New Guidance on Reserving Competitions for Below-Threshold Public Contracts

The government has introduced new voluntary measures allowing certain local authorities to reserve competitions for below-threshold public contracts to local or UK-based suppliers under the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026 (the “2026 Order”). To supplement the draft 2026 Order, the government published guidance on 3 December 2025 explaining how authorities can apply these new measures.

Aims of the Policy

The policy is designed to boost opportunities for local businesses, UK suppliers, and SMEs/VCSEs by widening the authorities’ ability to reserve competitions. Previously, section 17(5)(e) of the Local Government Act 1988 prevented authorities from restricting tenders based on supplier location. The 2026 Order disapplies this restriction in specific circumstances for below-threshold contracts.

Authorities within Scope

Under Article 2, the 2026 Order applies to best value authorities and parish councils in England covered by the 1988 Act.

Best value authorities are public bodies which must comply with the best value duty- the requirement to demonstrate that it is making arrangements that are economic, efficient and effective having regard to securing continuous improvement in how it carries out its work. This includes a wide range of local government and public bodies, such as county councils, district councils and combined authorities.

The 2026 Order does not include central government departments or their arm’s-length bodies, as Procurement Policy Note 005 sets out a separate below-threshold policy for those organisations.

Which Contracts are Covered

Authorities may only use the policy for “relevant contracts”— those below the procurement thresholds set in the Procurement Act 2023 which are:

• for the supply of goods, services or works to a contracting authority;
• a framework (or a call-off contract under a framework provided that the call-off is below threshold); or
• a concession contract.

Reservation Options

Authorities can choose to reserve competitions to:

1. Contractors based within the UK, or
2. Contractors based within a defined “local area”.

“Based within” means having substantive business operations in the area, regardless of ownership nationality. 

The “local area” is defined as:

1. where there is one relevant authority which intends to enter into a relevant contract:
   1. the area of that authority, or
   2. the area of that authority and any of the areas of the counties or London boroughs that border that area
2. where there are two or more relevant authorities intending to enter into a relevant contract:
   1. the areas of those authorities, or
   2. the areas of those authorities, and any of the areas of the counties or London boroughs that border those areas

In addition, authorities may reserve competitions for SMEs and/or VCSEs, either alongside the location-based restrictions above or independently.

Using Reservations Responsibly

The guidance stresses that reservations should be applied on a case by case basis and must not be used to bypass competition or justify direct awards. Authorities should balance local benefit with value for money and ensure the approach is proportionate to the market.

Transparency and Notice Requirements

When a location-based reservation is used, authorities must clearly state this in:

• below-threshold tender notices for notifiable contracts (≥ £30,000), or
• any advertisement for other relevant below-threshold contracts.

Authorities are encouraged to similarly disclose SME/VCSE reservations to support fair access.

Compliance and Accountability

Authorities must keep records of procurement decisions and may be subject to investigation by the Procurement Review Unit. Failure to comply with section 17 of the Local Government Act 1988 Act could expose authorities to legal challenge.

Next Steps 

The draft 2026 Order was laid before Parliament on 2 December 2025 and is due to go through the draft affirmative resolution procedure for approval. Once approved, the 2026 Order is expected to come into force in early 2026.

Contributors: Laura Wisdom (Partner), Shauna McGinn (Solicitor)

The government has introduced new measures allowing local authorities to reserve competitions for below-threshold public contracts to local suppliers