The Government has recently updated the procurement thresholds for public sector procurement processes for 2020. We outline what this means for you and your business.
When does this take place?
The updated thresholds for public procurement will affect new procurement processes from 1st January 2020 to 31st December 2020
Does Brexit affect this?
Yes and no. From 31st January 2020, the UK will cease to be subject to the EU procurement directives regime. However, at present, the Government has agreed on an 11 month transition period ending 31st December 2020. If this transition period holds until that time, these new EU thresholds will continue to be applied until 2021.
Moreover, the UK Government has already applied the EU Directive (2014/24/EU) around public procurement into UK law. For instance there is the Public Contracts Regulations 2015.
What are ‘Procurement Thresholds’?
These thresholds apply to transparent publishing in public purchasing. Tenders and contracts that fall above the new thresholds must be published in the Official Journal of the European Union (OJEU). This is a European wide publication that ensure competition nationally and between European states.
Public sector buyers are bound by these thresholds and need to be aware of them. Government departments, local authorities, NHS trusts, utilities, housing associations and other public and quasi-public bodies. The thresholds cover tenders and contracts let under the following laws:
- The Public Contracts Regulations 2015
- The Concession Contracts Regulations 2016
- The Utilities Contracts Regulations 2016
- The Defence and Security Public Contracts Regulations 2011
What are the new procurement thresholds?
| New Thresholds for 2020 | |
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| The Public Contracts Regulations 2015 | |
| Supplies & Services (not subsidised services contracts) | |
| Central Government bodies (large lots) | £122,976 |
| Others (large lots) | £189,330 |
| Supplies and services (small lots; all sectors) | £70,778 |
| Works (large lots, all bodies) | £4,733,252 |
| Works (small lots, all bodies) | £884,720 |
| Subsidised services contracts | |
| Subsidised services contracts (all bodies) | £189,330 |
| Light touch regime for services (all bodies) | £663,540 |
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| The Utilities Contracts Regulations 2016 | |
| Supplies and Services* (large lots; all sectors) | £378,660 |
| Supplies and Services* (small lots; all sectors) | £70,778 |
| Works+ (large lots; all sectors) | £4,733,252 |
| Works (small lots; all sectors) | £884,720 |
| *Unless exempt, subject to light-touch regime, subsidied, research and development services | |
| +Unless subsidised works contract | |
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| The Concession Contracts Regulations 2016 | |
| Concession contracts | £4,733,252 |
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| The Defence and Security Public Contracts Regulations 2011 | |
| Supplies and Services (large lots; all sectors) | £378,660 |
| Supplies and Services (small lots; all sectors) | £70,778 |
| Works (large lots; all sectors) | £4,733,252 |
| Works (small lots; all sectors) | £884,720 |
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These new thresholds are net of VAT. With these new figures, the thresholds have slightly risen, possibly owing to differing exchange rates compared to the last threshold renewal.
The source for this is covered in the Government’s Procurement Policy Note 06/19: New Thresholds 2020 and can be found here.
The importance of OJEU thresholds
OJEU rules mandate that contract values are calculated based on their whole-life cost. This entails calculating the maximum potential contract value and using that. Where no contract can be put in place, an estimation of value needs to be calculated and used and multiplied by the maximum contract length. This maximum contract length includes any and all possible extensions. The methodology used to calculate ought to be based on past purchases or spend over time in order to properly justify the contract value.
This is in part because contract values calculated on an annual basis can be exploited and used to shield fraud. For example let’s take a larger, £250,000 contract within OJEU threshold. This can be broken down into an annual spend of £50,000 thus putting it below OJEU thresholds for publication. Without the transparency of publication, purchasing managers could and did put out tenders fraudulently.
The cost of getting procurement wrong
An incorrect contract value can have a number of implications. First it might force a re-tendering of the contract early because the stated value has already been reached. The time and costs of re-tendering and can put additional strain on public authorities already stretched by other factors.
It can also affect supplier relations with that public sector body and can create negative publicity. In fact, a supplier can challenge the contract on the basis of procedure. This include suppliers outside of the bid and award process. They only need to show that, had they known the value was actually higher, they would have put in a bid.
Proper data publishing with correct contract values, underpinned by transparent methodology is the best defence against this.
Where do I find tenders and contracts?
From https://openopps.com. We publish 150,000 tenders from around the world each month. We have local and national tenders, including those not covered by OJEU and Contracts Finder thresholds. Contracts Finder states that any procurement process over £10,000 for central government or £25,000 for local government needs to be published on contracts finder.