Update to the procurement thresholds
Public procurement thresholds are being updated, we look at the impact of this on value of Central Government, and Sub-Central Government, contracts.
On 1 November 2021, the Government laid new public procurement regulations before Parliament (Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (SI 2021/1221)) (the New Regulations).
The New Regulations will amend the procurement regulations from the 1 January 2022 and introduce updated thresholds that will apply to all procurements advertised on or after 1 January 2022. The new thresholds will not apply to any procurement advertised prior to the 1 January 2022.
VAT
A crucial point to note is that the New Regulations do not just alter the amount of the relevant thresholds, but also change the method of calculation of the estimated contract value. At the moment, the estimated contract value of the procured contract is estimated net of VAT. However, from the 1 January 2022 the thresholds will be inclusive of VAT, rather than net of VAT.
Whilst the Light Touch Regime thresholds have not themselves been amended, it is important to note that this threshold will now also become inclusive of VAT and therefore, in effect, the threshold has been reduced.
Contracting authorities
The changes to the thresholds and the VAT position means that contracting authorities need to be extremely careful when calculating the estimated contract value once the New Regulations come into force on 1 January 2022.
Due to the combination of the updated thresholds and the VAT inclusion, the threshold levels practically have been reduced. Consequently, this will mean that from 1 January 2022, more contracts are likely to be caught by the procurement regulations and contracting authorities will need to be aware of this so that to be compliant with the specific procurement regime.
For example, a central government contract for goods/services with an estimated value of £120,000 net of VAT would not currently (so long as advertised before 1 January 2022) be caught by the Public Contracts Regulations 2015. However, assuming that same contract is subject to 20% VAT, it would, if advertised after 1 January 2022, be caught by the Public Contracts Regulations 2015 (despite higher threshold).
Further, it is important to remember that as of 16 August 2021, NHS England and NHS Foundation Trusts are classed as central government authorities.
Contracting authorities in England should also remember that regulation 110 of the Public Contracts Regulations 2015 requires below-threshold central-government contracts in excess of £10,000 and sub-central government contracts in excess of £25,000 to be advertised on Contracts Finder. These thresholds will not be changing.
New thresholds
The new thresholds which will come in to force on 1 January 2022, are as follows:
Public Contracts Regulations 2015
| Central Government Authorities | Central Government Authorities | Sub-Central Contracting Authorities | Sub-Central Contracting Authorities | |
|---|---|---|---|---|
| Old Threshold | New Threshold | Old Threshold | New Threshold | |
| Goods/Services | £122,976 (exc. VAT) | £138,760 (inc. VAT) | £189,330 (exc. VAT) | £213,477 (inc. VAT) |
| Works | £4,733,252 (exc. VAT) | £5,336,937 (inc. VAT) | £4,733,252 (exc. VAT) | £5,336,937 (inc. VAT) |
| Light touch regime (Schedule 3 of Public Contracts Regulations 2015) | £663,540 (exc. VAT) | £663,540 (inc. VAT) | £663,540 (exc. VAT) | £5,336,937 (inc. VAT) |
| Small lots for goods/services | £70,778 (exc. VAT) | £70,778 (inc. VAT) | £70,778 (exc. VAT) | £70,778 (inc. VAT) |
| Small lots for works | £884,720 (exc. VAT) | £884,720 (inc. VAT) | £884,720 (exc. VAT) | £884,720 (inc. VAT) |
Concession Contracts Regulations 2016
| Old Threshold | New Threshold | |
| Concession | £4,733,252 (exc. VAT) | £5,336,937 (inc. VAT) |
Utilities Contracts Regulations 2016
| Old Threshold | New Threshold | |
| Goods/Services | £378,660 (exc. VAT) | £426,955 (inc. VAT) |
| Works | £4,733,252 (exc. VAT) | £5,336,937 (inc. VAT) |
Defence and Security Public Contracts Regulations 2011
| Old Threshold | New Threshold | |
| Goods/Services | £378,660 (exc. VAT) | £426,955 (inc. VAT) |
| Works | £4,733,252 (exc. VAT) | £5,336,937 (inc. VAT) |
For information and advice on the revised thresholds or procurement law, please do not hesitate to contact our experts – Penri Desscan, Simon McCann, Tomos Lewis and Emily James.
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