New rules for reserving low-value contracts for local suppliers and SMEs
The Cabinet Office has published a new Procurement Policy Note PPN 11/20 allowing sub-threshold contracts to be reserved for local suppliers, SMEs and social enterprises, taking effect on 1 January 2021.
The publication of PPN/11/20 coincides with the release of the Government's Procurement Green Paper setting out wide-ranging proposals to amend the public procurement rules following the UK's withdrawal from the European Union – Click here to read our overview of the Green Paper.
PPN 11/20 applies to all central government departments, their executive agencies and non-departmental public bodies in conducting procurements under the Public Contracts Regulations 2015, where the contract value is below the current financial thresholds for public contracts. For central government bodies, this will apply to contracts valued below £4,733,2532 ex VAT for works, or below £122,976 ex VAT for services and supplies.
Other contracting authorities (i.e. local authorities, housing associations and ALMOs) are "encouraged to apply the principles" outlined in PPN 11/20 but are not strictly bound to apply the new rules. Where other contracting authorities choose to apply PPN 11/20, they should work within the thresholds applicable to them, which are generally £4,733,252 for works and £189,330 for services and supplies.
Contracting authorities who are included within the scope of PPN 11/20 or who choose to apply it to their procurements may now apply the following options when procuring below-threshold contracts:
- Competitions may specify that only suppliers located in a particular geographical area or areas can bid for the contract. This could be UK-wide, by country (metropolitan or non-metropolitan) but should not be defined by nations of the UK (e.g. England, Scotland, Wales or Northern Ireland). A supplier's location should be described by reference to where the supplier is based or established and has substantive business operations, and not by location of its corporate ownership.
- Competitions may specify that only Small and Medium Enterprises (SMEs) or Voluntary Community and Social Enterprises (VCSEs) can bid for the contract.
These options should be considered on a case-by-case basis and can be exercises on their own or together. In applying this policy, contracting authorities must continue to comply with the legal requirements for below-threshold contracts in Part 8 of the Public Contracts Regulations, including any requirement to advertise the opportunity via Contracts Finder. It is also important that contracting authorities achieve value for money and use good commercial judgement, and comply with their own internal procurement guidance, governance rules and procedures. PPN 11/20 specifies that contracting authorities should not make direct awards when reserving procurements under this policy, to ensure good value for money.
Contracting authorities may still choose not to apply the policy and run below-threshold contracts on an open basis without any reservation for the suppliers' location or type.
PPN 11/20 should not be applied to works services or supplies procurements where goods are to be provided into Northern Ireland, as these contracts will continue to be subject to a cross-border interest.