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Reserve below-threshold contracts for UK or local suppliers under the 2026 Order
Juli Lau and Shyann Sheehy look into the impact of the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026, and particularly how local authorities can now reserve below-threshold contracts for UK or local suppliers.
On 4th February 2026, the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 (the “Order”) came into force, with supplementary guidance on reserving competition for below-threshold contracts published on 16th February 2026 (the “Guidance”). The Order allows (but does not mandate) certain contracting authorities (“Relevant Authorities”) to reserve competitions for below-threshold contracts to businesses based in their local area or in the UK. The government states that these changes have been implemented to boost local businesses.
Scope of the Order
The Order applies to all best value authorities set out in s.1 Local Government Act 1999 and parish councils in England to which s.17 of the Local Government Act 1988 (“LGA 1988”) applies. Local authorities are part of this group.
The Order does not however apply to central government departments and bodies, who should instead follow the guidance in PPN 005 (Reserving below threshold procurements). It also does not apply to contracts which fall within the remit of the Health Care Services (Provider Selection Regime) Regulations 2023.
Impact of the Order
Previously, Relevant Authorities were prevented, under s.17(5)(e) LGA 1988, from reserving any contracts by reference to the supplier’s geographical location. The Order now allows Relevant Authorities to disapply this restriction and reserve competition for contracts, frameworks and concession contracts which fall below the threshold amounts in Schedule 1 of the Procurement Act 2023, to the following types of suppliers:
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Contractors based within the United Kingdom A contractor is based within the UK where they have established substantive business operations, not taking account of the location of the corporate ownership or control of the contractor.
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Contractors based within the Relevant Authorities’ local area “Local area” is defined as follows: Where there is one Relevant Authority:
Where there are two or more Relevant Authorities:
Where a Relevant Authority is wholly located in a county or London borough, the area of that authority may be either:
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Limitations
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Permitted If there are two or more district councils entering into a below-threshold contract together, the local area can include the:
The same principle applies to unitary authorities which do not have the same boundaries as a county area set out in s.1 and Schedule 1 of the Local Government Act 1972. |
Not Permitted Relevant Authorities must determine their local area by reference to where they primarily exercise their functions, but cannot state they have responsibility for the whole of England. The local area reservation cannot be used to restrict the competition for a below-threshold contract to England only. A district council cannot for the purpose of the Order extend its local area to bordering district councils. |
Practical steps for local authorities
- The above provisions remain voluntary and Relevant Authorities should consider their use on a case-by-case basis.
- The ability to reserve should not be used as a way to avoid the procurement rules to directly award a contract when a degree of competition should apply.
- Once a Relevant Authority has made the decision to use this option, it should specify its intention in either the advertisement of the tender (for contracts which are not notifiable below-threshold contracts) or the below-threshold tender notice (for notifiable below-threshold contracts pursuant to 87 PA23), stating whether the contract is being reserved to contractors in the UK or the local area (and specifying the extent of the local area).
- Relevant Authorities will still need to comply with their own internal guidance, governance and procedures.
- Relevant Authorities should also keep appropriate records of material decisions (including the decision to reserve competition pursuant to the Order) as per 98 PA23
- Pursuant to 19(4) of the Local Government Act 1999, Relevant Authorities should also have regard to the Guidance when applying the provisions of the Order.
Experts by your side
Sharpe Pritchard advise local authorities and utilities on all manner of public procurement matters. Our experts are on hand to guide you through the intricacies of the procurement regime and to advise on any other procurement related issues. For more information, contact us today.
Juli Lau is a Partner and Shyann Sheehy is a Paralegal at Sharpe Pritchard LLP.
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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email
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