Given we are operating in a broken market, should we go for a shorter contract? 5 years at 80-20 seems like a blank cheque for too long a period.

Our view is that a key part of fixing the market is to go for a long contract as this gives the firms some certainty and acknowledges the investment they have to make in this specialist area. We certainly do not think that the 80-20 weighting is a blank cheque, as although audit quality is vital, price is still an important factor as all bids must be by firms that have passed the assessment to provide local audit.

We are also considering whether the reasonableness / acceptability of bid prices should be tested by reference to market rates at the time of the procurement, as we are acutely aware of the financial pressures on our clients. To do this we are considering an approach whereby PSAA would set an acceptable price range. The lowest point of the range would be set by the lowest winning bid price submitted for any one of the contract lots.

The upper limit would be set by PSAA. It would take the form of a percentage uplift addition to the lower limit to reflect a reasonable expectation of the likely spread of realistic market prices. In setting the upper limit PSAA would take into consideration the stability and predictability of the market at that time, as well as researching and having regard to past experience of local audit procurements in England. We would envisage setting the percentage uplift no later than January 2022.

Compliant bid prices which fall within the range would be deemed acceptable and, subject to winning lot competitions, would result in the award of contracts. Bid prices which exceed the upper limit of the price range would be deemed unacceptable and would potentially lead to the exercise of one or more contract extension options.