Tenders Direct Blog

Comment from the experts at Tenders Direct.

New Public Procurement thresholds 2016/2017

Posted by Duncan Dallas on December 29, 2015

The European Commission has confirmed the new financial thresholds to be applied to public procurement. The new thresholds will apply from 1st January 2016 and be in place until the end of 2017.

When procuring goods or services over the financial threshold a public authority must do so under the Public Contracts Regulations 2015 in England, Wales and Northern Ireland. Scotland has not yet transposed the new EU directive and so is still operating under the Public Contracts (Scotland) Regulation 2012. The new thresholds apply to all European Union member states irrespective of whether they have introduced the European legislation, which in any case they must do by April 2016.

The main point of interest from our readers’ perspectives is that buying organisations must advertise any requirement over the new thresholds in the Official Journal of the European Union (OJEU), rather than just advertising it nationally. 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.

The European Union is also a signatory to the World Trade Organisation’s (WTO) Government Procurement Agreement (GPA) and so compliance with the European procurement directives is designed to ensure compliance with the GPA. While European legislation sets out the financial thresholds in Euros, the GPA defines them in the form of Special Drawing Rights (SDRs), which is an asset established by the International Monetary Fund (IMF). The value of the SDR varies daily and is based on the relative values of a basket of currencies consisting of the euro, Japanese yen, pound sterling, and U.S. dollar.While this time around the thresholds have been increased in Euros, the equivalent sterling value has actually decreased because of the strength of sterling against the Euro.

For UK buyers this means that they now have to publish more of their requirements, rather than less, in the OJEU and if anything is going to be more of a burden on their resources as they must adhere to stricter and more bureaucratic rules.

For UK suppliers this means that from 2015 to 2016 more UK contracts but fewer European contracts will be subject to OJEU publication. This could well mean that the competition on our own national contracts from across the channel will be stiffer but anyone from the UK looking to bid on EU contracts will have less opportunity than before.

A corporate blog wouldn’t be a corporate blog without me telling you our solution to the problems. For buying organisation’s in England we provide the mytenders service, which allows buying organisations to manage their OJEU and non-OJEU procurement exercises. Our helpdesk are well versed in EU procurement law, with some working towards the LLM Public Procurement Policy and Law at Nottingham University and another two having already attained distinction in this qualification. For suppliers we provide the Tenders Direct service, providing all the OJEU notices and sourcing all the sub-OJEU notices in the UK to give you our market leading notice alert service.

And so on to the new thresholds. I have provided the previous thresholds for 2014-2015 in brackets for reference.

PUBLIC CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Central Government £106,047 (£111,676)€135,000 (€134,000) £4,104,394 (£4,322,012)€5,225,000 (€5,186,000) £589,148 (n/a)             €750,000 (n/a)
Other contracting authorities £164,176 (£172,514)€209,000 (€207,000) £4,104,394 (£4,322,012)€5,225,000 (€5,186,000) £589,148 (n/a)            €750,000 (n/a)
Small lots £62,842 (£66,672)      €84,000 (€80,000) £785,530 (£833,400)€1,000,000 (€1,000,000) n/a

 

Social and other specific services are subject to the new ‘light touch regime’ as described in a previous blog.

UTILITY CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Utility authorities £328,352 (£345,028)€418,000 (€414,000) £4,104,394 (£4,322,012)€5,225,000 (€5,186,000) £785,530 (n/a)             €1,000,000 (n/a)

 

DEFENCE AND SECURITY CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Defence and Security authorities £328,352 (£345,028)€418,000 (€414,000) £4,104,394 (£4,322,012)€5,225,000 (€5,186,000)  

n/a

 

As ever, please don’t hesitate to let us know what you think by commenting below.

38 Responses to “New Public Procurement thresholds 2016/2017”

  1. Kate said

    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

  2. Mark Hield said

    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

    • Duncan Dallas said

      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

  3. Ben Fawcett said

    Hi Duncan,

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

    Ben

    • Duncan Dallas said

      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

      • Ben Fawcett said

        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?

      • Duncan Dallas said

        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

  4. Fiona Parker said

    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

    • Duncan Dallas said

      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

  5. Dharmendra said

    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

    • Duncan Dallas said

      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

  6. akhilbakhda@gmail.com said

    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

    • Duncan Dallas said

      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

  7. Emma said

    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

    • Duncan Dallas said

      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

      • Emma said

        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

  8. Paul Mullins said

    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

  9. MW said

    “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.

  10. 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

    • 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.

      • This is extremely helpful, thank you.

      • 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.

      • John of Newsham said

        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.

      • 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.

      • 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.

  11. Syed said

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

  12. John Newsham said

    “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

  13. Billy said

    Great, thanks for the clarification Duncan,

    Regards

    Billy

  14. Billy said

    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

    • Duncan Dallas said

      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

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