Quick answer: Most public sector organisations copy qualification thresholds from previous contracts without checking whether they're proportionate to the new one. The result is a selection stage that filters out competent suppliers on arbitrary grounds, leaving you with the same pool you always had.
I spent a long time in public sector procurement before I started looking at it from the outside. And one of the things you stop noticing when you're inside is how much of your qualification criteria is just inherited. Someone set a turnover multiple of 2x contract value in 2014, it went into the template, and it has been travelling through your procurement system ever since, applied to contracts it was never designed for.
That is not a minor administrative issue. It is a market access problem.
Where the thresholds come from
Most procurement teams will tell you their qualification criteria are based on managing risk. Turnover requirements protect against financial failure. Insurance requirements protect against liability. Experience requirements protect against underperformance. All reasonable in principle.
The problem is that the thresholds are rarely derived from an actual risk assessment of the specific contract in front of you. They are derived from whatever was used last time, or whatever the template says, or what someone once told a junior officer was standard practice.
A 2x annual turnover requirement applied to a £500,000 contract means you are requiring suppliers to demonstrate £1 million annual turnover. For many of the capable SMEs, VCSEs, and specialist providers you are supposedly trying to develop as a market, that threshold alone closes the door before they have read page two.
The insurance problem
Professional indemnity and public liability requirements are where I see some of the most disproportionate thresholds in practice. A £5 million public liability requirement on a contract worth £80,000 is not uncommon. Neither is a £2 million professional indemnity requirement on a low-risk advisory contract.
Insurance costs money. Carrying higher limits than your actual work requires costs suppliers money they are spending on the off-chance of winning your contract. Smaller suppliers may not hold those levels as standard, and obtaining them temporarily for a tender is not always straightforward. Some will simply not bid.
The Procurement Act 2023 is explicit that selection criteria must be proportionate to the subject matter and value of the contract. That is not new law in spirit — proportionality has been in procurement regulations for years — but it is now stated more plainly, and it will be harder to defend thresholds you cannot justify by reference to actual contract risk.
The experience threshold trap
Requiring three years' relevant contract experience sounds sensible. It probably is sensible for a complex, high-value contract with significant delivery risk.
Applied as a blanket requirement to a wider programme of contracts, it becomes a mechanism for permanently excluding newer suppliers, regardless of their actual capability. If you run a supplier development programme on one hand and require three years' prior public sector experience on the other, you have built a contradiction into your procurement process.
Experience requirements should reflect the genuine delivery demands of the specific contract. A supplier who has delivered comparable work in the private sector, in a different geography, or at a slightly smaller scale may be entirely capable of performing well. Your qualification stage should be asking whether they can do this work, not whether they have an audit trail that matches your template.
How to recalibrate
Start with the contract, not the template. Before you set a single threshold, ask what the actual financial exposure is if a supplier fails mid-contract, what the realistic insurance claims scenario looks like, and what level of prior experience genuinely predicts good performance here.
For turnover, the Cabinet Office guidance has long suggested a general cap of 2x contract value as a maximum, not a default. For many contracts, 1.5x or lower is more appropriate. For short-term or low-risk contracts, consider whether a turnover requirement adds anything meaningful at all.
For insurance, require what the contract actually warrants. If you are uncertain, talk to your insurance or legal colleagues about what coverage is genuinely necessary for the specific risk profile, not the theoretical maximum.
For experience, consider whether pass/fail experience thresholds are the right tool, or whether experience should be a scored quality criterion that allows suppliers to demonstrate equivalent capability through different routes.
Document your reasoning
Whatever thresholds you set, record why you set them. Not because auditors will ask — though they may — but because it forces the discipline of actually deriving thresholds from the contract rather than copying them from somewhere else.
If you cannot write a sentence explaining why a particular threshold is proportionate to this contract, that is a reliable sign it probably is not.
Your qualification stage is supposed to establish a minimum floor of capability. If it is functioning as a ceiling on who can participate, you have a supplier development problem that starts long before evaluation.