A new order proposing changes to the procurement landscape for local authorities in England and Wales is expected to come into force later this year. The Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 (the Order) updates the long standing restrictions on the use of non-commercial considerations in local authority procurement and aligns them with the framework introduced by the Procurement Act 2023 (the 2023 Act).
What is changing?
The Order amends section 17 of the Local Government Act 1988 (the 1988 Act), which restricts local authorities from taking certain non-commercial considerations into account when awarding contracts. Specifically, the Order clarifies circumstances in which the location of a supplier may be considered in relation to below-threshold contracts.
Under the amended regime, authorities will be permitted, on a discretionary basis, to reserve certain below-threshold procurements to suppliers based in the UK or within a defined local area (which may include neighbouring authorities). This represents a departure from the current position, where the geographical location of a supplier is generally treated as a prohibited non-commercial consideration.
In parallel, amendments to the Procurement Regulations 2024 will require below-threshold tender notices to state whether a contracting authority has exercised the option to reserve a contract to UK or locally based suppliers, in accordance with the Order. This reflects the 2023 Act’s wider emphasis on transparency.
Alignment with the Procurement Act 2023
Whilst the 2023 Act already enables authorities to design proportionate processes for below-threshold contracts and to consider barriers faced by small and medium sized enterprises (SMEs), the Order provides clearer statutory footing for limited local reservation in appropriate cases.
Importantly, the Order does not displace the core principles of the 2023 Act. Any reliance on supplier location must remain confined to the specific circumstances permitted by the Order and must not undermine the requirement for fair and transparent procurement processes.
What will this mean in practice for contracting authorities?
The ability to reserve below-threshold contracts to UK or locally based suppliers will be optional, not mandatory. Authorities choosing to use this flexibility will need to do so carefully and consistently, ensuring that procurement documentation, evaluation criteria and internal decision-making documentation, clearly reflects the statutory basis for reservation.
The Order does not amend any other provisions of section 17 of the 1988 Act, so authorities will still not be permitted to rely on broader political, ideological or unrelated workforce considerations when awarding contracts.
In practice, authorities should:
- Review procurement strategies, standing orders and templates
- Train officers and evaluators on the limits of permissible considerations, and
- Ensure that any use of local reservation is properly justified and documented to manage legal and audit risk.
What does this mean for SMEs and local suppliers?
For SMEs and community-based suppliers, the change may create additional opportunities to compete for below-threshold contracts. However, the Order does not amount to a general exclusion of larger or national suppliers. The definition of suppliers being ‘based’ in a particular area does not depend on corporate ownership or group structure, but rather on operational presence. Larger organisations with a genuine local footprint may still be eligible to bid where they meet the relevant criteria.
Equally, local suppliers should not assume automatic preference. Authorities must still ensure value for money and proportionate processes when procuring their contracts.
Conclusion
The Order represents an incremental but important update to the local government procurement regime. By aligning the 1988 Act restrictions with the 2023 Act, it provides greater clarity on what authorities may, and may not, consider when awarding below-threshold contracts. Used appropriately, the changes may support SME participation and local delivery, whilst preserving the principles of fairness, transparency and competition that underpin public procurement.
How can we help?
For further information about issues raised in this article, please contact a member of our Procurement team.
Nicola Cullen is an Associate in our Public Law and Regulatory team. Nicola provides comprehensive public procurement advice, guiding clients from the initial planning phases through to contract ma... Read More
