Utility Activity (UK)

Some of the most economically significant procurement in the UK is carried out not by traditional government departments but by utility operators: the organisations that provide water, energy, transport, and postal services. Because these entities often operate under statutory licences that give them market positions unavailable to ordinary commercial competitors, they are subject to a distinct procurement regime under the Procurement Act 2023 that reflects the different competitive pressures they face.

What is a utility activity?

A utility activity is an activity in one of the four sectors covered by the utilities regime: water (including drinking water supply, sewage treatment, and flood risk management); energy (including the provision of gas, electricity, heat, or oil); transport (including operation of networks for bus, tram, rail, metro, trolleybus, or ferry services, as well as airports and ports); and postal services (including the carriage and delivery of postal items).

An organisation that carries on a utility activity is a covered buyer subject to the utilities procurement rules in the Procurement Act 2023, provided it does so under a special or exclusive right granted by a public authority. The utilities regime broadly mirrors the approach of EU Directive 2014/25/EU, which historically governed utilities procurement across European member states.

The utilities thresholds are higher than the standard contracting authority thresholds. This reflects the recognition that utilities often operate in partially competitive markets and that the rationale for mandatory procurement competition is somewhat weaker than for core public bodies spending entirely taxpayer-funded money. The utilities regime also permits a broader range of direct award situations and allows buyers to establish their own qualification systems for pre-qualifying suppliers over extended periods.

Why it matters for bidders

If your target market includes utilities, you need to understand that the rules governing their procurement differ from those applying to local authorities or NHS bodies. The notice types, thresholds, and procedural options are different, and the applicable timescales may also vary. Opportunities in the utilities sector are advertised on Find a Tender (for UK utilities above the utilities thresholds) alongside opportunities from contracting authorities.

Utilities procurement has historically been associated with qualification systems that allow suppliers to apply to join a pre-approved list at any time, similar in concept to the dynamic market available to contracting authorities. Understanding the specific utility's qualification requirements is an important early step.

Example

A licensed water company in England operates a regional water supply network under a statutory appointment from the Water Services Regulation Authority. When it procures infrastructure maintenance services above the applicable utilities threshold, it must follow the utilities procurement rules in the Act: publishing a tender notice on Find a Tender, running a competitive procedure, and publishing a contract award notice after the contract is signed.

Frequently Asked Questions

Are all energy companies covered buyers under the Act?

Only energy companies that operate under a special or exclusive right, such as a statutory distribution network licence, are covered. An energy supply company competing in the open retail energy market without a special right is not a covered buyer and has no obligation to follow the Act's procurement rules.

What is the utilities threshold compared to the standard threshold?

The utilities thresholds are higher than the standard contracting authority thresholds for goods and services. The precise current values are published on GOV.UK and updated periodically. Works contracts have the same threshold for both utilities and contracting authorities.

Can a utility use the competitive flexible procedure?

Yes. The Procurement Act 2023 makes the competitive flexible procedure available to utilities as well as contracting authorities. Utilities also retain the option of qualifying systems, which allow them to maintain a continuously open register of pre-approved suppliers.