Regulated procurement | UK Regulatory Outlook October 2026

Government applies national security exemption to critical steel, shipbuilding, AI and energy sectors

The national security exemption allows contracting authorities to procure contracts wholly outside the Procurement Act 2023 if they consider it to be in the national interest to do so. In procurement policy note PPN025, the government confirmed that contracting authorities would be guided to apply this exemption in four sectors deemed critical to the UK's economic security: steel, shipbuilding, AI and energy.

The government has now confirmed that a new £6 billion plan to build three new floating docks for the Royal Navy's submarine service at HM Naval Base Clyde in Scotland, known as "Programme Euston", will be delivered through a UK-only competition under the national security exemption. The new docks will support maintenance for the UK's current and future fleet of nuclear submarines.

Alongside this, the government has committed to funding a new marine research vessel, to be built in a British shipyard and operational in the early 2030s. Both projects are described as part of a wider focus on how government spending can support British jobs and growth, while strengthening national security.

How the government defines a "UK-only competition" remains to be seen. It is currently unclear, for example, whether the UK subsidiary of a non-UK organisation would fall within this definition, or whether the Government would seek to go further and exclude suppliers with foreign-ownership. 

These procurements, while not conclusive of how future exempt contracts would be procured, could give an indication as to the direction of travel. Suppliers to the four critical sectors caught by PPN025 will be watching closely.

Funding deadline and contractor familiarity not enough to justify direct award, court rules

The High Court has dismissed Cornwall Council's challenge to a government decision clawing back over £2.1 million in European Regional Development Fund grant money. Most of that sum related to a direct award, made without any competition, to build a bridge over the A30. The council argued it had genuine technical reasons not to run a competitive procurement, including an approaching funding deadline and the contractor's work on an adjacent road scheme. The court rejected this reasoning on the basis that convenience, time pressure and familiarity with an existing contractor are not enough to justify bypassing competition. Instead there must be no other supplier that could perform the contract.

The remainder of the clawback concerned a separate contract. The council's tender for project management services required bidders to name at least one Cornish sub-consultant. The court found that this requirement unlawfully favoured bidders with existing local contacts over outside competitors, regardless of the council's wish to support the local economy.

The ruling underlines that convenience and funding pressure are not legal justifications for a direct award, and that local-preference award criteria can amount to unlawful discrimination against non-local suppliers.

High Court refuses to strike out set-aside claim over defective contract award notice

Publishing a contract award notice does not always protect a direct award from challenge. A recent High Court ruling shows that if the notice fails to accurately explain the justification for the award, a court can treat it as if it was never published at all.

In Apasen Limited v London Borough of Tower Hamlets, the council abandoned a competitive tender for domiciliary care services. It instead awarded interim contracts directly to several providers, citing "extreme and unavoidable urgency" under the Procurement Act 2023. It later withdrew two of those awards from Apasen and gave them to other providers instead. Apasen sought to have those contracts set aside.

The council tried to strike out that claim, arguing that publishing a contract award notice and observing a standstill period ruled out a set-aside remedy under section 105 of the Procurement Act. The court disagreed. It held it was arguable that a notice asserting urgency which was not factually justified should count as unpublished. It also held the urgency justification must appear in the award notice itself, not only in an earlier transparency notice, as happened here.

The ruling is preliminary and does not decide whether Tower Hamlets' awards were in fact unlawful. It nonetheless signals that contracting authorities relying on urgency to justify a direct award would do well to set out that justification fully and accurately in the award notice itself. A notice that omits or understates the urgency ground may not protect the contract from a later challenge, even where a standstill period was observed. Suppliers who lose out on a direct award may find that any gap in the notice's reasoning may support a set-aside claim.