What are the current EC procurement thresholds?
The thresholds from 1 January 2012 are available in this Cabinet Office Procurement Policy Note. They are generally updated once every two years.
In summary, the UK thresholds under the Public Contracts Regulations from 1 January 2012 are:
- Supply/Service contracts awarded by central government- £113,057
- Supply/Service contracts awarded by other contracting authorities - £173,934
- Works contracts - £4,348,350
Do the EC procurement thresholds include any applicable VAT?
No. The EC procurement thresholds relate to the value of the supply or service net of VAT.
We have been running a pilot. Can we extend the pilot contract to an over threshold value?
No. You should carry out a procurement under the Regulations to select the supplier. Additional care will need to be taken to ensure that the subsequent procurement process does not unfairly favour the supplier that delivered the pilot.
We do not know how much the contract value is – can we assume it will be under threshold?
You should use your best estimate of the contract value, taking into account all known factors at the time. If in doubt, you should advertise the requirement and follow an appropriate contract award procedure.
The contract includes a couple of optional elements. Should those be included in the threshold calculation?
Yes, if it is likely that they will be taken up during the contract term, as this is the estimated contract value over the entire contract term.
We are not listed as a "contracting authority" in the Regulations. Does this mean they do not apply?
Regulation 3 and Schedule 1 for the most part list specific public bodies to whom the Regulations will apply. However, Regulation 3(1)(w) is a catch-all provision which means that a potentially much wider field of public bodies than those expressly listed will be covered.
A body will be a contracting authority if (broadly speaking) it: (1) obtains more than 50 per cent of its funding from another contracting authority; or (2) is subject to management supervision by another contracting authority; or (3) has more than half of its board of directors/members appointed by another contracting authority. Note that this can in some cases include joint venture companies with public and private members.
The contract is a public services contract for "Part B Services". Do the Regulations apply?
Regulation 5(2) states that only certain sections of the Regulations apply to Part B service contracts, including:
- Part 1 which includes general elements around definitions, contracting authorities and thresholds. Most importantly Part 1 Regulation 4(3) which states that: "A contracting authority shall … (a) treat economic operators equally and in a non-discriminatory way; and (b) act in a transparent way." This means that the basic principles that underpin EU procurement law of equality of treatment, transparency and non discrimination apply to Part B services just as they apply to all other types of procurements
- Regulation 9 – the provisions on technical specification which are around ensuring the specifications are sufficiently generic so as not to discriminate against suppliers in other countries or SMEs and do not put in place unjustified barriers to competition
- Regulation 31 – requiring placing a contract award notice in the OJEU
- Part 8 which includes the provision of reports to the OGC and the form of publication of notices, confidentiality, means of communication and subcontracting
- Part 9 – applications to court – so the route for enforcing the Regulations applies equally to Part B Services as to all other goods, services and works.
As far as the Regulations are concerned, there is no requirement in relation to Part B services contracts to: (1) advertise the requirement in the OJEU (but a contract award notice in the OJEU must be placed); (2) follow one of the four contract award procedures; or (3) implement a standstill period (though recent case law suggests there may be a requirement to hold a voluntary standstill period where there is cross-border interest in the contract).
The contract is for some goods/Part A services and some Part B services. Is it a Part B services contract?
If the anticipated value of the Part B services is equal or greater to the anticipated total value of the other goods/services being procured under the contract, then the contract is a Part B services contract.
Are there any contracts to which the Regulations never apply, regardless of the value of the contract?
In principle, the Public Contracts Regulations 2006 do not apply to contracts that are under the relevant value threshold. However, while a formal procurement competition does not need to be run for such contracts, EU guidance states that the general principles of equality of treatment, non-discrimination and transparency require contracting authorities to consider the likely cross-border interest in the contract and ensure that it is opened up to an appropriate degree of advertising/competition accordingly, and to ensure that the selection process used is consistent with EU principles.
Certain specific types of goods and services are excluded from the Regulations (eg, arbitration or conciliation services) together with procurements where national security may be compromised if the Regulations are followed (eg, for secret defence equipment). Contracts for the acquisition of land, including existing buildings, are also excluded from the Regulations.
We are a contracting authority entering into a public contract with another contracting authority. Do the Regulations apply?
If the contract is over the EC procurement threshold value and it meets the definition of a public works, public supply, or public services contract, then yes, the Regulations apply. It makes no difference that the proposed supplier is another contracting authority. There is a limited exemption where the second entity is controlled by the first – see the next question below.
We are a contracting authority entering into a contract with a private company or special purpose vehicle in which we own shares or over which we have control. Do the Regulations apply?
Where the relationship between the contracting authority and the company or special purpose vehicle is particularly close, an exemption from the requirement to run a formal competition may be available, on the grounds that the proposed contract could not have any material effect on the relevant market. It is a very narrow exemption which only applies if:
- The contracting authority exercises over the company/SPV a control which is similar to that which it exercises over its own departments
- The company/SPV carries out the essential part of its activities with the contracting authority
Contracting authorities should obtain legal advice before attempting to rely on this exemption, which is very narrowly construed by the courts, and is subject to regularly changing case law.
If we divide up our requirement into several smaller contracts awarded at the same time and make sure each is "under threshold", will the Regulations still apply?
Yes. Regulation 8(11) requires the value of the contracts to be aggregated for threshold purposes where, taken together, they are effectively a “single requirement” for similar works/goods/services. Whether or not something is a "single requirement" must be looked at objectively, taking into account all the circumstances.
If we split up our requirement into several contracts awarded over a period of time (eg, one contract each year) and make sure each is "under threshold", will the Regulations still apply?
Yes. Regulation 8(13) states that, where a contracting authority has consecutive requirements over a period for several contracts with similar characteristics or for the same goods/services, the value of all these contracts must be aggregated for the purposes of the value thresholds.
If the contract value is under the EC procurement threshold, can we assume that there will be no procurement law issues to worry about?
Unfortunately not. EU guidance states that the general principles of equality of treatment, non-discrimination and transparency require contracting authorities to consider the likely cross-border interest in the contract and ensure that it is opened up to an appropriate degree of advertising/competition accordingly. EU principles must be followed in any selection process used where there is possible cross-border interest, including procurements that are under the EC procurement threshold. Many public sector bodies also have their own internal procurement rules/standing orders which must be followed for under threshold contracts.
Is there any way around running an OJEU procurement process – we simply do not have time?
The product or service you require may be available from a framework agreement, such as those operated by Buying Solutions. It will generally be much quicker to buy under a framework agreement than to run a separate procurement process. If there is no appropriate framework agreement and the requirement is genuinely urgent, then it may be possible to reduce some of the procurement timescales.