Procurement thresholds under the Procurement Act 2023: the official guidance, explained

The key facts

• The majority of the provisions in the Procurement Act 2023 only apply to a public contract, which requires the estimated value to meet the threshold amounts set out in Schedule 1 and the contract not to be exempted.
• All threshold amounts in the guidance are stated as including VAT, and section 123 confirms that a reference to an amount payable or paid under a contract includes any amount referable to VAT.
• Schedule 1 sets thresholds in three groups: amounts aligned to international agreements, amounts for defence and security contracts, and amounts for light touch contracts.
• For 1 January 2026 to 31 December 2027 the works contract threshold, the utility works threshold and the concession works and services threshold are each £5,193,000 including VAT.
• For the same period, supply contracts are £135,018 including VAT for a central government authority and £207,720 including VAT for a sub-central government authority.
• Utility contracts that are not works, defence or light touch contracts sit at £415,440 including VAT, as do defence and security goods and services contracts.
• Light touch thresholds are higher: £884,720 including VAT for light touch utilities contracts, £663,540 including VAT for all other light touch contracts, and £5,372,609 including VAT for light touch concession contracts.
• Thresholds are tied to the UK schedules to the WTO Government Procurement Agreement, are revised to reflect currency movements and take effect from 1 January of every even year, updated by statutory instrument.
• Certain contracts below the Schedule 1 amounts are still caught by the below-threshold provisions in Part 6 of the Act.

What this guidance is and who it applies to

The thresholds guidance is one of the technical guidance documents issued to support the Procurement Act 2023, and it sits in the Define phase of the guidance suite. Its job is narrow but decisive: it tells contracting authorities the amounts at which a contract becomes a public contract for the purposes of the Act, and therefore the point at which the bulk of the regime bites.

The guidance is written for anyone in a contracting authority who has to decide how a procurement will be run before any notice is published. That includes central government departments, sub-central authorities such as councils, and authorities buying in the utilities, defence and security fields, each of which has its own line in the tables. Suppliers benefit too, because the same figures determine whether a contract must be advertised and competed under the Act.

It is guidance, not law. The operative rules live in the Act itself, principally the definition of a public contract in section 3, the threshold amounts in Schedule 1, the exemptions in Schedule 2, the CPV codes that define works in Schedule 3, the relevant trade agreements in Schedule 9 and the interpretation provisions in section 123. The guidance points readers to companion documents on covered procurement and exempted contracts, and to PPN 023 on the 2026 threshold amounts.

The threshold amounts for 2026 and 2027

The guidance sets out three tables of threshold amounts, all expressed as including VAT, covering the period 1 January 2026 to 31 December 2027. The first group is aligned to the UK's international agreements. Within it, a utility works contract, a works contract, and a concession contract for works and services all carry a threshold of £5,193,000. A utility contract that is not a works contract, a defence contract or a light touch contract sits at £415,440. Supply contracts are split by the type of buyer: £135,018 for a supply contract awarded by a central government authority and £207,720 for a supply contract awarded by a sub-central government authority.

The second group covers defence and security. A defence or security works contract is £5,193,000, a defence or security concession contract is £5,193,000, and a defence or security contract for goods or services is £415,440. The figures mirror the mainstream amounts, so the practical work in this area is classification rather than arithmetic.

The third group covers light touch contracts, where the thresholds are set considerably higher to reflect the nature of the services involved. A light touch utilities contract is £884,720, all other light touch contracts are £663,540, and a light touch concession contract is £5,372,609. Every one of these figures is stated including VAT, which is the single most common source of error when teams compare an estimate against the tables.

Why the numbers move and where they come from

The thresholds are not a domestic policy choice made in isolation. The UK has obligations under trade agreements to provide market access to suppliers from partner states, and the guidance explains that the UK's thresholds in its relevant trade agreements either align with or are higher than the thresholds in the UK schedules to the WTO Government Procurement Agreement. The relevant trade agreements themselves are listed in Schedule 9 of the Act.

Because the underlying international values are expressed in a different currency, the sterling amounts have to be recalculated periodically to reflect currency movements. The guidance confirms that the revised threshold then takes effect from 1 January of every even year, and that the change is made by statutory instrument. That is why the current tables are labelled for a fixed window running to 31 December 2027, and why any figure quoted in an internal policy document has a shelf life.

The consequence for practice is simple. Thresholds should never be hard coded into templates, standing orders or delegation schemes without a review date attached. The next revision is already predictable in timing even if the amounts are not, and PPN 023 on the 2026 threshold amounts is the reference point for the current set.

Practical application

A threshold check is only as good as the value it is applied to. The guidance operates on the estimated value of the contract, and the estimate has to be built on the correct basis before any comparison with Schedule 1 is meaningful. Where a proposed contract combines different types of provision, or where an authority is unsure whether the arrangement is caught at all, the companion guidance on covered procurement and on exempted contracts should be worked through first, since Schedule 2 can take a contract out of scope entirely.

Three classification questions do most of the work. Is the buyer a central government authority or a sub-central government authority, because that alone moves a supply contract threshold from £135,018 to £207,720. Is the primary purpose of the contract the carrying out of works, which the Act ties to the CPV codes in Schedule 3 and which lifts the threshold to £5,193,000. And is the contract a light touch, utility, defence or security contract, each of which has its own line. Record the answer to each question and the reasoning behind it, because that record is what an auditor or a challenger will ask for.

Finally, do not treat a below-threshold conclusion as the end of the analysis. The guidance is explicit that certain contracts less than the threshold amounts in Schedule 1 are subject to the below-threshold provisions in Part 6 of the Act. Falling under a Schedule 1 figure changes which obligations apply; it does not always remove them.

How eSourcing Data helps

eSourcing Data gives buying teams one place to record the decisions this guidance turns on. The estimated value, the VAT inclusive basis on which it was calculated, the classification of the authority as central or sub-central, and the judgement on whether a contract is works, light touch, utility or defence can all be captured against the project at the point they are made, so the threshold conclusion is evidenced rather than assumed.

Because the threshold figures change on a fixed two year cycle, the platform's configuration and reporting help authorities avoid the stale number problem. Current amounts can be applied consistently across projects and teams, and reporting shows where activity is clustering just below a threshold, which is exactly the pattern that attracts scrutiny.

Where a procurement is above threshold, the same workflow carries the resulting obligations: publishing the required notices, running the competitive process and keeping the evaluation trail. Where it falls below, below-threshold workflows keep the lighter Part 6 route inside the same system, so nothing sits outside the audit trail simply because it was smaller.

What to do about it

1. 1Confirm whether your organisation is a central government authority or a sub-central government authority, and record it, because it changes the supply contract threshold.
2. 2Build every estimated value on a VAT inclusive basis before comparing it with the Schedule 1 tables.
3. 3Update procurement policy, standing orders and delegation schemes to the 1 January 2026 to 31 December 2027 figures, citing PPN 023.
4. 4Check Schedule 2 exemptions and the covered procurement guidance before concluding that a contract is in scope.
5. 5Classify works contracts against the CPV codes in Schedule 3 rather than by description alone.
6. 6Set a diary reminder for the next revision, which takes effect from 1 January of an even year by statutory instrument.
7. 7Route below-threshold contracts through the Part 6 checks rather than treating them as unregulated.