PPN 005: Reserving below threshold procurements · first published 17 February 2025
This Procurement Policy Note (PPN 005) sets out options that central government departments, their executive agencies and non-departmental public bodies (NDPBs) may use when buying goods, services or works below the Procurement Act 2023 threshold values. The key options are: (1) restricting a competition to suppliers based in a specific geographic area (UK-wide or down to a single county/London borough), and (2) on top of that, further restricting it to small and medium-sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs) only. Crucially, the SME/VCSE reservation can only be used alongside the location reservation — it cannot stand alone. This is an update to align with the Procurement Act 2023 terminology and applies to procurements started on or after 24 February 2025. The policy does not apply where goods are being provided into Northern Ireland and there is potential cross-border interest from EU suppliers.
WHO THIS APPLIES TO
THE ENKII VIEW
This policy is a genuine structural advantage for SMEs: buyers are explicitly permitted to ring-fence below-threshold competitions so that only SMEs and VCSEs in a defined area can bid, removing large-company competition entirely. The location-first requirement means locally based SMEs benefit most — being rooted in a county or London borough is now a bidding asset, not just a nice-to-have. However, the reservation is discretionary (buyers "may consider" it), so SMEs should proactively make the case to buyers that reserving is appropriate for a given contract.
1. Confirm and document that your business is based and has substantive operations in a specific UK county or London borough — this is now a formal eligibility criterion when a buyer applies a location reservation.
SMEs and VCSEs bidding for central government below-threshold contracts — The PPN defines supplier location by where the supplier 'is based or established and has substantive business operations' — corporate ownership address is not sufficient, so you need to evidence operational presence.
2. When engaging with a buyer pre-market or at tender stage, explicitly ask whether they have considered reserving the procurement for SMEs/VCSEs in your area under PPN 005 — buyers are permitted but not required to do so.
SMEs and VCSEs bidding for central government below-threshold contracts — The reservation is discretionary ('may consider'); proactive supplier engagement can prompt buyers to apply it, especially for contracts where local delivery and SME participation are relevant.
3. Ensure your organisation is clearly described using the standardised VCSE definition referenced in the PPN's associated guidance, and include this in your standard capability statements and PQQ (pre-qualification questionnaire) responses.
SMEs and VCSEs that also qualify as VCSEs (e.g. social enterprises, charities with trading arms) — The PPN states buyers 'should be clear in their procurement documentation about any intention to reserve the procurement, for example by including the standardised definitions of SMEs and VCSEs' — aligning your self-description to those definitions avoids eligibility disputes.
4. Monitor the central digital platform (Find a Tender / Contracts Finder) for transparency notices on below-threshold contracts in your county — reserved competitions will be visible there and represent opportunities with restricted (SME-only) competition.
SMEs bidding for contracts from central government buyers who may reserve below-threshold work — The PPN requires buyers to 'publish transparency notices on the central digital platform as appropriate in a timely manner', meaning reserved competitions must appear publicly and can be tracked.
5. If your firm has a parent company or corporate ownership in a different location from where you actually operate, prepare a clear statement distinguishing your operational base from your ownership structure before bidding on any reserved procurement.
SMEs operating across borders or with parent companies in other locations — Location eligibility is assessed by 'where the supplier is based or established and has substantive business operations and not by location of corporate ownership' — conflating the two could lead to disqualification.
Every rule below quotes the official document verbatim.
The PPN applies to all central government departments, their executive agencies and NDPBs awarding regulated below-threshold contracts for goods, services and/or works (excluding special regime contracts). (Central government departments, executive agencies, NDPBs; regulated below-threshold contracts)
“This PPN applies to all central government departments, their executive agencies and non-departmental public bodies when awarding regulated below threshold contracts for goods and/or services and/or works, other than special regime contracts.”
Other public sector bodies (outside central government) may apply this PPN but are not required to. (Wider public sector bodies (voluntary application only))
“Other public sector contracting authorities may wish to apply the approach set out in this PPN. However, application of the PPN should be considered in the light of authorities' relevant legal obligations.”
The PPN and its obligations apply from 24 February 2025 for procurements commenced on or after that date. (All in-scope organisations; procurements commenced on or after 24 February 2025)
“The Procurement Act 2023 and the Procurement Regulations 2024 applies to procurements commenced on or after 24 February 2025.”
Buyers may reserve a below-threshold competition to suppliers located in a specific UK geographic area — either UK-wide or a single county (or London borough). (In-scope organisations; regulated below-threshold contracts)
“Reserve the procurement by supplier location. This means being able to run a competition and specify that only suppliers located in a geographical area can bid. This could be UK-wide to support domestic supply chains and promote resilience and capacity, or where appropriate, by county (metropolitan or non-metropolitan, or by borough for London) to tackle economic inequality and support local recruitment, training, skills and investment.”
Buyers may additionally reserve a below-threshold competition exclusively for SMEs and VCSEs, but only when the location reservation is also applied — the SME/VCSE reservation cannot be used independently. (In-scope organisations; regulated below-threshold contracts)
“Reserve the procurement for small and medium sized enterprises (SMEs) and voluntary, community and social enterprises (VCSEs). This means being able to run a competition and specify that only SMEs and VCSEs can bid.”
The SME/VCSE reservation cannot be applied without the location reservation also being in place. (In-scope organisations wishing to use SME/VCSE reservation)
“the reservation for SMEs and VCSEs cannot be applied independently of the location reservation, which must always apply when reserving under this policy.”
Buyers must not use direct award (i.e. awarding without a competition) when reserving under this policy; a competition must still be run. (In-scope organisations; all reserved below-threshold procurements)
“To ensure value for money, in-scope organisations should not direct award when reserving procurements under this policy.”
Supplier location must be defined by where the supplier is based or established with substantive business operations, not by where its corporate ownership sits. (In-scope organisations; location-reserved below-threshold procurements)
“Supplier location should be described by reference to where the supplier is based or established and has substantive business operations and not by location of corporate ownership.”
Buyers must not define the reserved geographic area by the nations of the UK (England, Scotland, Wales, Northern Ireland), and where a county reservation is used, only a single county (or single London borough) may be named. (In-scope organisations using location reservation)
“In-scope organisations should not define by nations of the UK (i.e. England, Scotland, Wales, Northern Ireland) and where a county reservation is to be applied, only a single county (or borough for London) may be reserved.”
This policy must not be applied where goods are provided into Northern Ireland and there is potential cross-border interest from EU member state suppliers. (All in-scope organisations; procurements involving supply of goods into Northern Ireland)
“for supplies, services or works procurements where goods are to be provided into Northern Ireland and where there is cross-border interest, this policy should not be applied.”
Buyers must publish transparency notices on the central digital platform and comply with Part 6 of the Procurement Act 2023 for regulated below-threshold contracts. (In-scope organisations; all regulated below-threshold contracts)
“In-scope organisations must comply with the legal requirements in Part 6 of the Procurement Act 2023, applicable to regulated below threshold contracts. These include obligations to publish notices on the central digital platform and rules on assessing suitability.”
This briefing is enkii's interpretation of the official document — the official text always governs.
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