New Public Procurement thresholds 2016/2017

57 Responses

1. HI Duncan,

   Is there a limit before I go for tender.
   I manage 6 schools and the CEO is looking at changing Catering contractors, Do I have to go through the OJEU process, what is the limit before I go for tender.

   Karl

2. Hello, if a local government advertises a tender which states that it is ‘sub threshold’, what is the sub threshold figure they are referring to? Thank you

   1. Thank you so much John. That’s cleared that one up.

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7. Please can you clarify
   Is a housing association reprocuring a responsive repairs contract come under works or services threshold??
   Contemplating splitting contracts into lots
   Thanks

   1. Hi Ceri,

      Usually repairs would fall under the services category/threshold but you might want to double check with the Crown Commercial Service regarding the exact nature of the repairs.

      Gemma

8. Hi,

   If an authority publishes a tender invitation with an expected value that falls below these thresholds (and therefore does not publish the invitation in the OJEU), are they allowed to consider proposals that come in over the threshold or must they disqualify them?

   If some proposals are under the threshold and some over, must they decide in favour of those under the threshold or is it down to their own evaluation criteria? What if all proposals have a cost that exceeds the threshold.

   Many thanks in advance for any advice you can give.

   Jackson S.

   1. Hi Jackson,

      As you are still in the tendering stage then best practice would generally dictate that you re-run the procurement adhering to the OJEU rules if you want to consider the above threshold contracts.

      In your procurement documentation did you provide suppliers with a pricing band or maximum contract value (e.g. in the contract notice or the ITT documents)? If so then you can reference this and disqualify the above threshold submissions. If you did not then again best practice would dictate that you should restart the procurement and either go for a full OJEU above threshold process or go for a below threshold process but stipulate a maximum contract value in the procurement documents.

      Gemma

      1. Thank you Gemma, that’s very helpful.

9. Hello, a question for the room if I may… what are the provisions (if any) in the PCR if an incumbent provider goes into liquidation etc leaving a public sector organisation without a main contractor? Would a V.E.A.T notice be used in this case to enable a new provider to be selected without competition to ensure continuity of service?
   thanks
   Ben

10. Hi, would i need to publish in OJEU for following position- social housing repairs contract-

    tender the contract with an initial term of four years, with the option to extend by a further three years. The estimated contract value for the initial term of four years is £300,000 beneath the OJEU threshold for works. The additional three years places the contract at £2.5 million over the OJEU threshold for works

    1. Hi Lewis

       Thanks for your query. The thresholds apply to the value of the contract over its term and including any extension options. You should therefore publish the requirement in the OJEU.

       Regards

       Duncan

11. Hi Duncan, very helpful article. I am hoping you could help me determine a few things;

    We act as a broker and would like to be able to procure on public services behalf’s , one way to do this would be to have a OJEU compliant framework in place or to be appointed as a broker on another companies framework. One of our services would be to tender on behalf of clients ,the value of these contracts would likely be over the threshold although our fee for doing this on the clients behalf would be under , Am I right in thinking we would need to have all the OJEU compliance (is their an article which summarizes these requirements) in place to put through these contracts ? We also offer a service which is results based and theoretically means our fee could be £1 or £1 million do these contracts still need to be covered bu OJEU when you cannot pre-determine the value of such an arrangement?

    I know we as a company are missing out on the larger public clients and this is an area we should be involved with , its just a case of understanding the complexities and I am hoping your Knowledge will be of help.

    What would it take to set up our own OJEU compliant framework?

    Thanks in advance,

    John

    1. Hi John,

       Maybe you would be able to email me direct at gemma.waring@proactis.com as I am a little confused on what information you are looking for but to broadly address a few of your points:

       – You talk about managing a framework but also tendering on behalf of clients. It in reality you would not be able to do both as there would be a conflict of interests.

       – You mentioned the contract values but talk about your fee for running the framework and the value of the contracts being called off the frameworks in public sector you would be expected to have defined the value of the contract before procuring so you would know if it is above or below threshold.

       — You would also usually have to be a public sector body or be commissioned by one to set up a framework – it would not be the case that you would just set a framework up and then advertise for them to use it.

       Once I know more about your sector and the service you want to provide I will be in a better position to advise. I hope that helps for now but please do get in touch,

       Gemma

12. Hi Duncan,

    I hope you can help me figure something out. In 2015, we (a government agency) established a multi-party framework agreement whose estimated total value was expected to be less than €207,000 – based on that we only advertised it nationally. Here’s my question: let’s say that by the time the contract is up, we end up spending more than €207,000 (the EU threshold in 2015) but less than €209,000 (current threshold) – are we going to be in breach of EU regulations?

    Thank you!

    Kate

    1. Hi Kate

       Thanks for your question. The regulations governing this procurement are those as at the time that you advertised it so the previous threshold would apply.
       Regards

       Duncan

       1. Thank you, Duncan.

13. Hi Duncan, would VAT be included in the consideration of whether a tender needed to be completed or not? i.e. £150k + VAT for a local authority. would this fall outside of OJEU limits

    1. Hi Mark

       Thanks for your query. The thresholds are net of VAT and so you would consider the value £150 when considering the thresholds.

       Regards

       Duncan

14. Hi Duncan,

    When do the public contracts thresholds run from? As in January to January?

    Ben

    1. Hi Ben

       The thresholds are set for two years. The current ones have been in place since 1.1.16 and updated values will be in place for 1.1.18.

       Regards

       Duncan

       1. What is the duration for any specific threshold/ (e.g if the threshold is 160k does this apply for a calender year or any other period?

       2. Hi Ben

          I see what you mean now. The thresholds apply to the value of the contract over its term including any extension options. For example, if you had a 3 year services contract with a 1 year extension option and the combined value of the contract over 4 years exceeded the threshold then you’d be required to publish in the OJEU.

          Regards

          Duncan

15. Hi Duncan,
    Could advise me further on the new OJEU thresholds for Insurance contracts and the changes for Scottish Suppliers since the updated European Legislation in April 2016.

    Many thanks
    Fiona

    1. Hi Fiona

       Thanks for your query.

       The thresholds which apply to insurance services are as per the “Supply, Services and Design Contracts” in the tables above, so £106,047 for Central Government, £164,176 for other contracting authorities and £328,352 for utilities and defence and security authorities.

       When calculating the value of a contract for insurance services the authority does so based on the premium payable and any other form of remuneration over the term of the contract, including any extension options.

       I’m not aware of any changes specific to insurance providers further to the implementation of the new regulations. Please let me know if there was something specific you were referring to. We’ve done a number of blogs on how the new regulations affect suppliers which can be found here:

       https://blog.tendersdirect.co.uk/category/procurement-law/

       I hope this helps.

       Regards

       Duncan

       1. Hello, Is it too late to ask questions on this topic? I could really do with some advise in terms of Estimating the value of a Broker Services Contract. I would be very grateful for your thoughts.

          Should Insurance Broker Services (IBS) commissions, (an amount paid by the insurers to the Broker, based on the total value of the premiums procured through Insurance contracts) be counted as well as the annual value paid directly by a public body to the Broker? I am referring to PCR15 section 6, 18 a) & b). Or, is a), only applicable to remunerations, received by Insurers?

          Where do Brokers fit in specifically if anywhere at all

          Many thanks

          Angela

       2. Hi Angela,

          This is a very niche area so I can’t say I am 100% sure and I am struggling to find reference to part 18 in section 6 of the PCR2015. However, my interpretation of regulation 6 in PCR 2015 would suggest you do need to add the total value as it states:

          (3) Where a contracting authority is comprised of separate operational units, account shall be taken of the total estimated value for all those units.

          I hope this is of help,

          Gemma

16. Is £106,047 the threshold for the MOD up to 31/12/17?

    I read that it was £113K.

    I’d be grateful for clarification.

    Many thanks

    1. Hi Dharmendra

       It should be £106,047 for supply/services/design contracts as MoD are classed as Central Government.

       If you’ve read contradictory information you may wish to contact the MoD contracts website for clarification:

       https://www.contracts.mod.uk/

       Regards

       Duncan

17. Hi Duncan

    I have a works contract that is of £8500000 value – 60% is funded privately the other 40 per cent is to be funded by Heritage Lottery Funds. Is the project OJEU notifiable?

    Many thanks

    Akhil

    1. Hi Akhil

       Thanks for your question and apologies for the delayed response.

       According to the regulations I don’t believe you have to advertise it in the OJEU if the funding is less than 50% public. However, with a lot of funding projects like this the funding body may ask the recipients to go through the OJEU process to ensure that they are getting value for money and running a fair competition. Some bodies may even make it a requirement of receiving the funds. I would therefore advise contacting the project manager at the Heritage Lottery Fund for clarification.

       I hope this helps.

       Regards

       Duncan

       1. Hi Duncan – Thank you for your help
          regards
          Akhil

18. Hi Duncan,

    Firstly, great article. It’s been very useful.

    I have a quick query. We are in a position where we need to do an upgrade to an existing system, and ideally would look to Direct Award / Single Tender Action Justification this process. However, the total cost of the upgrade plus an increased support and maintenance charge means that this work will cost over 50% of the original contract value (the actual upgrade is 91% of the contract value, and the support and maintenance charges are increasing by 66%) which contravenes Regulation 72.

    I’ve run the figures, and every scenario of total contract length + total time remaining on contract + any extension periods comes to over 50%. The supplier has also stated that this work represents a significant change to the original function / contract (although i would potentially argue that is not the case, but if it is, then again this would contravene Regulation 72).

    My question pertains to whether I should include any enhancements that have been paid for above and beyond what is covered in the Support and Maintenance contract (and any subsequent increase in Support and Maintenance costs following those enhancements) should be included in the total contract value – this could see me getting the totals to squeeze in under 50%!

    Thanks and regards

    Emma

    1. Hi Emma

       I’m glad you found the article useful and thanks for your interesting question. I’m not sure that the regulations make it explicit but the Crown Commercial Service published the below guidance in October of last year:

       https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/560262/Guidance_on_Amendments_to_Contracts_-_Oct_16.pdf

       Within the FAQs of the guidance document there is the below question and answer:

       “Q: Where more than one major change is made, does the 50% limit apply to each amendment or in aggregate?

       A: Where more than one major change is made, the 50% limit applies each time provided the change is not aimed at avoiding the procurement rules. Note that it remains at 50% of the value of the original contract, not 50% of any increased price resulting from an earlier variation.”

       It would appear from this guidance that you can calculate the percentage increase based on the value of the original contract before you made any enhancements to the support and maintenance costs. I would always caveat my advice by recommending that you seek clarity from your own legal advisors.

       Best regards

       Duncan

       1. Hi Duncan,
          Thanks for that – it makes sense to me. It’s always good to have a starter for ten, and to vaguely sound like I know what I’m talking about prior to consulting the experts!
          Thanks
          Emma

19. Hi Tim,

    we’re a semi autonomous non governmental department funded directly by the government….
    We have in the past tendered major capital works and contracts and have chosen to advertise tenders for contracts and works using the central government scale… ie this year we’ve tendered anything over teh £106,000 threshold

    As funds have shrunk, our contracts and works are also shrinking to between £50,000 and £100,000 so not meeting the threshold for central government but sometimes exceeding the small lot threshold.
    These contracts are usually complete jobs , for design, supply and associated works.

    should we be tendering theses contracts as if they were an individual small lot? Is there a legislative requiremetn to or is it at our discretion unless we hit the larger threshold figure?

    Regards,

    Paul

    1. Hi Paul,

       Apologies for the late response.

       Lots and especially small lots are often an area of much confusion. The small-lots provision is actually a rule for excluding a lot from the procurement procedures. I have written a blog entry to further clarify the rules on small lots, that you can read here:
       https://blog.tendersdirect.co.uk/2017/01/06/procurement-terminology-what-are-small-lots/

       To answer your question, if your contracts are part of a group of similar contracts, and their combined (aggregated) value exceed the normal EU thresholds they should all go out for tendering, even if they individually are smaller value contracts. You can read more about aggregation in this blog entry:
       https://blog.tendersdirect.co.uk/2015/11/23/the-2015-regulations-on-the-aggregation-of-contracts-and-the-use-of-lots/

       Regards,
       Line

20. “The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting authority” – Just a query on your advice here – Should concession type contracts (for instance for some education catering services) actually be included within OJEU/LTR scope where effectively the contractor will receive income from sources other than from the contracting Authority? In many instances the amount payable by the contracting Authority in this instance is effectively zero or certainly well below thresholds.I note that contract notices typically estimate the likely contract income regardless of source.

    1. Hi MW

       Thanks for your query.

       For the first time Concession Contracts are covered in EU Law under a separate directive and therefore separate regulations in the UK.

       The EU Directive is found here: http://eur-lex.europa.eu/legal-content/GA/TXT/?uri=celex:32014L0023
       The UK regulations here: http://www.legislation.gov.uk/uksi/2016/273/contents/made

       The UK Directive gives instruction on how the value of a concession contract should be calculated: http://www.legislation.gov.uk/uksi/2016/273/regulation/9/made

       The thresholds for publication in the OJEU refers to Article 8 (1) of the EU Directive which is:

       1. This Directive shall apply to concessions the value of which is equal to or greater than EUR 5 186 000.

       The Sterling equivalent is £4,104,394.

       I hope this answers your query but please get in touch if further clarity is required.

       Thanks

       Duncan

21. Dear Duncan,
    As a novice I’d like to know what the definition of a small lot is. I can’t find it in the government sites. Many thanks in advance.
    Judith

    1. Dear Judith,

       Small lots are described in Paragraphs 14 & 15 of Regulation 6 of the Public Contracts Regulations 2015, which concerns how lots are treated when calculating the estimated value of a procurement.

       The value of a procurement needs to be known in order to decide whether the Regulations apply and what specific procedure should be followed. If a contract has an overall value that exceeds the threshold above which the Regulations apply then even if it is divided up into lots then each part must be handled according to the advertising and procedural rules set out in the Regs. It may be that it isn’t practical or cost-effective to treat a small lot in the same way as a major part of the contract and so paragraphs 14 & 15 provide an exemption from the regulations for this lot.

       To be defined as a small lot for supplies/services contracts it must not exceed £62,842 (€84,000) and for a works contract it must not exceed £785,530 (€1 million). The aggregate value of small lots that can be exempted from following the regulations cannot exceed 20% of the overall value of the contract.

       For example and depending on their own internal rules, in tendering a construction contract with an overall value of £10 million, a buyer could directly award a lot for architectural services worth £785,000 to an architect, without advertising it, or running a competitive tender, etc.

       This provision is designed to give some flexibility of approach to the buyer. It’s difficult to know how often this exemption is used as if it is invoked then it is unlikely to be advertised and so we don’t get any visibility of its existence.

       1. This is extremely helpful, thank you.

       2. Dear Tim,

          Having said your reply was extremely helpful I find I’m still in need of advice please. To stop beating about the bush, the problem is this: a local authority with the usual hard-pressed planning department and no master-plan launched a design competition for a large development site. They offered a small payment of £15,000 to each short-listed firm. They chose five firms (three of whom in fact dropped out). The total cost therefore could never have amounted to more than £75,000. In fact the two remaining firms put in far more than £15,000 worth of work, as usually happens, and came up with pretty detailed schemes, but in now way are they schemes ready to go out to tender for construction. My question is, was it necessary to go through the EU process for £75,000 (in fact £30,000)? And if it wasn’t, what is the status of the two schemes, neither of which is remotely popular although one has been selected? The final scheme is likely to cost £60+m.

          You see why I was wondering if this competition was a small lot.

          To make matters more complicated – and I don’t know if this is a legal issue – the winning scheme was chosen by a weighted scoring system, whereby a jury (under a confidentiality agreement) awarded points up to 60% of the final score for architectural quality and suitability, and the council’s officers (under no confidentiality constraints) awarded up to 40% for financial viability. It’s now become clear that the chosen firm scored lower on architectural quality – and it was after all an architectural competition – than the losing one, but higher on the finances.

          Is it the case that, if as I believe there was no need to go through the procurement process in the first place for such a small job, then the terms of the resultant competition need not be binding?

          Aaagh! You see why I need advice. And no, I don’t represent the losing firm of architects, but a significant volume of public opinion. Thank you again.

       3. This depends upon the nature of the original call to competition. If it was clear that the £75K was a first stage and that the later stages in what sounds like a competitive dialogue process would lead to the acceptance of the design then it could be ok. in which case the competition must have included a design and build element.

          There are other possibilities, they may using an existing framework either for the design stage or the construction stage or indeed both. You need to look at the original call to completion in detail or find out how they are putting it through an OJEU process.

          As for the weighted scoring approach this is normal, they have clearly weighted cost so significantly that it tripped the total score to favour the cheaper produce. It is not the best way to do it but I fear it may be legitimate, if it is a local authority I would be surprised if they have not followed the spirit of the OJEU. They will before signing the contract have to have a 10 day standstill period, in which case you could carry out a judicial review. Or if that period has passed they may have other things wrong that they could take forward. There is a recent example where local people challenged and had the contract overturned in the courts, but in that instance the plans were substantially changed after the contract was completed, which is clearly not the case here.

       4. I suspect that the design phase was run under the procedure known as a Design Contest (http://bit.ly/PCR-2015-Regulation-78).

          The threshold for deciding whether this should be advertised in the Official Journal depends on the value of any prizes, or the value of a contract that might be awarded to the winner. In a design contest, the winner will quite often be awarded a contract to complete a more detailed design which could then be used as the basis of the tender for construction.

          If the overall value of this project is ~£60 million then the design contract awarded to the winner of the contest will almost certainly be well over the threshold for a public service contract. If my assumption is correct then the answer to your first question is yes, it was necessary to go through the EU process for this contract.

          The criteria for selecting the winning design should be advertised in advance of the competition. It is perfectly sensible to include an element of financial viability in the evaluation, otherwise the result could well be a wonderful design that the authority cannot afford to build, or at least one that is much more expensive than another design that fulfils the specification.

          Reading between the lines I assume that local public opinion does not approve of the winning design? I am afraid that on the basis of the limited information you have provided, the procurement exercise seems to have been conducted properly. Indeed the contest for the design was advertised widely and so any interested firm could have entered the contest. You may believe that cost should have been allocated a lower percentage of the overall marks than the 40% allocated by the council, but this percentage would/should have been advertised in advance and it is up to the council to decide the relative weighting of the criteria.

       5. Dear Tim,

          Thank you again, even though you’ve given a reply I’m not happy to have. Clearly the small payment for the competition entries is separate from the much larger sum for the final development, and it is that final cost that means the OJEU process has to be followed, and seems to have been followed correctly.

          You’re right that local public opinion – much of it very highly qualified and relevant – does not approve of the winning design, which is hugely oversized and unsympathetic to the setting. I’d be very happy to provide more information but thought it was better not to be too public. I don’t think anyone was significantly unhappy at the outset that 40% of the marks should be allocated to the cost, but – in what was a design competition – to find that the winning scheme was only awarded less than half the maximum 60% for design by the partly professional jury, and in fact less than the losing scheme (which was also awarded less than half the maximum). So all in all an unhappy experience.

          But thank you for your time and help.

22. Is fitting a new boiler classed as WORKS or does it fall under supply contract?

    1. Hi Syed

       Thanks for your query. The Public Contracts Regulations 2015 list all activities which constitute works contracts in schedule 2:

       http://www.legislation.gov.uk/uksi/2015/102/schedule/2/made

       These are specified by CPV code and all in the table begin with the digits 45. As the Boiler Installation CPV code is 42160000 then this is not classed as a works contract.

       Regards

       Duncan

       1. This is brilliant. Thank you for confirmation.

23. “For UK suppliers this means that from 2015 to 2016 more UK contracts but less European contracts will be subject ”

    I think you mean “fewer”.

    John of Newsham

    1. You’re quite right John!

       Regards

       Duncan

24. Great, thanks for the clarification Duncan,

    Regards

    Billy

25. Hi Duncan,

    I have a small query – you state that when valuing the requirement, this does not include any extension options. I always thought that you were to include possible extensions.

    Guidance from the Scottish Government (see “valuing the requirement” from https://www.procurementjourney.scot/eu-guidance) states that you should include possible extensions, so I’m wondering if there is a difference in the Scottish regulations, to those for the rest of the UK?

    Regards

    Billy

    1. Hi Billy

       Thanks for your query. Having looked into the guidance from the Scottish Government and the EU and UK regulations I can confirm that options should be included in the estimation of contract value and not excluded as I originally stated.

       The UK regulations (http://www.legislation.gov.uk/uksi/2015/102/regulation/6/made) state:

       “General rules

       6.—(1) The calculation of the estimated value of a procurement shall be based on the total amount payable, net of VAT, as estimated by the contracting authority, including any form of option and any renewals of the contracts as explicitly set out in the procurement documents.”

       I have amended my original post to correct this error.

       Regards

       Duncan