Definitions, Scope & Principles of the Procurement Act 2023

Public procurement is a key component of effectively providing public services and guaranteeing the responsible use of taxpayer funds. As introduced in my last post, the Procurement Act presents a new framework for public procurement in the UK, reshaping how contracts are awarded and managed. Understanding the fundamental definitions, scope, and principles of the new system is crucial to maximising its advantages. Hence, this article examines these components and how they influence a procurement culture that values equity, openness, and fairness. 

Key Definitions Under the Procurement Act 2023

The Procurement Act introduces important definitions that clarify roles, responsibilities, and processes. Understanding these terms ensures consistency and compliance with the law. 

1. Contracting Authorities  

These are organisations handling public procurement. They include NHS organisations, schools, local governments, central government departments, and other public sector entities. If you work in a public sector body, it is important to understand how your contracting authority is defined, as this will determine the thresholds and specific legal requirements that govern how you procure goods and/or services. 

2. Covered procurement

A covered procurement refers to any procurement that meets the thresholds defined in the procurement Act. These thresholds determine when a contracting authority must comply with the full requirements of the Procurement Act 2023, depending on the type of contract (goods, services, or works) and whether the procurement involves public funds. 

The Cabinet Office, in a recent Procurement Policy Notice (PPN 023), updated thresholds that will now apply to public procurement. Hence, from the 1st January 2026, the thresholds set out in the table below will apply to public procurement. These updated amounts represent a modest adjustment from the previous levels, reflecting currency fluctuations and ensuring the UK remains compliant with its obligations under the World Trade Organisation's Agreement on Government Procurement (GPA).

UK Public Procurement Thresholds (Effective 1 January 2026)

Contract Type	Threshold Amount	Remarks
Defence & security works contracts	£5,193,000	Applies to large-scale construction or infrastructure projects in defence/security.
Defence & security concession contracts	£5,193,000	Covers contracts where suppliers operate services and derive income from users (e.g., military facilities).
Defence & security contracts (other)	£415,440	Applies to general defence/security goods and services (non-works, non-concessions).
Utilities works contracts	£5,193,000	For major construction projects in utilities (energy, water, transport).
Utilities light-touch contracts	£884,720	Covers social, health, and education-type services delivered by utility providers.
Utilities contracts (other)	£415,440	Applies to supplies and services in utilities (excluding works and light-touch).
Light-touch concession contracts	£5,372,609	For concession-style contracts in social/health/education services.
Light touch contracts (other)	£663,540	Applies to social, health, and education services (non-concession).
Concession contracts (general)	£5,193,000	Applies to contracts where suppliers run services and recover costs from users (e.g., toll roads).
Works contracts (general)	£5,193,000	Standard threshold for construction/infrastructure projects outside defence/utilities.
Central government contracts (goods, services, works)	£135,018	Applies to supplies and services procured by central government departments.
Sub-central government contracts (goods, services, works)	£207,720	Applies to local authorities, NHS bodies, schools, etc.

3. Framework Agreements

Frameworks are agreements with one or more suppliers that set out terms (e.g., pricing) for future contracts. They streamline procurement by avoiding repetitive tendering processes. The Procurement Act 2023 defines a framework as a 'contract between a contracting authority and one or more suppliers that provides for the future award of contracts by a contracting authority to the supplier or suppliers.'  

Over the years, framework agreements have become an increasingly important tool for public sector contracting authorities. According to a 2023 assessment, 26% of all public sector contracts were awarded through a framework. This sharp growth highlights their growing popularity, with the NHS in particular showing a strong preference for using frameworks to manage procurement.

4. SMEs and VCSEs

 

The Act recognises the unique challenges faced by Small and Medium-Sized Enterprises (SMEs) and Voluntary, Community, and Social Enterprises (VCSEs). It encourages contracting authorities to reduce barriers and create opportunities for these organisations to participate. This entails streamlining the procurement process, increasing transparency, and making sure to promote opportunities in a manner that is understandable to smaller, locally based suppliers. Encouraging SMEs and VCSEs to participate more actively in procurement helps provide services that are a unique fit for local needs and community objectives, but not just that, it also helps build stronger relationships between the public and private sectors, promoting economic growth.

Procurement Threshold 2026-2027

Understanding these definitions is the first step in navigating the new procurement terrain and the subsequent scope it covers.

Scope of the Procurement Act 2023

The Procurement Act applies to a wide range of public sector organisations and procurement activities. Find below an attempt to break it down:  

Who Is Covered?

• Central Government Departments 
• Local Authorities
• Health Sector Organisations (e.g., NHS trusts)  
• Education Institutions (e.g., schools, colleges, universities)  
• Devolved Authorities in Wales, Scotland, and Northern Ireland (depending on specific arrangements)  
• Private entities conducting procurement on behalf of these organisations are also subject to the Act, ensuring accountability and compliance at every level.  

What Is Covered?

The Act applies to:  

Public Contracts: Contracts for the supply of goods, services, or works that exceed the relevant financial thresholds (see above). These are the most common forms of procurement and apply to central government departments, local authorities, NHS bodies, schools, and other public sector organisations.  

Framework Agreements: These are agreements that predefine terms for future contracts. They allow contracting authorities to run further competitions or make direct awards to suppliers already admitted to the framework, thereby improving efficiency and consistency.  

Dynamic Markets: Introduced to replace the old Dynamic Purchasing System (DPS), dynamic markets remain open throughout their life, allowing suppliers to apply and join at any time. They give increased flexibility, transparency, and opportunities for SMEs and VCSEs. More of this will come in subsequent articles. 

Concession Contracts: These provide suppliers the authority to utilise a product or service and receive payment directly from consumers (e.g., running parking lots, toll roads, or recreational facilities). The contracting authority here, e.g, a local council, benefits by transferring risk and securing service delivery without direct payment.  

Utilities Contracts: These are contracts awarded by entities operating in sectors such as energy and transport. They have their own thresholds and procedures, reflecting the unique nature of utility markets.  

Defence and Security Contracts: Special rules apply to contracts in these areas, recognising their sensitivity. These include works, services, and concessions related to national security and military operations.  

Light Touch Contracts: These are contracts for certain social, health, and education services. They are subject to simplified rules but still require transparency and fairness, given their importance to communities and vulnerable groups.  

Procurements below the threshold are excluded, but they must still adhere to principles such as fairness, transparency, and proportionality.  

General Principles of the Procurement Act  

Three guiding concepts are at the core of the Procurement Act. They include transparency, integrity, and value for money principles. These are not just theoretical or abstract concepts; they actively shape the management of public funds and the procurement process. Together, they ensure that procurement is not only efficient but also fair, ethical, and in line with broader societal objectives. 

Transparency is the cornerstone of the Act. It means that every stage of the procurement process should be open and accessible, with information shared clearly with suppliers and the public. The Act expects authorities to publish tender opportunities, decisions, and pipeline notices for major contracts worth over £100 million annually. This openness builds trust, reduces corruption risk, and encourages healthy competition. By embracing a "transparency by default" mindset, contracting bodies create an environment where accountability and fairness thrive.  

Integrity is equally vital. It ensures that procurement is conducted honestly, professionally, and with strong governance. Authorities must actively manage conflicts of interest, prevent fraud, and uphold ethical standards throughout the process. A culture of integrity reassures both suppliers and the public that decisions made are fair and responsible. By acting professionally and with accountability, authorities safeguard public money and strengthen confidence in the system.  

Finally, value for money goes beyond simply picking the cheapest option. It's about achieving the best balance of economy, efficiency, and effectiveness over the lifetime of a contract. This principle encourages authorities to think strategically, weighing long-term benefits against short-term savings. It also recognises the importance of social and environmental value, ensuring that procurement decisions contribute to broader goals such as sustainability and community impact.  

Together, these principles create a procurement culture that is open, ethical, and forward-looking. They remind us that procurement is not just about transactions, but about building trust, protecting public funds, and delivering outcomes that serve society as a whole.  

How Do These Principles Shape Procurement Culture?

In so many ways, the three main principles of the new procurement Act shape the entire culture surrounding public sector buying. Below I have itemised how the Act influences procurement attitudes and behaviours:  

1. It treats suppliers equally and prevents unfair advantages, which fosters a competitive market that benefits suppliers and helps authorities secure better value.  

2. It creates real opportunities for smaller businesses and community organisations by simplifying processes and lowering barriers, so authorities can tap into fresh, innovative solutions from a broader range of suppliers.  

3. Transparency and shared goals prompt contracting authorities to work together, cutting duplication and improving efficiency. For example, they can pool resources to achieve common aims, such as reducing environmental impact and getting better procurement deals from suppliers.  

4. When procurement is open and handled with integrity, it strengthens public confidence because citizens can see how decisions are made and trust that public funds are being used responsibly.  

5. By building social and environmental considerations into procurement choices, the Act lets authorities use purchasing power to drive positive change, turning procurement from a simple transaction into a way to deliver broader societal benefits.

Next Steps?

Contracting authorities must take concrete steps to incorporate the concepts, definitions, and scope of the Procurement Act into their daily operations. They should train employees on transparency, integrity, and value for money, review internal rules to ensure compliance with the Act's obligations, and streamline procedures to make participation easier for smaller companies and community organisations. When granting contracts, authorities should also have a long-term perspective, emphasising advantages that endure over the lifespan, and maintain clear records of their decisions to demonstrate accountability.  

By implementing these changes, authorities establish an equitable, effective, and inclusive procurement environment. Staff members will gain confidence and consistency through training, and the reduced procedures inherent in the Act will also allow creative solutions from a variety of providers. Accessible and well-understood procurement enhances competitiveness and puts authorities in a better position to gain value for the general public.

The Act also encourages authorities to think strategically about the wider impact of their decisions. Looking beyond short-term savings ensures contracts deliver resilience, sustainability, and social benefits over time. Carefully recording decisions not only supports compliance but also strengthens public trust by demonstrating that procurement choices are made responsibly and transparently.  

Ultimately, the Procurement Act is about more than just awarding contracts. It sets the foundation for a culture built on trust, collaboration, and innovation. By embracing its principles, authorities can ensure their procurement activities reflect fairness, accountability, and public benefit. Staying committed to these foundations means procurement will not only comply with the law but also deliver lasting value for organisations and the communities they serve.