Regulated below threshold contracts under the Procurement Act 2023: A how-to guide

The Procurement Act 2023 is now in force, but that will only have an impact on trusts when they start to run processes which are caught by it. At the moment, we’re seeing a number of queries from trusts on how to deal with below threshold contracts, and it seems that there’s some confusion about what notices are required and when, so we thought that it would be useful to provide you with a quick podcast on your obligations in this regard.

Thank you for joining me today. My name’s Helen Redfern, and I’m a senior solicitor in the procurement team at Hempsons LLP. From what I’m about to say, you will see that much will depend on your internal roles, the value of your contract and your intentions.

So, starting off, the first thing that you’ll need to know is what is a regulated below threshold contract? Well, a regulated below threshold contract is a contract for the supply for pecuniary interest of goods, services, or work to a contracting authority, a framework. A concession contract that has an estimated value of less than the threshold amount stated in schedule one of the Act for that particular type of contract and is not an exempted concession or utilities contract.

Today, we are going to look at the key points that you will need to consider if you are an English contracting authority when you award a regulated below threshold contract. We won’t be covering the procurements which are listed in Section 84 2 of the Act, where the below threshold rules in part six of the act don’t apply, and that includes, for example, procurements by schools. Also, if you are awarding a contract which has a mixture of different elements which are subject to different thresholds, or where at least one element is subject to a special regime such as a concession contract, light touch, or utilities contract, you will need to review the mixed procurement provisions in sections five and 10 of the Act and the relevant cabinet office guidance notes to check that your contract should not be treated as above threshold.

So, what options are available to you if you want to award a regulated below threshold contract? Well, you do have flexibility to design your procurement, and you could choose from a few different options. So, for example, you could make a direct award without any competition. You could invite potential suppliers to submit quotations, or you could decide to run a more formal competition between suppliers.

In each case, it’s advisable to consider which is the most appropriate route for your particular requirement, including, for example, what process do you need to follow to comply with your organisation’s internal policies and documents such as standing financial instructions and standing orders. What is appropriate for your particular requirement? Thinking about the complexity, the value, and other risks of the contract, and what approach is likely to result in value for money for your organisation? Looking at the particular process requirements under the Act for regulated below threshold contracts, we are going to pick on two of the most popular routes and look at those.

So, first, how do you make a direct award without competition? Well, if you are directly awarding regulated below threshold contract, and its estimated value is either not less than £12,000 including VAT, if you are an English central government authority, which includes NHS Trusts and NHS Foundation Trusts; or an estimated value which is not less than £30,000 including VAT, in the case of other English contracting authorities, then you will only be obliged to publish one notice, which is a contract details notice.

Your contract details notice must be published as soon as reasonably practicable after entering the contract. The Act doesn’t specify what the soon as reasonably practicable means, but the Cabinet Office guidance suggests that while this will be a judgment call for you, it will usually mean within 30 days for central government authorities, 120 days for below threshold light touch contracts. 90 days otherwise, of the contract being entered into.

The information to be included in that notice is listed in Regulation 36, the Procurement Regulations 2024, and you’ll see when you look at it that it is less than you’ll need to include for other types of contract details notice. If your contract’s estimated value is below £12,000 including VAT, or £30,000 including VAT, as appropriate, then there is no obligation on you to publish any notice at all.

So, what if you want to run a competition instead? If you are running a competition to award a regulated below threshold contract, you won’t be obliged to follow the process that you would for an above threshold contract under the Act, although you might wish to voluntarily adopt some of these processes where you think that that is appropriate. Instead, you’ll need to comply with the requirements which apply to regulated below threshold contracts.

Before inviting tenders, you must have regard to the fact that SMEs may face barriers in competing for a contract and consider where such barriers can be removed or reduced. If you are calling off from a framework, this requirement doesn’t apply. If you are inviting the submission of tenders, you must not restrict the submission of tenders by reference to an assessment to a supplier’s suitability to perform the contract, which might include, for example, by reference to a supplier’s legal and financial capacity and technical ability. This doesn’t prevent you from requesting information from suppliers as part of their tender and assessing suitability at award stage, it just prevents you from restricting who can submit a tender by reference to that. There is an exception to this rule for certain works contracts above the threshold set out in section 85 3 of the Acy and the other contract set out in section 85 5 of the Act, which include, for example, if you are calling off from a framework.

If the estimated value of your contract is not less than £12,000 pounds including VAT, in the case of English central government authorities, or not less than £30,000 pounds including VAT, in the case of other English contracting authorities, then you will need to publish at least one notice and possibly two notices. If you are advertising the opportunity, you must publish a below threshold tender notice on the central digital platform before you advertise the opportunity anywhere else.

The below threshold tender notice must include the information which is listed in Regulation 24 of the Procurement Regulations 2024, and you’ll see that it’s a lighter touch version of the tender notice. Any time limits that you include in your below threshold tender notice must be reasonable and the same for each supplier, and you should ensure that you provide suppliers with sufficient information in the notice and/or your tender documents to prepare their tender.

The requirement to publish a below threshold tender notice does not apply where the contracting authority is only advertising for the purpose of inviting tenders from a closed group of pre-selected suppliers, such as, for example, when you are calling off from framework, or from targeted individual suppliers, provided that you do not advertise the procurement in any other way.
So, that is your first notice. In terms of the second notice, as soon as reasonably practicable, after entering into your contract, you must publish a contract details notice in the same way that you needed to for a direct award. Now, this requirement will apply even if you weren’t required to publish the below threshold tender notice. It’s worth noting that if you’re planning to award certain regulated below threshold contracts for works by reference to a dynamic market, if you are permitted to do so, then the requirements will be slightly different.

So, now that we’ve looked at the process requirements, are there any requirements that will apply when you are managing your regulated below threshold contract after reward?
As a general rule, you will have flexibility to decide how you want to manage your regulated below threshold contract. However, Section 88 of the Act sets out a number of prompt payment provisions, which will be implied into every regulated below threshold contract, which is entered into by a contracting authority, and in addition, the relevant subcontracts, and these are similar to the prompt payment terms, which are implied into above threshold contracts.

Generally speaking, regulated below threshold contracts can be modified without restriction. However, it’s worth noting that if the value of the modification will take the value of the contract over the relevant threshold and Schedule One of the Act, then your contract will be a convertible contract and you may only modify it where the modification is permitted under Section 74 of the Act, and you’ll need to comply with the notice requirements in Section 75 of the Act.

So, summing up from what we’ve covered today, you’ll have seen that you’ve got greater flexibility on how you would like to award and manage your regulated below threshold contracts, subject of course, to your organisation’s requirements such as SFIs, the value of the contract in question, and how you are planning to run a process to award the contract. Different notices and requirements are going to apply depending on your specific circumstances.

If you have any queries about what we’ve talked about today or you’d like to discuss your specific circumstances, please don’t hesitate to get in touch with us.

Thank you for joining us today.