In a world with scarce resources and inflationary pressures, it often costs more to acquire what you need. It’s therefore natural to expect an increase in the threshold value at which procedures relating to awarding public contracts come into operation. 

But from January 2022, a critical change in how the threshold is determined effectively means the threshold is reducing. It’s a change that could catch many people out. Here’s what you need to know.

Why do we need Public Procurement Financial thresholds?

The purpose of the Public Procurement Framework is quite simple. The legislation aims to ensure the public gets value for money, defined as “the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought.”  Some of the legislation is UK based and some takes the form of EU directives. Post Brexit it can be difficult to know what’s relevant. In short, EU directives on public procurement no longer bind the UK, but they remain part of UK law in the form of The Public Contracts Regulations 2015. Whenever a public contract value exceeds a specified financial threshold (relating to the full life of the contract) certain procedures must be followed. It’s this legislation that is being amended. 

The critical New Year change

From 1 January 2022, the financial thresholds are being updated. A fundamental point to note is that the new threshold values are inclusive of any applicable VAT rather than being shown net of the tax. In real terms, where VAT applies to the contract, the thresholds have gone down, rather than up. If – based on previous contract values – you’re assuming you don’t need to follow procedures, you could easily be mistaken. The following table shows the current and new financial thresholds: 

Type of Contracting Authority Type of ContractCurrent threshold (Exclusive of VAT)New threshold (Inclusive of VAT) 
Central Government AuthorityServices contract Supply of goods contract£122,976£138,760
Sub-Central AuthoritiesServices contract Supply of goods contract£189,330£213,477
AllWorks contract£4,733,252£5,336,937
AllLight Touch Regime£663,540£663,540

Please note that although coming into force on 1 January 2022, the changes do not apply to procurements started before that date. Whether it’s concerning legislation, thresholds, or procedures, public procurement can be a challenging area. As always, if you’d like to tap into our expertise, do get in touch on 0800 246 5432. 

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