(1) Different financial thresholds apply to supplies and services contracts according to the classification of the contracting authority. The EU procurement rules apply to contracts above the specified thresholds:
- For contracting authorities that are central government authorities the threshold is £106,047
- this includes government departments and executive agencies
- For contracting authorities that are sub-central government authorities the threshold is £164,176
- this includes local authorities and social housing providers
(2) Under the new Public Contracts Regulations 2015 (PCR 2015) there are more flexibilities available to sub-central authorities - such as a different form of advertising and the ability to agree the date for return of tenders with tenderers in restricted procedures and so reduce timescales.
Why is there a distinction? The reason for the distinction is that central government bodies are caught by the provisions of the WTO General Procurement Agreement (GPA) where they are listed in Annex 1 of the GPA.
The lower financial thresholds are the GPA thresholds and the GPA procurement rules apply. In practice, compliance with the EU procurement rules applying to central government authorities ensures compliance with the GPA.
What are Central Government authorities? Central government authorities are listed in Schedule 1 of the PCR 2015 (and were similarly listed in Schedule 1 of the PCR 2006).
Schedule 1 of the PCR 2015 lists:
- Department of Health
- NHS Business Services Authority
- NHS Trusts
- Welsh NHS bodies
as well as NI health bodies and Scottish health boards
Both the PCR 2015 and PCR 2006 are expressed to cover successor entities, stating:
"Where an entity listed in this Schedule is succeeded by another entity, which is itself a contracting authority, the successor entity shall be deemed to be included in this Schedule".
The PCR 2006 also listed as Schedule 1 entities:
- National Health Service Strategic Health Authorities
The GPA declaration made by the UK government on the revision of the GPA lists as at 2012 included in the indicative list Strategic Health Authorities and NHS Trusts
As the PCR and its predecessors have evolved there has been a degree of uncertainty as to how the departures from the original list should be interpreted.
There has been a level of uncertainty for some time around the classification of NHS bodies including CCGs. The uncertainty stems from whether or not they would be interpreted by the Court as a successor body to bodies listed, or whether there had been a lawful decision to remove them from the GPA list
Whilst Monitor released Guidance in March 2015 confirming that Foundation Trusts are sub-central (see https://www.gov.uk/government/publications/nhs-foundation-trust-bulletin-march-2015/nhs-foundation-trust-bulletin-march-2015) it is unclear whether this has the sanction of the Government and reflects changes notified to the GPA. It must be said that the decision looks odd in the light of the succession wording, since NHS Foundation Trusts are the same body as predecessor NHS Trusts which have achieved authorisation. However we take the view that the official guidance on the point should be taken as reflecting an intention by the Government to modify its GPA list
No equivalent guidance has been issued regarding CCGs. The view had been taken that although PCTs were not named in the 2006 Regulations, they were successor bodies to Health authorities in respect of the commissioning functions and accordingly they should be regarded as central government bodies. Given the decision not to name them either in the 2006 Regulations nor again in the 2015 Regulations, it seems likely that this is not the case.
Again it is open to question whether CCGs are successors to those functions and should be classified as Central government bodies. It is arguable that the absence of PCTs and CCGs from the SIs may be deliberate, and mean that the matter is purely one for the GPA, and not the CCGs themselves to resolve. It is certainly the case that with both FTs and CCGs there are significantly different governance structures and the relationship with Central government is more distant, although they are far from entirely free agents.
Until guidance is issued we have taken the view that it is safer for CCGs to assume that they are central authorities.
The consequences of getting the classification wrong is that a contract could be declared ineffective (with the associated civil financial penalty that attracts) and/or the authority could face injunctive proceedings and/or damages.