A practical question is now coming up more often across council procurement teams: can a local authority lawfully limit a below-threshold competition to local suppliers?

For authorities in England, the answer is now yes in some cases, but only within a defined legal framework and only if the procurement is structured properly from the outset. That makes this one of the more significant live implementation issues for councils managing lower value procurements, especially where members, commissioners and service teams are looking for stronger local economic impact.

The key point is that this is not a general power to favour local firms whenever an authority wishes. It is a specific change to the old position under the Local Government Act 1988, and it comes with conditions that procurement officers need to understand before using it.

What has changed

The change sits alongside the Procurement Act 2023 below-threshold regime and the new England-specific order that now allows relevant authorities to reserve some below-threshold competitions by supplier location.

In practical terms, relevant authorities in England can now choose, for certain below-threshold contracts, to reserve competition to suppliers based within the United Kingdom or to suppliers based within a defined local area. Authorities may also reserve such competitions to SMEs, VCSEs, or both, either on their own or alongside the location-based reservation.

For local authorities, that is a notable shift. For many years, officers were used to section 17 restrictions which made location-based selection highly sensitive and, in most cases, off limits. That is no longer the whole story for qualifying below-threshold procurements.

Why this matters to councils now

This matters because below-threshold purchasing is where a large volume of local authority commissioning and procurement activity actually happens. It is also where councils often feel the strongest pressure to support local markets, smaller providers and community organisations.

The new power gives councils more room to shape those competitions in a way that can support local economic benefit, supplier diversity and place-based delivery. It is likely to be particularly relevant for lower value services, neighbourhood delivery, reactive works, community-based provision and other contracts where local presence or local knowledge may be commercially relevant.

At the same time, this is also an area where misuse could create challenge, inconsistency or poor value for money. The legal change gives councils a tool, not a blank cheque.

Which contracts are in scope

The new reservation power applies to relevant below-threshold contracts in England. In simple terms, that means contracts to which section 17 of the Local Government Act 1988 applies and which fall below the applicable Procurement Act threshold for a public contract.

For most councils, the important operational point is that this concerns below-threshold activity, not above-threshold covered procurement. Authorities should therefore be careful not to carry assumptions from these rules into their wider Procurement Act procedures.

It is also important to remember that a notifiable below-threshold contract for most local authorities will usually mean one with an estimated value of at least £30,000 including VAT. That matters because where a contract is notifiable and the authority advertises it, notice requirements also come into play.

What councils are actually allowed to do

Authorities can reserve a below-threshold competition in one of two location-based ways.

The first is to reserve it to suppliers based within the United Kingdom.

The second is to reserve it to suppliers based within the local area. That local area is not whatever the authority informally considers local. It must be defined in line with the legislation and the accompanying guidance. Depending on the authority and the procurement, it may include the authority’s own area and, in some circumstances, bordering counties or London boroughs.

This is where officers need to be careful. A district council, county council, combined authority, police body or fire authority should not assume the same local area approach automatically applies in every case. The permitted scope depends on the structure and geography of the authority involved.

Authorities can also choose to reserve a competition to SMEs only, VCSEs only, or SMEs and VCSEs. In some cases that may be combined with a local area reservation. That could be attractive for councils seeking to stimulate smaller local markets, but it still needs a clear commercial rationale.

What this does not allow

The most important misconception to avoid is that the new power creates a general right to buy local.

It does not.

It does not remove the need for competition where the authority has decided to run a competition. It does not automatically justify excluding wider markets. It does not mean every service should be restricted to local firms. It also should not be used as a disguised direct award mechanism.

Authorities still need to act lawfully, proportionately and in line with their own governance, standing orders and financial rules. They also still need to consider value for money, market conditions, operational risk and whether there is enough capable competition within the reserved field.

In some cases, the right answer will still be to procure openly because the local market is too thin, the service is too specialist, or a broader field is more likely to secure better outcomes.

Notice and process requirements matter

This is where some councils may come unstuck.

If an authority is advertising a below-threshold competition and relying on one of the location reservation options, the reservation must be made clear in the advertisement. If the authority is using a local area reservation, it must also specify what that local area is for the purposes of the procurement.

For notifiable below-threshold contracts, that means the reservation position needs to be reflected in the below-threshold tender notice. In other words, this is not something that should sit only in an internal strategy note or in an officer’s mind. It has to be visible in the published procurement documentation where the rules require advertising.

That makes early planning essential. Officers need to decide before inviting tenders whether they are reserving the competition, on what basis, and how that decision will be documented and published.

What authorities should do next

Councils should start by reviewing their contract procedure rules, template documents and low value procurement guidance. Many internal documents will still reflect the older position and may not yet explain the new reservation options accurately.

Procurement teams should also produce a simple internal decision framework for service departments. That framework should require officers to record why a reservation is being used, how the local area has been defined where relevant, whether there is enough likely competition, and how value for money will still be protected.

Member and officer expectations should also be managed carefully. The existence of a legal power does not mean it will be appropriate in every case. Procurement needs to remain disciplined, evidence-based and commercially defensible.

The practical takeaway

For English local authorities, the new below-threshold reservation rules are a genuinely useful development. They give councils more flexibility to support local and UK-based suppliers and to widen access for SMEs and VCSEs in the right circumstances.

But the new power only adds value if it is used properly. The authorities that will benefit most are not the ones that treat it as a political shortcut. They are the ones that build it into their procurement governance, define the local area carefully, preserve genuine competition and use the new flexibility where it makes commercial as well as policy sense.