Public procurement: key facts & compliance considerations

Guide

Public procurement: key facts and compliance considerations

14 February 2023

Public procurement is the purchase of goods, works or services by public sector bodies.

Following our departure from the EU, our procurement rules have remained broadly the same, with limited changes made to the Public Contracts Regulations 2015 (PCR). While change is coming, for the moment this guide sets out the regime as it stands, following Brexit. The PCR establish a particular procurement process for legal frameworks for the award of public contracts, for works, goods or services which fall within the scope of the rules and exceed specified financial values. The intention of the PCR is to ensure that contracts are awarded fairly, transparently and without discrimination, and that all potential bidders are treated equally, i.e., that the principles of public procurement are complied with.

The Public Contracts Regulations 2015 (PCR) covers the following types of contracts which are tendered for and awarded by a contracting authority:

public supply contracts;
public works contract;
public service contracts;
framework agreements including call-off contracts; and
contracts awarded under dynamic purchasing systems,

which have an estimated value (based on the length of the contract including any extensions, and including VAT) in excess of the relevant thresholds (these are set out below).

The PCR also sets out a light touch regime which applies to contracts for the provision of certain social or other specific services, i.e., health or catering. This also provides for procedural rules which govern below threshold contracts which are explained below. There are certain exceptions to the general principles and the type of contract, and the circumstances of award should always be looked at when considering your obligations under the PCR.

The Public Contracts Regulations 2015 (PCR) applies to bodies that are ‘contracting authorities’. The definition of contracting authorities is deliberately wide and is intended to include those bodies that spend public money. Ordinarily this will include, for example, local authorities, bodies governed by public law and publicly funded education establishments such as further education colleges and universities.

The full force of the Public Contracts Regulations 2015 (PCR) will only apply when the estimated value of the contract (including VAT and any renewals or extensions) equals or exceeds the relevant threshold. Note that the inclusion of VAT in the value assessment is relatively new, and applies from 1 January 2022. Where a public service contract does not indicate a total price and is for a period longer than four years, or is of indefinite duration, the contract value is calculated based on a four-year term. The applicable thresholds are amended every two years. The current thresholds (applicable from 1 January 2024) are shown in the table below.

	Supplies	Services	Works
Entities listed specifically in Schedule 1 of the Regulations	£139,688	£139,688	£5,372,609
Other public sector contracting authorities	£214,904	£214,904	£5,372,609
Light touch regime for services	n/a	£663,540	n/a

Generally speaking, contracts that fall below the financial thresholds are governed by Part 8 of the Public Contracts Regulations 2015 (PCR) (Below-Threshold Procurements). The PCR does not require contracting authorities to advertise below threshold contracts, however if they choose to it must be published concurrently via Contracts Finder, and any contract award must be published on Contracts Finder. It should be noted that even though there is no requirement under the PCR to advertise, the contracting authority may be compelled to do so by its own standing orders, and this will then require an equivalent publication on Contracts Finder.

There is no requirement to follow a particular procurement process for below threshold procurements, but it should be noted that the use of a pre-qualification stage is not allowed (with some exceptions for works and light touch services). Government guidance issued should be followed.

Under the Public Contracts Regulations 2015 (PCR), certain service contracts are not subject to a full procurement process and a light touch regime is applicable.

These types of service contract include certain health and social services, education services, legal services and recreational or cultural services; the specific services are listed at Schedule 3 of the PCR.

The regime is only applicable to those services listed at Schedule 3 of which the contract value exceeds the threshold. Any contract below this amount should follow the rules applicable to below threshold contracts.

Under this light touch regime, the contracting authority must advertise a contract opportunity and contract award on Contracts Finder, but is not required to use a particular procurement procedure.

The contracting authority is, therefore, at liberty to set its own time limits, so long as they are reasonable and proportionate, and the contract award is in accordance with the general principles discussed above.

A framework agreement is an agreement with one or more suppliers which allows the contractor to ‘call off’ individual contracts for goods, works or services when they are required in line with the terms of the framework agreement. Under the framework agreement there is no actual commitment to buy. The Public Contracts Regulations 2015 (PCR) provides that where the framework agreement is properly tendered (as if it were a contract) there is no need to repeat this process for each call-off.

A number of framework agreements have been tendered by both local and national contracting authorities that may be utilised by other public bodies. When using such framework agreements established by other contracting authorities, public bodies must ensure that the framework agreements have been procured properly and are available for use by them.

The contracting authority must follow one of five award procedures provided for in the Public Contracts Regulations 2015 (PCR):

Procedure	Key features	Minimum time limits	Days
Open	All interested parties can submit a tender. No negotiation with bidders is permitted. Suitable where tenders will be easy to evaluate.	Minimum time for receipt of tenders from date Contract Notice sent.	35
Restricted	Interested parties can submit an expression of interest. Only those meeting the contracting authority’s pre-qualification or selection criteria will be invited to submit a tender. Ordinarily a minimum of five suppliers must be invited to tender. Negotiation with bidders is not permitted, just clarification and finalisation of terms. The contract must be awarded to the most economically advantageous tender.	Minimum time for receipt of requests to participate in negotiation (SQ response) from the date Contract Notice sent.	30
		Minimum time for receipt of initial tenders from the date the invitation to tender sent.	30
Competitive dialogue	Interested parties which meet the contracting authority’s selection criteria may be invited to negotiate the terms of the contract. Ordinarily a minimum of three suppliers must be invited to submit initial tenders. The contracting authority may award the contract based on initial tender (if the contract notice allows for this) or enter into negotiation with bidders on the basis of the initial tenders. This procedure is only available for particularly complex contracts.	Minimum time for receipt of requests to participate in dialogue or negotiation (SQ response) from the date Contract Notice sent.	30
		Minimum time for receipt of initial tenders from the date the invitation to tender sent.	30
Competitive procedure with negotiation	Interested parties which meet the contracting authority’s selection criteria may be invited to negotiate the terms of the contract Ordinarily a minimum of three suppliers must be invited to submit initial tenders. The contracting authority may award the contract based on initial tender (if the contract notice allows for this) or enter negotiation with bidders on the basis of the initial tenders This procedure is only available for particularly complex contracts	Minimum time for receipt of requests to participate in dialogue or negotiate from the date the contract notice sent	30
Innovation partnership	The establishment of a structured partnership with the aim of developing an innovative product, works or service which will be subsequently purchased by the contracting authority; so long as the supplier has complied with the agreed performance levels and costs There must be a need for a solution which is currently not available on the market for this procedure to be used A minimum number of three suppliers would ordinarily be invited to negotiate	Minimum time for receipt of tenders from the date the invitation to tender sent	No minimum. Timescale to be determined by the contracting authority.

It should be noted that the Public Contracts Regulations 2015 (PCR) prescribe minimum time limits for different parts of each of the procurement procedures outlined above, these are as set out in the above table. The minimum time limits may be reduced by certain numbers of days when making use of Prior Information Notices and electronic advertisement and acceptance of tenders and in urgent situations.

The remedies for failure to adhere to the requirements of the Public Contracts Regulations 2015 (PCR) available under the PCR are complicated but include:

an order to set aside a decision of a contracting authority in the course of a tender procedure;
the award of damages to an operator which has suffered loss or damages as a result of the breach;
ineffectiveness of contracts;
financial penalty imposed on the contracting authority.