Procurement Reform (Scotland) Act 2014 thresholds: consultation analysis

2. Background to the consultation

When public bodies buy goods, works or services they must follow certain rules set out in law. Which rules apply to the award of a contract is determined by the value of that contract. The Act puts some rules in place which:

• require contracts to be advertised
• set out the standards which govern the tender process, and
• put other duties on public bodies

The Act only applies to contracts worth more than a specified amount. These values are known as ‘the Act’s thresholds’. The threshold from which contracts for goods and services are subject to the Act’s provisions is set at £50,000 while the threshold for works contracts is set at £2 million. The community benefit threshold is currently set at £4 million.

Since the Act was passed in 2014 the thresholds have not changed, however the impact of inflation in the intervening years has been significant. Had the thresholds been adjusted for inflation, they would now be 39.5% higher than they are^[1]. Inflation has had the effect of “lowering” the Act’s thresholds in real terms. The consultation therefore sought views on whether these thresholds, referred to as the goods, services and works thresholds, should be changed, and if so, by how much.

The Act also places a duty on public bodies to consider imposing community benefits in contracts worth more than the specified threshold amount, currently set at £4 million. A community benefit is a contractual requirement put in place by a public body relating to:

• training and recruitment
• the availability of sub-contracting opportunities, or
• which is otherwise intended to improve the economic, social or environmental wellbeing of the authority's area in a way additional to the main purpose of the contract in which the requirement is included

This means that buyers intending to carry out a regulated procurement exercise worth £4 million or more must, before carrying out the procurement, consider whether to include community benefit requirements as part of the contract. In addition to this the public body must, in the contract notice relating to the procurement, include:

a) a summary of the community benefit requirements it intends to include in the contract, or

b) where it does not intend to include any such requirements, a statement of its reasons for not including any requirements.

When community benefit requirements are included in a contract, the public body must include in the award notice a statement of the benefits it considers will be derived from those requirements.

For more information and data on the thresholds please read the consultation document. For more information on the Act, including community benefits, please see the Procurement Reform (Scotland) Act 2014: statutory guidance.