PSR or Procurement Act? Which Rules Apply to Health Contracts

Two separate procurement regimes now operate across health and care in England, and the line between them is drawn by what is being bought rather than by who is buying it. Getting the classification wrong does not produce a technical irregularity. It produces an award made under the wrong process, which is the kind of defect that gets contracts unwound.

The Provider Selection Regime: health care services only

The Provider Selection Regime came into force on 1 January 2024 and governs the procurement of health care services by relevant authorities. The first thing to understand about it is the thing most managers assume cannot be true: "There is no minimum threshold for application of the regime."

No threshold means no small-purchase exemption. A health care service contract worth a few thousand pounds is inside the regime exactly as a multi-million pound contract is. The processes differ, but the regime applies.

There are five processes available: three forms of direct award (A, B and C), the most suitable provider process, and the competitive process. Each carries its own evidential requirements and its own notice obligations.

The notice periods that catch people out

The timing rules are short and specific, and they are not interchangeable between processes:

• Where the most suitable provider process is used, the authority must publish its intention and wait at least 14 days before proceeding.
• A standstill period of 8 working days applies before a contract can be concluded following certain processes.
• An award notice must be published within 30 days of the contract being entered into.
• Frameworks are capped at a maximum of 4 years.

Eight working days is not eight days. In a week containing two bank holidays it is a fortnight of calendar time, and award timetables built on calendar assumptions slip accordingly.

What "considerable change" means to an existing contract

Existing contracts can be varied, but a variation that constitutes a considerable change triggers the regime afresh. The test is conjunctive: the lifetime value of the contract must increase by at least £500,000 and by at least 25%.

Both limbs must be satisfied. A £300,000 uplift on a £400,000 contract is a 75% increase and does not meet the money test. A £600,000 uplift on a £20 million contract clears the money test but is 3% and does not meet the proportion test. Neither is a considerable change on its own, which gives commissioners more room to vary small and very large contracts than is widely assumed — and less room in the middle.

What sits outside the regime

This is where training providers need to pay attention. The Provider Selection Regime does not cover:

• Education services.
• Social care services.
• Goods, medicines and equipment.

All of those fall to the Procurement Act regime instead. A training contract is therefore not a Provider Selection Regime matter, even when the buyer is an NHS trust and the subject is clinical practice. The commercial case for a workforce development proposal has to be written against the Procurement Act, which is one of the five tests any public sector proposal has to pass — a structure we set out in the five case model.

Two further scope points. Local authorities are relevant authorities only in respect of health care services, not their wider functions. And non-NHS providers are not relevant authorities at all, so a provider subcontracting onward is not itself running a Provider Selection Regime process.

The Procurement Act regime

The Procurement Act 2023 came into force on 24 February 2025. It covers public procurement generally — an envelope of roughly £400 billion of annual spend — and brings with it mandated 30-day payment terms and the Central Digital Platform for notices and supplier information.

The two regimes do not overlap: regulation 49 of the Procurement Regulations 2024 provides that the Act does not apply where the Provider Selection Regime applies. Classification therefore decides the regime completely, rather than creating a choice.

The thresholds, and the VAT trap

Unlike the Provider Selection Regime, the Procurement Act regime is threshold-driven. From 1 January 2026 the thresholds are:

• Central government goods and services: £135,018
• Sub-central authorities, goods and services: £207,720
• Light touch services: £663,540
• Utilities: £884,720
• Works: £5,193,000
• Light touch concessions: £5,372,609

These figures are inclusive of VAT. That single word moves a contract across a threshold at roughly one in six, and it is the most common reason a procurement is run at the wrong level. A £180,000 ex-VAT services contract for a sub-central authority is £216,000 inclusive — above the threshold, not below it.

The thresholds are also revised on a two-year cycle, so any internal guidance quoting figures should carry the date they took effect.

Why this belongs in a training conversation

Three reasons. First, a training provider that pitches an NHS buyer on the assumption that health care service rules apply will propose a route the buyer cannot lawfully use. Second, a buyer that classifies a training contract as a health care service will run a process that does not protect the award. Third, the inclusive-of-VAT thresholds determine whether a straightforward workforce development purchase needs a full competitive exercise or not, which affects timescales far more than the content of the proposal does.

It also interacts with workforce spend that is already under pressure. Temporary staffing is subject to its own price controls and reduction targets, as we set out in the NHS agency price caps, and the budget envelope a training purchase has to fit inside is constructed from lines that are mostly fixed, which we cover in how a care budget is built.

One practical rule

Before anything else, classify what is being bought: health care service, or everything else. That single decision determines the regime, the thresholds, the notice periods and the standstill. Everything downstream depends on it, and it is the cheapest decision in the process to get right.

This article describes the rules as published and is not legal advice. Thresholds and notice periods are revised periodically, so verify current figures before relying on them in a live procurement.