Under the Procurement Act 2023 (PA23) a below threshold contract is defined as a contract with an estimated total contract value (including VAT) of less than the threshold amount for the type of contract. A ‘Regulated below-threshold contract’ is a below-threshold contract which is not an exempted contract, a concession contract, or a utilities contract (are subject to regulations in Part 6 (sections 84 to 88) of the PA23). An ‘Exempted contract’ is a type of contract listed in Schedule 2 of the PA23, to which the Procurement Act generally does not apply.
For below-threshold contracts, contracting authorities have more flexibility in how they design and manage the procurement process, however, they must still comply with their internal procurement policies and have regard to the national procurement policy statement (NPPS). This flexibility can include awarding contracts without competition, inviting quotes from selected suppliers, or limiting contracts to UK-based suppliers or those from a specific area. They can also prioritise small and medium-sized enterprises (SMEs) or voluntary and community organisations (VCSEs). However, this flexibility does not apply to procurements with potential cross-border interest.
Regulated below-threshold contracts
Procedure (PA23, Section 85)
Section 85 of the Procurement Act states that for regulated below-threshold contracts, contracting authorities cannot limit who can submit tenders based on the supplier's suitability to perform the contract. This includes factors like legal status, financial stability, or technical ability, such as checking past experience, financial records, or criminal convictions. Authorities cannot use these criteria to reduce the number of suppliers invited to tender before bids are submitted and therefore may not include a pre-qualification stage. However, they can ask for and assess this information during the bid evaluation process.
There is an exception to the rule prohibiting a separate suitability stage in relation to a below-threshold works contract if the contract has an estimated value of not less than the threshold value set out for goods and services.
Section 85 does not apply to the award of a contract under a framework.
Duty to consider small and medium-sized enterprises (PA23, Section 86)
Before inviting tenders for a regulated below-threshold contract, a contracting authority must:
- Consider Barriers for SMEs: Recognise that small and medium-sized enterprises (SMEs) may encounter specific challenges in competing for the contract.
- Assess and Reduce Barriers: Evaluate whether these challenges can be reduced or eliminated to facilitate SME participation.
This does not apply to the award of a contract under a framework.
Notices (PA23, Section 87)
Before advertising elsewhere for tenders for a "notifiable below-threshold contract," a contracting authority must first publish a "below-threshold tender notice," unless the tenders are being invited from specific or pre-selected suppliers. After entering into a notifiable below-threshold contract, the authority must publish a contract details notice as soon as possible. The below-threshold tender notice and contract details notices must be published on the central digital platform.
A "notifiable below-threshold contract" refers to contracts with an estimated value of:
- not less than £12,000 (central government authorities); or
- not less than £30,000 (all other contracting authorities)
Time limits in the below-threshold tender notice must be reasonable and the same for all suppliers.
N.B. NHS Trusts and NHS Foundation Trusts are now subject to the same (lower) threshold as other central government authorities.
Other notices may be required for below threshold contacts in certain circumstances. The below diagram sets out the possible notices for below threshold contacts and includes a description of the voluntary notices which are optional, but do not have to be used.
Implied payment terms (PA23, Section 88)
Section 88 of the PA23 sets out the prompt payment provisions that apply to public contracts which are similar to those set out in the PCR2015.
