If you understand how to value a contract under the old Public Contracts Regulations 2015 then (good news!) you understand how to value it under The Procurement Act 2023 as nothing has changed in that regard! However, if you don’t know or aren’t sure then read on!
Check the contract value
TPA2023 sets specific thresholds for contracts that require compliance. You need to know the whole life value of the contract. This means the total cost for the contract across the whole term, rather than the annual cost.
You must include any optional extensions to the ‘initial term’. So if you have a three year contact with two optional extensions of 12 months each, taking you up to a possible five year term, then you must include those extensions even if, ultimately, you don’t end up exercising them.
Remember that for catering contracts the whole value of the contract is not just what the school pays – it includes the value of all meals even those being paid for by the parents.
If you are a Trust another important point to consider is the fact that you are the Contracting Authority, not your individual schools. As a result you need to aggregate your spend across the Trust e.g. the value of all the outsourced cleaning contracts across all of your schools needs to be added together when calculating the contract value. You must not split your requirements into smaller orders to avoid the Regulations. As Trusts increase in size this often results in many more contracts being ‘caught’ up with the requirement to run a TPA2023 compliant process.
Consider the nature of the contract
The thresholds are different depending on whether the contract is for goods, services, works or Light Touch Regime contracts. The thresholds are updated every two years. The current thresholds (from 1 January 2024) are:
- Supplies and Services: £214,904 (including VAT)
- Works: £5,372,609 (including VAT)
- Light Touch Regime (e.g. catering): £663,640 (including VAT)
There was an important change when the thresholds were updated in January 2024 and that is around VAT. The thresholds now INCLUDE VAT so if what you’re procuring is VATable then you need to add that to the total when calculating the contract value.
Once you know the value of the contract to be tendered, you can compare this to the relevant threshold. If your value exceeds the threshold, then you will need to run a TPA2023 compliant tender.
Please bear in mind that if your contract value is very close to the threshold you may want to consider running a TPA2023 tender anyway. If it turns out that the bidders consider that the cost of running your contract is higher than the current value (e.g. due to an increase in labour costs, or increased food costs), then you may find yourselves in a sticky situation with your contract value suddenly exceeding the threshold. This is also important where you’re tendering something with multiple elements such as a payroll service, HR Administration system and an Applicant Tracking System. Whilst the individual elements may be below threshold if you award to one bidder you’re potentially over threshold so always worth considering this too.
Ask an expert
If you’re not sure, get some advice! It is important that you adhere to the Act, as you could otherwise be open to legal challenges from suppliers which could lead to a hefty legal bill (and a headache for you) for even the simplest of issues.
So, if you don’t think your situation is clear-cut, don’t hesitate to get in contact with us. We offer a free 30 minute consultation to all schools and Trusts to help answer your procurement queries – you can send us a message or book a call.
