In this Procurement UnpACked, we explore the new rules for procuring below-threshold contracts following the enactment of the Procurement Act 2023 (PA 2023). The below-threshold contracts procured in Northern Ireland or with international details will not be discussed. 

What is below the threshold?

Schedule 1 of the PA 2023 sets out the established types of procurement contracts along with their minimum thresholds. When considering what is below threshold, consider the type of contract along with its corresponding threshold, if your type of contract falls below this threshold it is not a public contract but instead is a below-threshold contract and subject to less rigorous rules under the PA 2023.

Regulated below-threshold contracts and their notice requirements

There are both regulated and unregulated below-threshold contracts. Section 84 of the PA 2023 indicates that a regulated below-threshold contract is one that is not, (a) an exempted contract in schedule 2 of the PA 2023, (b) a concession contract, or (c) a utilities contract. 

Whether or not these contracts are notifiable depends on their value. If they have an estimated value of – (a) in the case of a contract to be awarded by a central government authority, not less than £12,000, or (b) otherwise, not less than £30,000, then notice is necessary.

When notice is required, Guidance indicates that the contracting authority will only need to publish the following notices:

Below-threshold tender notice (BTTN)

This notice is only needed when the contracting authority intends to advertise the contract for the purpose of inviting tenders. The guidance indicates that a BTTN is not required when the contract is awarded directly or advertised for bid to pre-selected suppliers.

The contract details notice

Section 87(3) of the PA 2023 obliges a contracting authority to publish a Contract Details Notice upon reward, as soon as reasonably practicable. The guidance indicates that this obligation applies to all notifiable below-threshold contracts, including:

• Below-threshold call-off contracts awarded under a framework;
• Directly awarded below-threshold contracts; and,
• Below-threshold contracts awarded through a closed competition with a list of favoured suppliers.

Unregulated below-threshold contracts

There are some below-threshold contracts that are unregulated by even the lighter touch rules in the PA 2023. Unregulated below-threshold contracts include:

• Exempted contracts under schedule 2 of the PA 2023;
• Concession contracts;
• Utilities contracts; and,
• Contracts procured by a school (defined in section 123(1) of the PA 2023).

Some new flexibilities

Currently, section 17 of the Local Government Act 1988 (LGA 1988) restricts contracting authorities from considering non-commercial matters, including location, when awarding and managing certain contracts. The Guidance indicates that the government will use the powers of section 116 of the PA 2023 to lift this restriction. This will permit local government and other contracting authorities subject to the LGA 1988, to reserve procurement of below-threshold contracts to suppliers that are based in the UK, or located in a specific county or borough of the UK. It is the government’s hope that this will add flexibility to the procurement of below-threshold contracts. The geographical limits can only be either the entirety of the United Kingdom or restricted to a single county. The limits cannot be defined by nations of the United Kingdom, i.e. England, Scotland, Wales, and Northern Ireland.

In addition to the ability to reserve procurement by supplier location, contracting authorities can also reserve procurement for small and medium-sized enterprises (‘SME’), as well as, voluntary, community and social enterprises (VCSE). This means that contracting authorities can run bids for the procurement of below-threshold contracts and specify that only SMEs and VCSEs can participate. 

There is useful guidance on both of these new flexibilities in the ‘PPN 005: Guide to reserving below threshold’, linked below. The guidance is only applicable to centralised public bodies but other contracting authorities may wish to adopt the principles into their own practices.

And some new rules

Despite below-threshold contracts being subject to lighter touch regulations, contracting authorities should still consider the obligations in the PA 2023 that apply to procurement in general. Such as, the requirement to have regard to the national procurement policy statement or the Welsh procurement policy statement, as well as the rules regarding contract modification.

In addition to the above obligations, regulated below-threshold contracts are subject to the following conditions and restrictions:

• Contracting authorities cannot have a preliminary stage to assess suppliers' suitability, with the exception of those contracts described in section 85 of the PA 2023;
• Section 86 of the PA 2023 provides contracting authorities with a duty to consider SMEs when awarding a contract. Along with consideration, contracting authorities must look out for barriers to entry into the contract for SMEs and consider whether these barriers can be removed or reduced;
• Contracting authorities cannot set up a below-threshold dynamic market;
• Implied prompt payment terms require contracting authorities to pay valid, undisputed invoices within 30 days of receipt or the due date, if later; and,
• The notice requirements for notifiable below-threshold contracts discussed above.

What is different?

Many of the below-threshold rules under the PA 2023 mirror those that existed under the previous regime of the Public Contracts Regulations 2015. However, notable differences include:

• Welsh devolved authorities are not exempt from the notification requirements of below-threshold contracts;
• The definition of ‘central government authority’ at Schedule 1 of the PA 2023 includes NHS Trusts and NHS Foundation Trusts, subjecting them to the  same lower threshold as other central government authorities;
• Below-threshold tender notices must be first publicized on the central digital platform; and,
• The flexibilities for restricting bids geographically or to SME’s and VCSE’s discussed above. 

For more information

For more information on the PA 2023 and below-threshold contracts, please contact Mark Cook.

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