The Cabinet Office has issued a new Procurement Policy Note (PPN) setting out principles for the procurement of “below threshold” contracts following Brexit. This explains how a contracting authority might limit a below threshold procurement to suppliers in specified geographical areas or certain types of suppliers. In this insight, we answer some of the most common questions around the new PPN.

When does the PPN apply?

PPN 11/20  and the related guidance set out options that contracting authorities should consider when procuring goods, services and works which are below the public procurement thresholds set out in Public Contracts Regulations 2015. Currently, The PPN applies to contracts below £189,330 (for goods and services) and £4,733,252 (for works).  It does not apply to above threshold procurements which remains subject to the Public Contracts Regulations 2015.

For registered providers of social housing and local authorities, the PPN is not a legal requirement, but they are encouraged to apply these principles and this would be considered best practice.

What does the PPN say?

The PPN says contracting authorities may consider “reserving” or limiting their procurement to suppliers in a particular geographic location or to specific types of supplier. The options here are:

1) Reserving the procurement to suppliers in the UK or to suppliers in a particular county

This means only allowing suppliers in a particular geographical location to bid for the contract. This can either be UK-wide or by reference to a particular county (which must be only one county).  

The PPN makes it clear that a procurement should not be limited to a particular nation of the UK (e.g. England, Scotland, Wales and Northern Ireland) but could be limited to suppliers in the UK only or suppliers in a single county.

The intention here is to support domestic supply chains or (where limiting the procurement to a particular county) to “tackle economic inequality and support local recruitment, training, skills and investment”.

2) Reserving the procurement for Small and Medium Sized Entities (SMEs) and Voluntary Community and Social Enterprises (VCSEs)

This means only allowing this type of supplier to bid for a contract in the procurement.

Contracting authorities can apply one of these options or both of them together. For example, you could say that a procurement is only open to SMEs/VCSEs in the UK.

What do I need to do?

Registered providers and local authorities should consider whether they want to reflect this PPN and the related guidance within their procurement policy for below threshold procurement.

If you do want to apply the principles in the PPN, this should be applied on a case by case basis when you are procuring a below threshold contract. There are a number of factors which you would need to look at when making a decision to reserve a procurement. Fundamentally, however, it will be important to show that value for money can be demonstrated with your chosen approach.

Where you do decide to limit or “reserve” the procurement in this way, the reasons for your decision should be recorded and approved internally. The guide includes a template for this where you are limiting the procurement by geography which may be helpful to use.

Your procurement documents should also make it clear that you intend to reserve the procurement and this will need to be included in your Contracts Finder notices. The guide includes useful definitions which will be helpful to use within your procurement documents.

Can I still run a procurement that is not reserved?

Yes, it is still possible to run a procurement for a below threshold contract that is open to everyone. It is not an obligation to reserve below threshold contracts to suppliers in particular geographic locations or to SMEs/VCSEs. The PPN is however encouraging consideration of “reserved” procurement.

A procurement that is open to everyone might in some cases be the most appropriate way to ensure value for money, for example where there is a lack of a competitive market in the UK only.

Can I still make direct awards?

The PPN says that direct awards should not be made under the policy. This is because it says that value for money will not be achieved in this way and that written quotes or tenders should be used.

The guide does, however, suggest that direct awards might still be made where this can be justified, such as where there is genuinely only one supplier or where the supplier has previously provided goods, services or works following an open competition.

For registered providers and local authorities, this approach is likely to be consistent with their internal procurement policies which will often require some level of comparison pricing and/or tender in order to ensure value for money. Where a direct award is to be made, there should be appropriate safeguards in place and a consideration of how this will demonstrate value for the money.

Are there any exceptions?

The PPN does not apply to procurements where there is a cross-border interest and goods are to be provided in Northern Ireland.

How Capsticks can help

At Capsticks we strive to ensure our clients are “one step ahead” in delivering their ambitions to ensure value for money and the best possible service. We offer an experienced and responsive team of specialist procurement lawyers who are on hand to review your procurement options and/or procurement compliance.

If you have any queries around what is discussed in this article, and the impact on your organisation, please contact Katrina Day or Lee Clarke to find out more about how Capsticks can help.