If you’re a local authority, registered provider or other contracting authority, or a developer working with one, the lawfulness of your development projects has long sat in a grey area. You’ve often had to make difficult, high‑risk judgments about whether your arrangements amount to public works contracts, whether a compliant procurement process is required and whether the risks are acceptable.

So, has the Procurement Act 2023 (PA23) changed that?

The previous regime required authorities to look at the substance of a transaction and assess whether the main object of a contract was the design/ execution of construction activities or a “work” or the realisation of a “work” corresponding to requirements specified by the authority exercising a decisive influence on the type or design or work.

Case law, a lot of it in the EU courts, had also established a number of issues relevant to this assessment including whether there was an enforceable obligation to deliver the relevant works and whether the authority would receive a direct economic benefit from the works in return for some form of consideration.

The answer in many cases was ‘yes’; for obvious reasons the authority wanted to ensure proper delivery of a project to its own specific requirements and therefore an enforceable works obligation and a decisive influence on design was a necessity.

Authorities sometimes sought to get round this by relying on the “exclusive rights” ground[1] to directly award a works contract on the basis that the authority could not acquire the development site in question unless it also agreed to award the works contract to a specific developer. Sometimes the developer might already own the site but sometimes a “back to back” arrangement would be put in place between the original landowner, the developer and the authority.

Whether the exclusive rights ground applied in either scenario was never tested by the courts and it therefore remained a risk area for authorities, particularly if the authority couldn’t adequately demonstrate that there was no reasonable alternative and that there hadn’t been an artificial narrowing of competition.

What the changes mean for you in practice

PA23 includes a similar “exclusive rights” ground for making a direct award[2]. However, there are some key points you need to know going forward:

1. Under PA23, the language you now have to apply when assessing public works contracts and the exclusive rights ground is similar to the old regime but not identical. That makes it harder for you to judge how far the courts will rely on previous case law. While the wording appears broader and could pull more development agreements into scope, there’s no clear indication in the statutory guidance that this was the intended outcome. As a result, you’re operating with greater uncertainty when assessing risk.
2. PA23 also increases what must be published. Before a direct award is made, a transparency notice needs to be published, followed by a contract award notice, contract details and, where the value exceeds £5 million, a copy of the contract itself, even if it has been directly awarded. This heightened transparency means reliance on the exclusive rights ground is more exposed, increasing scrutiny and the risk of a challenge.
3. That said, the statutory guidance offers some reassurance. It confirms that “exclusive rights” can include land ownership and that an owner of land has the right to determine which supplier delivers works on it. However, that reassurance is quickly qualified. You still need to assess whether a developer asserting exclusive rights genuinely does so. If another supplier (or the authority itself) could negotiate a lease or licence from the landowner, exclusive rights may not apply. In practice, this means you may need to test whether the landowner would be willing to grant rights to others, even though these discussions can be commercially sensitive.
4. Crucially, the exclusive rights ground will only apply where there is no reasonable alternative. For authorities, that usually means carrying out a detailed assessment of your requirements, covering design, timescales and funding and considering alternative sites, alongside enquiries with the landowner. Skipping this analysis could significantly increase exposure to challenge.

How we can support you

So, the answer to the question of what has changed is, in summary, not an awful lot (or at least not yet). It remains to be seen if the new rules will be interpreted differently by the Courts. The issues are still complex, and if you’re involved in a specific transaction, you should take legal advice to assess how the legislative provisions apply to your individual circumstances.

If you have any questions or need support, please contact Kathryn Vickers and our experienced procurement team.

[1] Regulation 32(2)(b)(iii) Public Contracts Regulations 2015

[2] Paragraph 5 of Schedule 5 PA23

[3] Guidance: Direct Award (HTML) – GOV.UK