Why this matters now
For many councils, the question is no longer whether local businesses should have a fairer opportunity to win public contracts. The question is how to do this lawfully, commercially and transparently under the Procurement Act 2023.
That question has become more immediate in 2026. English local authorities now have a specific voluntary route to reserve competitions for certain below-threshold contracts to suppliers based within the United Kingdom or within a defined local area. This is a meaningful change from the previous position, under which local authorities were generally prevented from taking account of the location of a contractor's business activities when carrying out procurement functions.
The new flexibility is not a general permission to award contracts to a preferred local firm. It does not remove the need to demonstrate value for money. It does not apply to every contract. It does not allow local preference to be introduced quietly during evaluation. Used properly, however, it gives councils an additional tool to support accessible markets, local economic growth and the participation of smaller suppliers.
The practical issue for procurement and commissioning teams is therefore clear: where a local reservation is being considered, the council must be able to show why the contract is suitable, how competition will remain credible, how the decision will be advertised, and how the resulting contract will deliver value for residents.
What has changed for English councils
The Guidance on reserving competitions for below-threshold contracts, updated on the 16th of February 2026, confirms that a new voluntary policy permits in-scope authorities in England to reserve competitions for below-threshold contracts to businesses based locally or in the United Kingdom.
The guidance reflects the Local Government (Exclusion of Non-commercial Considerations) (England) Order 2026. In specific circumstances, the Order disapplies the restriction concerning supplier location in section 17(5)(e) of the Local Government Act 1988 for below-threshold contracts.
For councils, that distinction matters. Location can now be taken into account for an eligible reserved competition, but only within the scope permitted by the Order. Outside that scope, the wider restrictions on non-commercial considerations continue to apply.
The change should therefore be understood as a controlled procurement option, not a general local purchasing preference.
Which authorities and contracts are covered
The policy applies in England to best value authorities to which the relevant Local Government Act restriction applies, as well as parish councils within scope. This includes the types of local authority most likely to be commissioning goods, works and services for communities, and may include joint committees exercising procurement functions for relevant authorities.
The option applies only when an authority is conducting a competition for the award of a relevant below-threshold contract. Under the Procurement Act 2023, this broadly means a contract, framework or concession with an estimated value below the relevant threshold for that type of requirement.
The policy does not apply to contracts subject to the Health Care Services (Provider Selection Regime) Regulations 2023. Councils commissioning relevant health care services must therefore distinguish those arrangements from procurements falling within the new local reservation route.
This first-stage scoping exercise is essential. A decision to reserve a competition should never begin with the desired supplier base and work backwards. It should begin with a clear assessment of the requirement, estimated value, applicable legal regime, available market and the council's own contract procedure rules.
What does reserving a competition actually allow
For an eligible below-threshold competition, a council may determine before inviting tenders that only contractors based within the United Kingdom may participate.
Alternatively, the council may determine that only contractors based within a defined local area may participate.
The local area is not an unrestricted concept. Depending on the circumstances, it can include the authority's own area and any counties or London boroughs bordering that area. Where two or more relevant authorities intend to enter into the contract, their areas and relevant bordering counties or London boroughs may be included in accordance with the Order.
The definition of a supplier being based within an area is also important. It relates to where that contractor is based or has established substantive business operations. It is not determined by the location of corporate ownership or control. A foreign-owned business with substantive business operations in the defined local area may therefore be eligible, whereas a business with no such local operation will not qualify simply because it promises to deliver locally after award.
This prevents councils from treating the policy as a superficial preference for familiar names. Eligibility must be applied consistently against the defined reservation.
Local reservation is not the same as local outcomes
Councils should distinguish between two legitimate but different approaches.
A reserved competition limits which eligible suppliers may participate in a particular below-threshold competition, where the legal conditions are met and the authority has chosen to use the voluntary policy.
A procurement for local outcomes is designed so that any eligible bidder can compete to deliver measurable benefits relevant to the contract, such as apprenticeships, targeted employment support, community engagement, local supply chain opportunities, service accessibility or environmental outcomes.
Both approaches may support local communities, but they involve different legal and commercial decisions.
For some low-value, locally deliverable contracts, a reserved competition may be proportionate and effective. Examples could include certain minor works, place-based community activities or locally supplied operational requirements, provided that a credible competitive market exists.
For larger, specialist or above-threshold procurements, councils should normally focus on accessible procurement design and contractually measurable outcomes rather than attempting to restrict competition by supplier location.
The National Procurement Policy Statement identifies economic growth and stronger supply chains as priorities, including giving small and medium-sized enterprises and voluntary, community and social enterprises a fair chance at public contracts. This supports thoughtful market design and the removal of barriers. It does not convert local preference into the default award approach.
The first governance test: is there a functioning market
The ability to reserve a competition does not mean it is sensible to do so.
Before choosing a local or United Kingdom reservation, a council should understand whether enough capable suppliers are likely to meet the eligibility requirement and compete meaningfully. This is particularly important where service continuity, specialist capability, safeguarding, construction risk or technical integration is involved.
If a local reservation results in only one credible bidder, higher prices, reduced quality or a fragile delivery solution, the authority may struggle to demonstrate that the approach represented best value.
Good pre-market engagement is therefore central to a defensible decision. An authority may need to explore supplier capacity, delivery geography, market interest, barriers for SMEs and VCSEs, likely pricing pressure, insurance requirements, mobilisation capability and the availability of alternative providers.
Engagement must be open, fair and properly documented. A reservation should be informed by market evidence, not adopted simply because an incumbent provider, elected member or service manager would prefer work to remain local.
The second governance test: has the authority selected the right route
The local reservation power only applies to competitions for eligible below-threshold contracts. It should not be used as a reason to split a larger requirement, underestimate value or avoid a compliant route for a wider aggregated need.
Authorities should consider whether similar requirements should be valued together, whether the contract sits within a wider programme, whether options or extensions affect estimated value, and whether a framework or other route already provides a better commercial solution.
A council may also need to consider whether reserving by location is the most effective method of supporting the intended policy goal.
Where the objective is to increase SME or VCSE participation, removing unnecessary procurement barriers may provide a better result than geography alone. The guidance confirms that councils may also consider reserving eligible below-threshold competitions to SMEs only, VCSEs only, or SMEs and VCSEs, either independently or in conjunction with a permitted location reservation.
This creates useful design choices, but it also increases the need for commercial judgment. A local SME reservation could increase opportunity for smaller local businesses, while also reducing the potential market significantly. The authority should understand that trade-off before issuing the opportunity.
The third governance test: can the decision be explained publicly
A reserved competition must be transparent from the outset.
Where an authority advertises a notifiable below-threshold contract and wishes to rely on a local or United Kingdom reservation, it must identify the reservation in the below-threshold tender notice. For local authorities, a notifiable below-threshold contract is generally a regulated below-threshold contract valued at not less than £30,000 including VAT.
The notice must be published on the central digital platform before the opportunity is advertised elsewhere. Where a local area reservation is used, the advertisement must state the extent of the local area for that procurement so that suppliers can understand whether they are eligible to participate.
This is not an administrative afterthought. The transparency requirement protects suppliers and the authority. It makes the rule of the competition visible before bids are invited and avoids a situation in which geography influences selection or evaluation without disclosure.
Councils should also ensure that their internal approval record aligns with the published position. The record should identify the contract value, the chosen reservation, the defined area, the market evidence, the value for money assessment, the approval route and the notice requirements considered.
Section 98 of the Procurement Act 2023 requires appropriate records of material decisions. A local reservation is precisely the type of commercial decision that should be supported by a clear audit trail.
What councils should not do
Councils should not assume that a local reservation permits direct award to a chosen local business.
Councils should not apply a local weighting or informal preference in an above-threshold procurement merely because local economic growth is a strategic priority.
Councils should not use an artificial contract value or fragmented requirement to bring a procurement below threshold in order to access the reservation route.
Councils should not define a local area more widely or differently than the Order permits.
Councils should not exclude foreign-owned suppliers where they meet the test of being based within the specified area through substantive business operations.
Councils should not select the reservation approach without testing whether it will preserve genuine competition, capability and value for money.
Councils should not treat a successful local award as the end of the policy objective. The council still needs to manage delivery, payment, performance, social value and supplier risk after award.
What councils should do now
Review contract procedure rules and below-threshold guidance.
Authorities should check whether their internal rules, procurement templates and officer guidance recognise the 2026 Order and set out an appropriate approval process for any proposed reservation. Officers need to know when legal, procurement or governance review is required before an opportunity is advertised.
Create a reservation decision template.
A short but disciplined decision record should capture the applicable contract, estimated value, procurement regime, justification for reservation, market evidence, defined local area where relevant, SME or VCSE considerations, value for money assessment, notice requirements and authorisation.
Identify suitable contract categories cautiously.
Authorities may wish to review upcoming below-threshold pipelines to identify categories where a reserved competition might be practical. The exercise should be evidence-led and contract-specific, rather than creating a blanket expectation that all low-value contracts will be localised.
Carry out proportionate preliminary market engagement.
A council considering a reserved competition should understand whether suitable suppliers have substantive operations within the proposed area, whether competition is likely to be adequate, and whether barriers other than location are preventing local or smaller suppliers from bidding.
Remove barriers where reservation is not appropriate.
The Procurement Act 2023 guidance on covered procurement objectives reinforces the requirement to have regard to barriers that SMEs may face and to consider whether those barriers can be removed or reduced. Councils should examine lotting, turnover thresholds, insurance requirements, tender timescales, contract complexity, payment practice and market engagement even where the contract cannot or should not be reserved locally.
Align notices and records.
Where the authority uses a reservation, the published notice, internal approval, procurement documentation and evaluation approach must all reflect the same eligibility basis. A reservation cannot be defended effectively if it is clear in one document but ambiguous in another.
Plan post-award monitoring.
Supporting a local supplier is not achieved simply by awarding a contract. Councils should monitor delivery standards, payment performance, risks, community outcomes and any social value commitments through the contract lifecycle. This ensures that local procurement decisions result in evidenced benefit rather than assumption.
Practical implementation resources, procurement governance material and contract management support are available through the Prestige Commercial Consulting support hub. Where teams need structured capability development on the Procurement Act 2023, below-threshold procurement and commercial decision-making, further learning is available through the PCC Learning Platform.
The supplier perspective
The new policy creates opportunities, particularly for smaller businesses and VCSEs with genuine local or United Kingdom operations. It may make some council opportunities more accessible where suppliers previously struggled to compete against national providers on scale or bid resource.
However, suppliers should not assume that being local guarantees success. A reserved competition remains a competition. Suppliers still need to demonstrate capability, value, deliverability and compliance with the tender requirements.
Businesses should also ensure that any claim to be based within the specified local area can be evidenced through substantive business operations. Authorities are likely to need a consistent approach to checking eligibility, particularly where a reservation has reduced the field of competitors.
For established local businesses, the strongest message remains the same: local presence can create access to an opportunity, but demonstrable service quality, credible pricing and reliable delivery will determine whether the contract produces sustainable value.
A wider procurement policy direction, but not an unlimited power
The local reservation option sits within a broader policy direction. The Cabinet Office's government response on growing British industry, jobs and skills through public procurement, published on the 26th of March 2026, confirms continued interest in using public procurement to support economic growth, resilience, local jobs and opportunities for SMEs and VCSEs.
Importantly, that government response also states that future legislative proposals remain dependent on securing parliamentary time. Councils must therefore distinguish between existing powers that can be applied now and wider policy proposals that may require further legislation or guidance.
As at the 1st of June 2026, the practical operational change for English councils is clear: certain below-threshold competitions may now be reserved locally or nationally under the 2026 Order, provided the authority follows the prescribed scope, transparency requirements and governance discipline.
Closing takeaway
The new local reservation power gives English councils a valuable additional option. Properly used, it can help create accessible opportunities for local businesses, SMEs and VCSEs while supporting local economic resilience.
But the power is narrow for a reason. Public procurement must still protect competition, value for money, transparency and defensible decision-making.
Councils should not ask only whether a contract can be reserved for local suppliers. They should ask whether it should be reserved, whether the market can support that decision, whether the process is transparent, and whether the final contract will produce measurable value for the community.
For authorities reviewing below-threshold procurement policy, local supplier strategies or Procurement Act 2023 governance arrangements, further support is available from Prestige Commercial Consulting Limited.