In or out of the Procurement Act? What higher education institutions need to know

When the Procurement Act 2023 (PA 2023) came into force on 24 February 2025, there was a rush to the exit by universities to declare themselves outside the scope of the PA 2023 on the basis that they do no consider themselves contracting authorities.

The Procurement Act 

Typically an HE organisation will procure a very wide range of goods, services and works, some of them of a very specialist nature. The PA 2023 gives greater flexibility to contracting authorities as to how they can carry out procurement processes, but also introduces greater transparency requirements to publish procurement notices throughout the procurement and contract lifecycle and imposes increased contract management obligations. This can put an administrative burden on HE procurement teams at a time when HE organisations are already facing considerable financial pressure.

The legal test

The definition of a contracting authority (which includes a public authority) under the PA 2023 uses slightly different language to the test under the Public Contracts Regulations 2015. In practice, the tests under the PA 2023 have been flipped so that it is necessary to look firstly if an organisation is controlled either financially or through public authority oversight and secondly, if the organisation is operating other than on a fully commercial basis.

Whilst the language is different, the Guidance to the Procurement Act on the Contracting Authority Definition issued by the Cabinet Office states that " the features of a contracting authority are the same as those in the previous legislation", and that there is “no intended or implied change in the scope of entities covered". The Guidance also continues in stating "The features of funding, control and non-commercial nature are intended to capture the same contracting authorities as were previously covered”.

The possibility of falling outside the scope of the PA 2023 will not be open to all HE organisations. The key financial test is whether the organisation is less than 50% public funded, for example, from funding body grants, research grants and tuition fees. A large part of revenue is likely to come from tuition fees paid on behalf of students by the Student Loans Company, but whilst it may be arguable that such income should be treated as private income, the question has not yet been determined by the courts so there is some uncertainty. If Student Loans Company income is treated as public rather than private income, then some HE organisations may find themselves majority public funded. 

Clearly there are a number of benefits of being outside the scope of the procurement rules in terms of potential cost savings and more agile procurement. There are drawback however, for example, access to some frameworks may be restricted and there are a number of funding opportunities, such as the public sector decarbonisation scheme operated by Salix Finance, which is only available to contracting authorities. It is recommended that HE organisations carry out a costs benefit analysis as well as considering the cultural implications for the organisation and the risk of flip flopping in and out of the procurement regime, if the financial split between public and private funding is finely balanced. 

We have experience of advising HE organisations on their status under the procurement rules and supporting them through the process of coming out of the procurement rules. For further assistance please contact Stephanie Rickard in our Higher Education team at 07384 251 896.