March 2022 edition: Changed Public Procurement Thresholds and Procurement Top Tips

Changed Public Procurement Thresholds and Procurement Top Tips

At the beginning of the year, the Department for Education updated its guidance to schools in relation to Buying Procedures and Procurement Law for Schools. Since 1st January 2022 there has been a significant change around how the value of contracts are calculated that anyone with buying and budget responsibilities in schools or Multi-academy Trusts (MATs) needs to be aware of.

Background

For the purposes of procurement legislation it is usually the Academy Trust, as the legal entity that is making the decisions and entering into contracts, rather than the individual academy that is classed as the contracting authority.

Academy Trusts are therefore caught by the Public Contract Regulations (PCR) and so must consider the procurement thresholds when entering into contracts for works, services and goods. The thresholds that determine at what point contracts must fully comply with the PCR public procurement procedure are reviewed every two years.

What has changed?

As of 1st January 2022, the procurement thresholds have changed. For example, under the previous regime, the threshold for contracts for services and goods that need to be procured under a fully compliant PCR public procurement procedure was £189,330 exclusive of VAT.

Under the new regime, from 1st January 2022, the threshold under the PCR increased to £213,477 however, this figure is now inclusive of VAT.

The threshold value for services and goods contracts has therefore effectively been lowered when VAT is deducted and is now £177,897 exclusive of VAT. This means that more contracts will be caught under the procurement regime. Given the length of time it can take to run a compliant tender process and meet any notice requirements of existing contracts, the lower threshold represents a significant change.

What do Trusts need to do?

The Procurement Policy Note Action PPN 10/21 ("PPN”), published in December 2021, sets out that the suggested, not prescriptive, default for calculating VAT for this purpose is to add the standard rate of VAT (currently 20%) to the contract estimation net amount. The overall contract value should be taken as the value of the contract rather than an annual amount for the purposes of calculating the overall contract value.

When a contract for goods or services is advertised, the guidance confirms that the estimated contract value will continue to be provided exclusive of VAT. This means that when considering a new contract, Academy Trusts need to ensure that VAT is added to the contract value before considering if it would fall above the procurement threshold.

If contracts are above the threshold, Academy Trusts as contracting authorities will need to ensure that they use a PCR compliant bidding process.  In some instances, there may be suitable frameworks available for use. We provide some top tips below.

Even where the contract value is not above the threshold, the DfE consider any contracts worth over £40,000 to be high value contracts. The DfE guidance outlines that the contract should be awarded either through a framework or following a competitive, advertised procurement process. The DfE recommend getting legal advice before any high value spend. The Academy Trust Handbook requires that where a contract is high value, the Trust must:

  • Assess the market.

  • Prepare your contract and tender documents.

  • Advertise in the right places.

  • Consider using an expression of interest to cut the number of bids you’ll need to assess later.

  • Send an invitation to tender to people who reply to your advert.

  • Fairly assess all the bids you get, using the same process.

  • Choose the bid that offers best value for money.

  • Award the contract to the highest scoring bidder.

This updated guidance comes at a time when the Government is considering an overhaul of the current procurement legislation following Brexit. A new Procurement Bill is expected to be published in the spring and we will be able to provide an update on the expected changes once the Bill is published.

Top tips on how to manage a fully compliant PCR public procurement procedure:

  • Identify the type of contract e.g. services, goods, works, mixed contract etc.

  • Identify the estimated total value of the contract (over the total contract period).

  • Consider the application of the Regulations and if necessary take advice to see if the rules apply.

  • Ensure time frames are followed and a compliant, clear and transparent process when awarding the contract.

Light touch regime

Does your contract fall under the light touch regime e.g. catering? If so, a higher threshold will apply.

If contracts are above the threshold, Academy Trusts as contracting authorities will need to ensure that they use a PCR compliant bidding process.

Below threshold:

If your total contract value is below the threshold for a full procurement process, consider your Trust procurement policy and the DfE’s guidance on high value contracts (over £40,000) to determine the process to follow.

If the contract would be considered high value, you must:

  • Assess the market, prepare your tender documents.

  • Advertise in the right places.

  • Send an invitation to tender to people who reply to your advert.

  • Fairly assess all the bids you get, using the same process and consider value for money.

  • Award the contract to the highest scoring bidder.

Above threshold:

Consider whether your contract would fall above the thresholds. If so, a full procurement process will need to be undertaken -

  • Assess the market.

  • Consider whether there is a framework agreement you can use.

  • Prepare your invitation to tender and consider what tender process to use (Academy Trusts tend to use the open or restricted procedures).

  • Advertise via the Find a Tender Service.

  • Assess all bids fairly and consider value for money.


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