On 29 October 2021, the Government released The Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (“the Regulations”).

When they come into force on 1 January 2022, the Regulations will update the financial thresholds in the Public Contracts Regulations 2015 (“PCR”), the Concession Contracts Regulations 2016 (“CCR”) and the Utilities Contracts Regulations 2016 (“UCR”).

The thresholds have been reviewed and updated to ensure they continue to correspond with the World Trade Organisation’s Agreement on Government Procurement. A key change applicable from 1 January 2022 is that the relevant thresholds are now inclusive of VAT. This also includes the thresholds under the Light Touch Regime, although the baseline threshold for these services has not changed from the 2020/21 figure.

Procurement processes commenced before 1 January 2022 will not be affected.

The New Thresholds

The financial thresholds under the PCR, UCR and CCR have been amended as follows:

Practical Impact

Contracting authorities will now need to include VAT in their estimated contract values and, where applicable, factor this into any procurement activities from 1 January 2022. Standing Orders/ Contract Procedure Rules may also need to be updated. The net effect of these new changes, given the real terms reduction in the thresholds, is that more contracts will fall within the statutory regime. This underlines the need for a full costing exercise to be undertaken at the start of every procurement, to ensure that the advertisement and procurement documents build sufficient headroom to allow for future requirements and changes in scope.