Regulatory and compliance

Public and utilities procurement thresholds are set to rise in the new year

Published on 1st Dec 2021

The revised value thresholds that trigger the application of public and utilities procurement regulations will now include VAT

From 1 January 2022, new public and utilities procurement thresholds will come into force. These changes will be brought into effect by the Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (SI 2021/1221).

The regulations update certain financial thresholds in the Defence and Security Public Contracts Regulations 2011 (SI 2011/1848), Public Contracts Regulations 2015 (SI 2015/102) (PCR 2015), Concession Contracts Regulations 2016 (SI 2016/273) and the Utilities Contracts Regulations 2016 (SI 2016/274).  These amendments do not affect any procurements that commence before the regulations come into force.

One of the key changes is that the new thresholds now include VAT rather than being net of VAT.  The amendments to the thresholds are as follows:

Public Contract Regulations 2015

Contract type  Current threshold (net of VAT) New threshold (including VAT)
Public works contract £4,733,252 £5,336,937
Public supply contracts and public service contracts awarded by central government authorities, and their design contests. £122,976 £138,760
Public supply contracts and public service contracts awarded by sub-central contracting authorities, and their design contests. £189,330 £213,477

Utilities Contracts Regulations 2016 

Contract type  Current threshold (net of VAT) New threshold (including VAT)
Public works contract £4,733,252 £5,336,937
Public supply and services contracts and design contests £378,660 £426,955

Concession Contracts Regulations 2016

Contract type  Current threshold (net of VAT) New threshold (including VAT)
Concession contract £4,733,252 £5,336,937

Osborne Clarke comment

The threshold figures determine whether contracts are subject to the procurement regulations.  

This VAT change means that there has in real terms been a reduction in value of the threshold figures.  In order to meet their legal obligations, contracting authorities procurement teams will need to ensure they take account of VAT when calculating the value of their contracts from 1 January 2022.

The government expects to provide further guidance by publishing a Procurement Policy Note in due course.

 

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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