UK Cabinet Office latest revisions to the Model Services Contract

What should I do?

Contracting authorities seeking to run a procurement under PA23 that will be based on the Model Services Contract should familiarise themselves with the updates in MSC v2.2, so that they can ensure that the planned procurement process aligns with the latest changes. Contracting authorities that regularly use their own version of the Model Services Contract may wish to update their template contracts to align with MSC v2.2.

Suppliers bidding for contracts that will use MSC v2.2 will also need to understand the changes and the impacts for them. This includes in some cases, additional protection for the Supplier (e.g. prompt payment terms), but in other respects Supplier exposure to additional risks (e.g. termination rights for the public sector Buyer and removal of the concept of allowable assumptions).

Summary of key changes made in MSC v2.2

Key amendments made in MSC v2.2 can be summarised as follows:

• “Modular” Approach – Introducing the use of a Front Sheet, supplemented by Core Terms and optional/mandatory Schedules. The new Front Sheet incorporates customisable content from multiple Schedules, making for a more condensed format and therefore easing contract management for both parties. Public sector Buyers can now ”tick” the Schedules that apply to their specific projects and can select other aspects of the MSC v2.2 that apply, such as the specific IPR option being utilised and whether the contract is a “Critical Service Contract”.
• PA23 – Aligning MSC v2.2 with PA23 requirements including updated transparency, termination, exclusions, conflicts of interest, KPIs, electronic invoicing, sub-contracting, and prompt payment provisions.
• PPNs – Revising drafting as required by Public Procurement Notices, including those that have been withdrawn, added or reissued.
• Personal Data Updates – Strengthening data protection measures to reflect the latest EU and UK “adequacy” decisions relating to the US regime, including mechanisms for data transfer and protection.
• TUPE – Clarifying TUPE requirements by aligning the Staff Transfer Schedule with the remainder of the contract and avoiding conflicting obligations.
• Allowable Assumptions – Removing the concept of allowable assumptions and associated price adjustments mechanism where those assumptions are incorrect, which increases the onus on Suppliers to do their own due diligence.
• Cybersecurity Updates – Updating the Security Management Schedule with new security control policies, incident responses, and mandatory cybersecurity certification requirements.
• Sustainability – Introducing an optional Carbon Reduction Schedule, which requires Suppliers to maintain a credible Carbon Reduction Plan. Where deemed “related to and proportionate” in contracts valued at over £5 million, this is a mandatory requirement.
• Late Payments – Removing the concept of advanced delay payments and expanding public sector Buyers’ powers to publish supplier non-compliance following late payment of Sub-contractors.

Implications of the MSC v2.2 key amendments for public sector Buyers and Suppliers

We examine below in high level some of the notable MSC v2.2’s drafting updates and the impacts the PA23 will have on public sector Buyers and Suppliers to show the direction of travel in the refreshed MSC v2.2 drafting. However, please note that exemptions may apply to the contract provisions, so advice should be taken on the application of the general contractual principles to a particular project scenario.

Transparency

The definition of “Transparency Information” has been expanded to cover broader categories of information. The definition now includes any information or notices published under PA23 (e.g. Contract Details Notices, Contract Performance Notices, Contract Change Notices, Contract Termination Notices, payments information), copies of the contract, information required to be disclosed under the Freedom of Information Act and Publishable Performance Information as defined under PA23 (subject to various exemptions).

KPIs

Suppliers face new KPI requirements as outlined under the PA23:

• Where a contract has an estimated value of over £5 million, public sector Buyers must set at least three KPIs, which the Suppliers will be assessed against,, with their performance publishable on an annual basis in the form of a Contract Performance Notice.
• Buyers have been granted new discretionary exclusion grounds for poor performance, meaning that Suppliers may be excluded from the procurement process should they fail to perform the contract to the public sector Buyer’s satisfaction.

Supplier’s will be pleased, however, that Buyers’ ability to unilaterally amend and change the weighting of KPIs has been removed.

Sub-contracting

MSC v2.2 also serves to provide Sub-contractors with protections, directly impacting Suppliers:

• Supplier payment obligations have been extended to pay all invoices and sums due to Sub-contractors within an average of 55 days or less, reducing to 45 days from 1 October 2025. Should suppliers continue to pay Sub-contracts on a late and delayed basis, public sector Buyers have new powers to publish Supplier’s details on the Non-Compliance list.
• Buyers are able to require a Supplier to enter into a legally binding arrangement with a proposed Sub-contractor to comply with the requirements of a conditional procurement award or, where the Supplier intends to rely on a Sub-contractor, to pass the conditions of participation. If a Supplier chooses not to do so, public sector Buyers are entitled to terminate the contract or require the Supplier to enter into a legally binding agreement with an alternative Sub-contractor of the public sector Buyer’s choosing.

Contract Termination Grounds

MSC v2.2 introduces additional rights for Buyers to terminate where i) they consider that the contract was awarded or modified in material breach of the PA23 or any regulations made under it; ii) a Supplier has become an excluded/ excludable Supplier since the award of the contract; or iii) a Supplier’s Sub-contractor is an excluded/ excludable Supplier, alongside replacing the narrower “fraud and bribery” grounds with a wider category of exclusions.

Security Management

Security Management Schedules are now divided between “Part A (Authority-led Assurance)” and “Part B (Supplier-led Assurance)” Security Management Schedules. Part A proposes that public sector Buyers are positioned to assess the Supplier systems, whilst Part B requires the Supplier to assess its own systems. It will be for the public sector Buyer to decide which parts will apply.

Buyer-specific Terms

This new Schedule allows public sector Buyers to insert department-specific terms. The Schedule is blank for the Buyer to complete. The CCS guidance is that any terms included should be “relevant and proportionate”, which will avoid the risk that inclusion of lengthy and unfamiliar terms could complicate and slow down the negotiations or introduce duplication or conflict.

Conclusion

The refreshed MSC v2.2 helps to simplify, modernise and align the contract with PA23. However, it remains a complex set of legal terms and is intended to be used in conjunction with obtaining professional legal advice.

For further information, we recommend that users of MSC v2.2 consider the guidance document (available here: Model Services Contract – Guidance for Buyers) and the list of changes (available here: Model Services Contract – List of Changes) that have been produced by CCS.

For more information

Eversheds Sutherland’s Technology Team has extensive experience in advising public and private sector clients on complex and high value projects using the Model Services Contract and is currently advising high profile clients on ensuring their contract terms comply with the latest MSC v2.2 updates and delivering training on the new public sector procurement requirements. Please contact Joanne Veitch, Madhulika Kanaujia or Elizabeth Marshall or if you would like to discuss this in more detail.

Further reading on PA23 – Previous Eversheds Sutherland Client Briefing Notes

How the Procurement Act 2023 (“PA23”) will shape the contract terms

The Procurement Act 2023: Key changes and what you need to know

The impact of the new Procurement Act 2023 - England, Wales and Northern Ireland