Thresholds are not just numbers: what the Procurement Act guidance really asks of buyers
Threshold tables look like the easiest part of the Procurement Act 2023 to get right. They are a list of numbers, published by the Cabinet Office, with a start and end date on them. Yet thresholds remain one of the most reliable sources of procurement error, because the failure is almost never in reading the table. It is in the value you carry to the table, the box you think your organisation sits in, and the year you last checked. The official guidance quietly flags all three.
The VAT trap is still the biggest one
Every threshold in the guidance is stated as including VAT, and the Act reinforces the point at section 123: a reference to an amount payable or paid under a contract includes a reference to any amount referable to VAT. That is a single sentence with real consequences, because most internal budget figures, business cases and finance system records are held net of VAT.
Run the arithmetic on a supply contract for a sub-central authority. A net estimate comfortably under £207,720 can cross the line once VAT is added, and the contract that a team planned to run as a light quotation exercise turns out to be a covered procurement with notice obligations attached. Nobody sets out to make that mistake. It happens because the number travelled from a finance system to a threshold table without anyone asking which basis it was on.
Who you are changes the answer
The tables split supply contracts by buyer type, and the gap is not trivial: £135,018 for a central government authority against £207,720 for a sub-central government authority, for the 2026 to 2027 window. Works contracts sit far higher at £5,193,000, and the light touch regime is higher again, with all other light touch contracts at £663,540 and light touch concessions at £5,372,609.
That structure rewards accurate classification and punishes assumption. Arm's length bodies, joint arrangements and shared services teams buying on behalf of several organisations are where this goes wrong most often, because the buying entity and the benefiting entity are not the same and nobody has written down which one drives the threshold. The remedy is unglamorous: settle the question once, in writing, and reference it from your procurement policy rather than re-litigating it project by project.
The same discipline applies to the works question. Whether a contract is a works contract is tied to the CPV codes in Schedule 3, not to whether the job feels like construction. A contract that involves building work but whose primary purpose is something else may not be a works contract at all, and the threshold swing between those two answers is measured in millions.
Thresholds expire, and your policy documents do not know it
The guidance explains that thresholds are aligned to the UK schedules to the WTO Government Procurement Agreement, are recalculated to reflect currency movements, and take effect from 1 January of every even year by statutory instrument. In other words, the number in your standing orders has a built in expiry date, and the current set runs to 31 December 2027.
In practice, out of date thresholds survive in the least visible places: a contract procedure rules appendix, a delegation matrix, a template business case, a training slide from a previous cycle. None of those documents shouts when it goes stale. Put a review date against every place a threshold figure appears, tie the review to the even year cycle, and cite the current PPN rather than transcribing the number, so there is a single authoritative source when it changes.
One last point that gets lost in the focus on getting over the line. Coming in under a Schedule 1 figure does not mean the Act stops applying. Certain contracts below those amounts fall within the below-threshold provisions in Part 6. The threshold question decides which regime you are in, not whether you are in one.
Make the check auditable, not instinctive
The strongest threshold practice is boring. Before a route is chosen, someone records four things: the estimated value and the basis it was calculated on, whether the authority is central or sub-central, which category the contract falls into, and whether any Schedule 2 exemption was considered and ruled out. That takes minutes at the start and answers most of the questions a challenge or an internal audit will raise later.
The alternative is what many teams do now, which is to reach a threshold conclusion in a conversation and never write it down. When the figures change every two years and the categories run from £135,018 to £5,372,609, an undocumented instinct is a thin defence. Treat the threshold decision as a recorded step in the process, with a named owner and a date, and the rest of the Act becomes far easier to comply with.
The takeaways
- All Schedule 1 thresholds are VAT inclusive, so never compare them against a net estimate.
- Central government supply contracts are £135,018 and sub-central are £207,720 for 2026 to 2027.
- Works, utility, defence and concession contracts sit at £5,193,000, with light touch higher again.
- Thresholds are recalculated and take effect from 1 January of every even year, so cite the PPN rather than hard coding figures.
- Below threshold is not out of scope: Part 6 still applies to certain smaller contracts.
Want the full breakdown?
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