the themes under the PA 2023 are the same as under the PCR 2015, but there are some important changes. Alongside the new permitted modifications, the increased transparency around modifications may well see a change in risk appetite in some contracting authorities when it comes to modifications. This is an area where we can foresee a good deal of case law arising.

For more information

For more information on the PA 2023 and the PCR 2015, please contact Alex Lawrence.