Your financial regulations will set out matters such as when it is practicable to:
Only obtain one quotation (for very low value expenditure)
Obtain a minimum of three quotations (for low value expenditure)
When it is mandatory to seek a minimum of three formal tenders (for everything else)
What is classed as ‘very low value’, ‘low value’ and ‘everything else’?
Very low value expenditure
This is likely to be any one-off or repeat purchase where the total expected to be paid over the period of requirement is less than £10,000. Many schools, trusts and colleges set an even lower value cap of £5,000, so you will need to check your own financial regulations to confirm the upper limit of this cap. Your financial regulations will usually require you to obtain one quotation in writing.
Low value expenditure
There is usually a capped limit of £50,000-£60,000. Again, this will vary from institution to institution. Your financial regulations will usually require you to obtain a minimum of three written quotations, to demonstrate value for money.
Everything else
This is expenditure where your one-off need or ongoing annual requirement exceeds your institution’s low-value cap. This will usually be expressed in your financial regulations as value £x to threshold, and then ‘above threshold’. Your financial regulations will usually require you to obtain a minimum of three to five formal tenders, either through open tendering or by mini competition call off from an existing framework, such as those set up by CPC.
Why two value bands?
This is because the Procurement Act 2023 (the Procurement Act) and before it the Public Contracts Regulations 2015, defines when it is mandatory to comply with national legislation, and when it is appropriate only to follow your own institution’s financial regulations.
The national thresholds change on 1st January of every even dated year. The current thresholds are:
Supplies/Services: £207,720.00 (including VAT)
Light Touch Regime: £663,540.00 (including VAT)
Works: £5,193,000.00 (including VAT)
The current thresholds will be in place from 1st January 2026 (lasting until 31st December 2027).
What is the Light Touch Regime?
The Light Touch Regime is a narrow range of primarily healthcare, education and social services deemed not to be of interest to international trade. If you outsource the delivery of part of your teaching services (for example, to a specialist provider with technical knowledge that you cannot employ a teacher or lecturer to deliver), it would fall into the Light Touch Regime. This would give you a higher threshold as you will only need to comply with your financial regulations when tendering for those services. Similarly, annual contracts with examination boards for syllabus and student examinations fall into this category.
What if I need to award a contract that exceeds the national thresholds?
When you expect the value of your contract to exceed the thresholds, you need to follow the rules set down in the Procurement Act. These rules cover:
How you plan and define your requirements
How you procure the contracts to deliver those requirements
How you manage those contracts whilst they are live
If you are a budget holder within your school, trust or college, your financial regulations should tell you what to do when the anticipated value of the contract you want to award exceeds the relevant national threshold. If you are in doubt, you should liaise with your finance service (or if your institution has one, your procurement service). They will support you to make sure that you tender and award your contract requirement in accordance with the rules set out in the Procurement Act.
This might be achieved by sourcing through an existing public sector framework, where a lot of the hard work has already been done to put in place an agreement through which you can award your own contract, or it may mean advertising your tender on a national portal called the Find a Tender Service, seeking tenders from any supplier which sees your advert and wants to respond.
Of course, the first question you should ask yourself is “I have the budget, but do I need to spend it?”
What impacts these expenditure caps/thresholds?
VAT
The Government expects all public sector bodies to treat expenditure levels for the purposes of caps or thresholds as VAT-inclusive. Most educational establishments cannot recover VAT added on to invoices by suppliers. When you are calculating the estimated costs of your requirement, don’t forget to add-on 20% VAT if the estimates are from businesses who normally don’t quote VAT-inclusive prices until they are sending their invoices for payment.
Repetition of requirement
A genuine one-off purchase, such as a piece of equipment that will last for several years, has a one-time purchase value. If you need to buy supplies or services each year or on a regular basis, then the value of expenditure to compare against the caps or thresholds in your financial regulations, is the estimated total cost of expenditure over a four-year period. For example, if you have a budget of £10,000 per annum for stationery, and each year that is roughly what you end up spending, then your estimated contract value for the purpose of complying with your financial regulations is £40,000.
Is the education sector exempt from any of this?
Yes. There are three key exemptions from the Procurement Act and any regulations made under it, as far as education is concerned:
The Schools Exemption. Don’t be fooled by the title, it includes schools, multi-academy trusts and colleges of further education
The devolved nations exemptions for:
Wales
Northern Ireland
What about Scotland? The Scottish Parliament has not adopted the Procurement Act 2023 as its primary legislation governing public expenditure in Scotland. It has its own rules which are an adaptation of the 2015 Public Contracts Regulations. If your institution is based in Scotland, contact your CPC Regional Procurement Advisor for further information about this.
What do these exemptions mean?
The Schools Exemption essentially exempts schools, trusts and further education colleges from compliance with most of the provisions of the Procurement Act when its expenditure requirement falls below the Act’s thresholds. This means that the only rules you need to follow are your own financial regulations. You are still obliged to follow the principles of public procurement (equal treatment, proportionality and transparency) to achieve value for money.
The Wales/Northern Ireland Exemptions set out where you do not follow the Procurement Act if your school, trust or college is based in one of these two countries within the UK. Instead, you will be obliged to comply with slightly different rules that are imposed by the devolved administrations in these UK countries.
School / MAT members - the information on this page aligns with the following ISBL Professional Standards: 3.12