Local Government Reorganisation (LGR) is advancing across England, replacing two‑tier areas with new unitary councils and reshaping accountability, service delivery and commercial footprints.
For procurement teams, LGR lands just as the Procurement Act 2023 (PA23) is bedding in. Together, these major policy changes are redefining how local authorities procure and manage long‑term contracts.
Planning procurements under the new regime
PA23 places greater emphasis on forward visibility and transparency, including pipeline notices (for authorities expecting to spend more than £100m under relevant contracts), and structured publication of a range of other notices on the Central Digital Platform. This demands earlier and more disciplined pipeline shaping – particularly important where future structures, geographies and budgets are uncertain due to LGR.
The Cabinet Office guidance and sector briefings recommended treating PA23 implementation as an organisational change programme. Accordingly contracting authorities may well have recently reviewed their contract governance and commercial agendas. LGR demands more of the same, with the added requirement of aligning contract pipelines and coordinating procurement resources between authorities that will soon be combined under LGR. Practically, authorities would be wise to work with their neighbours to map likely procurement timelines (new service requirements, contract expiry and procurement launch dates) against LGR milestones such as proposal, transition and (likely) vesting day.
Long‑term contracts: re‑procure now or extend?
Where long-term contracts are approaching expiry, LGR will be a significant factor in procurement planning – raising a number of conflicting concerns. To what extent should a local authority commit to a 10-15 year contract when it may be merged with a neighbouring council within five years? Should such authorities bind the future unitary council over such a lengthy period? In any case, can councils achieve best value from the market when running a procurement amid such uncertainty? Can the alternative – extending existing contracts – ever provide best value when the incumbent provider is negotiating without competition?
Waste contracts exemplify the dilemma. The market has consolidated, with a few large operators carefully selecting the opportunities they bid for; the policy environment is changing, Simpler Recycling, Extended Producer Responsibility and the Emissions Trading Scheme (to name but a few); and LGR will require novations, harmonised service models and potential re-routing of collections and disposal arrangements. Running a major procurement in this environment risks thin competition and misaligned specifications; conversely, delaying can defer needed efficiencies and compliance upgrades.
In many areas, a time‑limited extension can be pragmatic to bridge to vesting day, allowing the new unitary to run a fully scoped and aligned competition once it is up and running. Contract modifications or extensions must fall within one of the familiar "safe harbours" set out in section 74 and Schedule 8 of PA23. Note that contracts entered into before 24 February 2025 are still governed by the previous procurement regime and so Regulation 72 of the Public Contracts Regulations 2015 will still apply.
Where a new procurement is conducted, authorities should consider enlarging the scope of the procured opportunity to allow the service requirements of neighbouring councils to be added to it once LGR has taken place. This can be achieved by unambiguously providing for the possible expansion in the contract and in the tender (or transparency) notice for the award of that contract (Paragraph 1 of Schedule 8 of PA23). The impact of LGR could also be accommodated as a permitted modification by stating it to be a "known risk" (Paragraph 5 of Schedule 8 of PA23). Note however that, amongst other parameters of the "known risk" safe harbour, such modifications cannot increase the value of the contract by more than 50%. Therefore it may not be available to expand service delivery to the full extend needed (for example where the contract for one district needs to grow to cover a unitary formed by merging three or four districts).
Alignment before LGR vesting dates
Where neighbouring districts deliver services in different ways, the new unitaries will inherit a patchwork of in-house and outsourced delivery models. Expiring contracts can therefore present an opportunity to rationalise delivery models across merging councils. Before extending or reprocuring, those councils should consider whether shared services models would allow service alignment prior to LGR taking effect – smoothing (or at least front-loading) the alignment process.
Options include in‑sourcing (if that aligns with the practice of neighbours), establishing or expanding Teckal companies to be jointly controlled by multiple merging districts, or designing shared services to jointly deliver council functions. PA23 retains exemptions that allow contracts to be awarded in such scenarios without running a procurement process. These exemptions include "vertical" arrangements (Teckal) and "horizontal" cooperation (Hamburg Waste). This can accelerate alignment, avoid fragmented procurements and support consistent standards across the new unitary authority.
More broadly, LGR policy papers highlight the strategic aim of simpler structures, improved accountability and savings to the public purse – outcomes that are echoed throughout PA23. Authorities should therefore assess delivery options together, considering commercial strategy, social value and market capacity to choose the route that best supports seamless vesting and long‑term resilience.
Key messages for procurement leads
While LGR undoubtedly brings considerable disruption for the local authorities involved, taking a proactive, cross-authority approach to procurement can alleviate some of the burdens. Aligning procurement plans around LGR milestones and publishing compliant pipelines and notices will be essential to achieving best value and maintaining market confidence.
Having considered all options for service delivery and contract management, authorities should where appropriate:
- Identify an appropriate safe harbour for contract modification to implement short, value‑tested extensions – synchronising end dates and enabling post‑vesting re‑procurement;
- Provide in their tender documents for the expansion of contracts across a future unitary authority's area; and/or
- Exploit exempted arrangements to align services via in‑sourcing, (horizontal) shared services or (vertical) joint Teckal companies.
With proper application, PA23 can be a catalyst for better outcomes, stronger markets and clearer accountability in the context of LGR – a welcome antidote to the disruption and administrative upheaval that many fear.
