Public procurement - updates to thresholds derived from the GPA: SPPN 4/2025

Purpose

This policy note provides notice of changes to financial thresholds contained in the Public Contracts (Scotland) Regulations 2015, the Utilities Contracts (Scotland) Regulations 2016 and the Concession Contracts (Scotland) Regulations 2016.

Key points

• threshold values will be updated and are relevant to procurement exercises which commence on, or after, 1 January 2026
• no changes have been made to the treatment of VAT since the publication of SPPN 8/2021
• updates to these thresholds should not be confused with the current work to review the thresholds in the Procurement Reform (Scotland) Act 2014 (the Act)

Background

Scottish Ministers must revise the threshold values contained in the procurement regulations every two years to ensure that they remain aligned to thresholds set out in the World Trade Organisation’s Agreement on Government Procurement (GPA).

Under the rules of the GPA, the procurement thresholds must include VAT.

A separate project is currently underway to review the financial thresholds contained in the Procurement Reform (Scotland) Act 2014. Those thresholds are not derived from the GPA. More information on this work, including a public consultation, is available on Citizen Space and via the consultation document.

Treatment of VAT

Whenever VAT may be payable under a contract, purchasers must ensure that an allowance for VAT is included in the calculation of the estimated value of the contract, for the purposes of determining whether the contract equals or exceeds the new threshold values.

Unless purchasers are able to demonstrate that a lower (or no) rate of VAT applies to a contract, a suggested method of calculating the estimated value of a contract is to add the standard rate of VAT (currently 20%) to the net contract estimate. As this is the highest rate of VAT which is chargeable in the UK, purchasers will avoid underestimating the contract’s value if this is used.

If the contract’s subject matter is exempt from VAT or zero rated VAT, then purchasers do not need to include VAT when calculating the estimated value of the contract.

If VAT is initially payable but later recoverable it must be included in the calculation of the estimated value of the contract.

Including VAT when calculating the estimated value of a contract only applies when estimating the value of a contract to determine whether it equals, or exceeds, the new threshold values. This in turn determines which set of regulations apply; for example, whether the contract opportunity notice and award notice will be published on the UK-wide Find a Tender Service website.

When filling out the estimated contract value in a contract opportunity notice or in a contract award notice on Public Contracts Scotland (PCS), purchasers should continue to input the value as a figure excluding VAT.

Procurement Reform (Scotland) Act 2014

The threshold values in the 2014 Act are not revised every two years and have not changed, remaining £50,000 for goods and services, and £2 million for works contracts. Likewise, the method for calculating the estimated contract value of procurement which falls under the Act has not changed and remains exclusive of VAT.

Please note that the thresholds within the Act are currently under review. More information on this work, including a public consultation, is available on Citizen Space and via the consultation document.

New threshold values

Updated threshold values from 1 January 2026 are detailed below:

The Public Contracts (Scotland) Regulations 2015

Supplies and services (except subsidised services contracts)

Bodies listed in Schedule 1

New threshold £135,018
Indicative value excluding 20% VAT £112,515

All other bodies

New threshold £207,720
Indicative value excluding 20% VAT £173,100

Works

All bodies new threshold £5,193,000  
Indicative value excluding 20% VAT £4,327,500  

Light touch regime for services (unchanged)

All bodies threshold £663,540
Indicative value excluding 20% VAT £552,950

Small lots – supplies and services (unchanged)

Supplies and services threshold £70,778
Indicative value excluding 20% VAT £58,982

Small lots – works (unchanged)

Threshold £884,720
Indicative value excluding 20% VAT £737,267

The Utilities Contracts (Scotland) Regulations 2016

Supplies and services

All sectors new threshold £415,440
Indicative value excluding 20% VAT £346,200

Works

All sectors new threshold £5,193,000
Indicative value excluding 20% VAT £4,327,500

Small lots – supplies and services (unchanged)

Supplies and services threshold £70,778
Indicative value excluding 20% VAT £58,982

Small lots – works (unchanged)

Threshold £884,720
Indicative value excluding 20% VAT £737,267

The Concession Contracts (Scotland) Regulations 2016

Concession contracts new threshold £5,193,000
Indicative value excluding 20% VAT £4,327,500

The Procurement Reform (Scotland) Act 2014 (unchanged)

Public contract (other than a public works contract) threshold £50,000 (ex VAT)
Public works contract new threshold £2,000,000 (ex VAT)

Action required

For procurement processes which commence on or after 1 January 2026 contracting authorities must:

• apply the revised thresholds laid out above
• consider VAT when calculating the estimated value of a procurement for the purpose of determining whether that contract meets or exceeds the new threshold values

Public bodies are reminded that:

• when calculating the total value of the contract, all lots and contractual options should be included in that calculation

• when completing relevant forms on PCS which require an estimated contract value to be quoted, you must continue to exclude VAT from the value
• continue to exclude VAT when calculating the estimated value of a contract for procurements which fall under the Procurement Reform (Scotland) Act 2014

Further guidance on how to calculate the estimated value of the contract can be found on the Procurement Journey.

Dissemination

Please bring this SPPN to the attention of all relevant staff, including those in agencies, non-departmental public bodies and other sponsored public bodies within your area of responsibility.