We’ve hyped up 2024 for many reasons. It’s not just another year; it’s a pivotal moment for public procurement in the UK. The year ahead is shaping up to bring some interesting changes. We thought we’d hit the ground running by exploring key trends and changes in the UK public procurement landscape.
Public Procurement Thresholds Updates
An important update that came into effect on 1st January 2024 is the increase in public procurement thresholds. Procurement thresholds determine the rules and procedures businesses must follow when competing for public sector contracts. The thresholds themselves refer to the maximum estimated value of a contract and are set to ensure a fair and transparent bidding process. When the threshold for a contract is exceeded, more rigorous procedures are triggered, often involving public advertising and competitive bidding. This is designed to promote fairness, prevent corruption, and ensure the best value for public money.
Understanding these thresholds as a supplier is essential. It will affect your strategy when bidding on government contracts and your chances of winning them. Those new to procurement can better understand the competitive landscape and compliance when they know the thresholds.
There has been a slight increase to most of the current thresholds, with the Light Touch Regime remaining unchanged.
The Public Contracts Regulations
| Contract Type | Threshold until 31 December 2023 (inclusive of VAT) | Threshold from 1 January 2024 (inclusive of VAT) |
|---|---|---|
| Works (including subsidised works contracts) | £5,336,937 | £5,372,609 |
| Supplies & Services - Central Government | £138,760 | £139,688 |
| Supplies & Services - all other contracting authorities | £213,477 | £214,904 |
| Subsidised services contracts | £213,477 | £214,904 |
| Light Touch Regime for services | £663,540 | £663,540 |
| Supplies and services - small lots | £70,778 | £70,778 |
| Works - small lots | £884,720 | £884,720 |
The Utilities Contracts Regulations 2016
| Contract Type | Threshold until 31 December 2023 (inclusive of VAT) | Threshold from 1 January 2024 (inclusive of VAT) |
|---|---|---|
| Supplies and services | £426,955 | £429,809 |
| Works contracts | £5,336,937 | £5,372,609 |
| Supplies and services - small lots | £70,778 | £70,778 |
| Works - small lots | £884,720 | £884,720 |
The Concession Contracts Regulations 2016
| Contract Type | Threshold until 31 December 2023 (inclusive of VAT) | Threshold from 1 January 2024 (inclusive of VAT) |
|---|---|---|
| Concession contracts | £5,336,937 | £5,372,609 |
The Defence and Security Public Contracts Regulations 2011
| Contract Type | Threshold until 31 December 2023 (inclusive of VAT) | Threshold from 1 January 2024 (inclusive of VAT) |
|---|---|---|
| Supplies and services | £426,955 | £429,809 |
| Works | £5,336,937 | £5,372,609 |
| Supplies and services - small lots | £70,778 | £70,778 |
| Works - small lots | £884,720 | £884,720 |
These revised thresholds take into account inflation over recent years. The adjustments aid in striking a balance between simplifying procurement processes for low-value contracts while maintaining transparency and competition for higher-value contracts. The change opens up more low-value contract opportunities for suppliers that bypass lengthy tendering processes. It also allows contracting authorities to directly award contracts below thresholds while ensuring value for money.
Post-Brexit Policy Changes
With the Brexit transition period behind us, a key area of focus is the divergence from EU procurement regulations. This includes potential shifts towards supporting domestic suppliers and tweaking contract rules to favour local businesses. The evolving landscape poses unique challenges but also opens doors for innovative approaches and strategic partnerships.
The Procurement Act
The New Public Sector Procurement Bill is set to go live in October 2024. It aims to simplify the procurement process, increase transparency, and facilitate SME participation. There will also be an emphasis on social value and policy goals related to sustainability, climate change, and social inclusion.
For a detailed analysis of the new Procurement Act, our MD, Ella Grant, wrote an insightful blog not long ago. She delves into its impact on suppliers, including the public debarment list and shift from MEAT to MAT. Take a read here.
Social Value and Sustainability
The UK has already put in place mechanisms to deliver economic, social and environmental outcomes via procurement. These include the Public Services (Social Value) Act 2012, UK Climate Change Act, Equality Act, Modern Slavery Act, and others.
The Public Services (Social Value) Act is reshaping procurement beyond cost-effectiveness. It emphasises the importance of social impact in tender evaluations, encouraging suppliers to contribute positively to society. This could mean creating more local jobs, supporting community projects, or ensuring ethical supply chains. An example of this shift is the increased social value weighting in bid evaluations to a minimum of 10% as part of the governance and approvals process for contract awards. Suppliers now need to think beyond the bottom line and consider their social footprint.
Green Procurement: A New Era of Sustainability
Gone are the days when environmental sustainability was just a trendy phrase. Today, it’s a central pillar in procurement decisions. In alignment with the UK’s net zero carbon emissions targets, procurement policies are now more stringent. Suppliers are expected to demonstrate significant green credentials, moving beyond mere compliance to integrating sustainable practices at their core.
For example, Crown Commercial Service has aligned its sustainable procurement approach with the Government’s 2050 net-zero target. They focus on integrating sustainability into every aspect of the supply chain, from sourcing to suppliers, materials, and workers. Key strategies include purchasing electricity from renewable sources, using energy-efficient technologies like LED lighting, transitioning to ultra-low emission or electric vehicles, and employing low-carbon construction materials.
The Local Government Association (LGA) has also provided a toolkit for sustainable procurement. It includes examples of how embedding sustainability into procurement can support organisational objectives and local and national priorities.
Innovative Technology in the Public Sector
The incorporation of technologies like AI and blockchain is revolutionising procurement processes by enhancing efficiency, transparency, and analytical capabilities. AI can automate and optimise procurement tasks, reducing time and cost while also improving accuracy. Blockchain ensures unmatched transparency and security, especially in contract management and supplier verification. The growth of electronic procurement systems is further facilitated by these technologies, leading to more streamlined, transparent, and effective procurement processes.
With this tech-driven evolution expected to continue, required skill sets will shift. Procurement professionals will need to be data literate and ready to adapt to digital transformations.
SME & Startup Opportunities
The UK government is actively working to increase SME participation in public procurement. In 2021, only about 21% of direct government public procurement spending was awarded to SMEs, indicating room for growth. The new Public Sector Procurement Bill includes provisions to increase SME participation, such as greater visibility of upcoming work, creating a single website for registration, and reducing unnecessary insurance costs before bidding.
New government plans aim to overhaul procurement rules, cutting red tape and making it easier for smaller businesses to win contracts. In a bid to foster inclusivity and innovation, there’s a shift towards breaking up large contracts into smaller lots. This is a game-changer, levelling the playing field and allowing smaller players to bid for and win contracts that were previously out of reach.
Globally, similar trends are evident. In 2022 the US government exceeded its small business contracting goal by awarding a record 26.5% of federal contract dollars to small businesses. While there’s no direct link between US and UK practices, we can be hopeful that this indicates a shift towards supporting and leveraging the potential of SMEs in public sector procurement.
Public procurement in 2024 stands at an exciting crossroads. The convergence of policy shifts, technological advancements, and societal values creates a dynamic environment. For suppliers, staying informed and adaptable is crucial. This year promises not just changes but opportunities for those ready to embrace them.
This year, many of the largest Crown Commercial Service frameworks will open their doors to suppliers again. We got everyone prepared with our White Paper, Unlock the Door to 2024. If you haven’t seen it yet, it’s not too late to learn about the opportunities coming up! Download here.
