Procurement thresholds changing from January 2022: what do charities need to know?

Charities subject to the public procurement rules, as well as those that supply services to public sector bodies, should be aware of the new procurement threshold values which will apply to public services contracts advertised on and after 1 January 2022.

Which charities might be subject to the public procurement rules?

In the UK, the Public Contracts Regulations 2015 (“PCR 2015”) set out the rules to be followed by contracting authorities when conducting tenders. These rules apply to “contracting authorities”, which are usually public sector bodies such as local authorities and central government departments (including, since August 2021, NHS Foundation Trusts).

A charity, however, can also fall within the wide definition of “contracting authorities”, in certain circumstances. Charities that receive substantial funding (that is, more than 50 per cent of their funding) from government, local authorities or NHS Trusts, or have more than half of their trustee board appointed by such bodies, are most likely to find themselves subject to the procurement rules.

If a charity is a “contracting authority” for these purposes, and it is proposing to enter into a contract for the supply of goods or services or the building of works which is above a stated value threshold, then it must comply with the public procurement rules, including running a transparent procurement process in accordance with one of the procedures set out in the PCR 2015.

What is changing from January 2022?

Now the UK has left the EU, the revision is implemented not by way of a communication from the European Commission, but rather by means of a UK statute, and the various sets of procurement regulations will be amended with effect from 1 January by the Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (SI 2021/1221).

Although in most cases the thresholds themselves will increase, a key change is that the thresholds stated will operate as inclusive of VAT, as opposed to exclusive of VAT as is currently the case. 

This will effectively revise thresholds downwards for those contracts to which VAT is applicable. This will mean a new approach for procurement teams when calculating contract value, and remembering to take account of any VAT payable when assessing whether the appropriate threshold is reached.

New thresholds

Public Contracts Regulations 2015

The threshold for central government authorities (including since August 2021 NHS Foundation Trusts) procuring services or goods will rise from £122,976 to £138,760. For sub-central authorities, that threshold will rise from £189,330 to £213,477.

The threshold for works contracts for all authorities will rise from £4,733,252 to £5,336,937, while the threshold for all authorities procuring contracts subject to the “light touch regime” remains at £663,540.

Concession Contracts Regulations 2016

For concession contracts, the threshold for all authorities will increase from £4,733,252 to £5,336,937.

Utilities Contracts Regulations 2016

The threshold for goods and services contracts will increase from £378,660 to £426,955, with that for works increasing from £4,733,252 to £5,336,937. The threshold for “light touch regime” services remains at £884,720.

For more on the latest developments in procurement, head over to our Procurement Portal.