How to value a China supply contract
For a procurement using the Procurement Act valuation rules, estimate the maximum payable, including VAT, additional supply options and extensions or renewals. Assess related purchases together unless there are good reasons not to. Request an itemised contract quote from Cambridge China Bridge.
Start with the contract, not the factory invoice
For a school, council or NHS trust using these valuation rules, the starting point is the maximum amount payable under the contract. A factory quotation or initial purchase order may show only part of that commitment.
Ask your procurement lead to confirm the applicable regime and threshold category. List the contracting buyer, supplier, goods, delivery scope and payment terms. Use Understanding your landed price to identify cost headings, then mark which are payable under this contract and which are paid separately.
Keep VAT in the threshold estimate
The Cabinet Office guidance says the estimated contract value should include VAT. Do not carry a VAT-exclusive landed-cost figure straight into the threshold assessment.
Request a quotation showing the net amount, applicable VAT and gross amount separately. If buying directly from a factory, ask finance to document how VAT is reflected in the estimate. Keep the import-tax discussion in VAT on imports from China separate from the procurement valuation worksheet.
Include options, extensions and renewals
The maximum-value estimate includes options for additional supplies and options to extend or renew the contract. Valuing only the initial term leaves those contractual commitments out.
Request a price schedule covering the initial supply and every optional quantity, delivery location and renewal period. For furniture, equipment or uniforms, identify optional replenishment and support explicitly. Record the quantity limits, price assumptions and currency conversion used, rather than relying on an informal expectation of future orders.
Review related purchases across the buyer
Requirements that can reasonably be aggregated must be valued together unless there are good reasons not to. Dividing purchases to reach a below-threshold value is not a good reason.
Check planned purchases across departments, sites and budget holders. Separate invoices, factories or delivery dates should prompt a review of the underlying requirement. Record why purchases belong together or why separate valuation is justified. Ask the procurement lead to approve that reasoning before orders are placed.
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Keep a valuation record that can be checked
Keep the quote version, scope, VAT treatment, optional purchases, renewal assumptions and related-purchase decision together. Show each included amount once so that a delivered quotation and its underlying freight or handling costs are not counted twice.
Ask Cambridge China Bridge for a breakdown that your procurement team can reconcile to the proposed contract. Use the school and charity sourcing approval pack for the wider approval file. Arrange a fresh review if the specification, contract scope or available pricing changes before commitment.
Frequently asked questions
Does procurement contract value include VAT?
Yes. The Cabinet Office valuation guidance says the estimate should include VAT. Ask finance to show the VAT treatment separately from the net contract amount.
Do optional repeat orders count towards the threshold?
Include additional supplies available through options in the contract, together with extension and renewal options. Do not value only the initial order.
Can separate school or hospital departments value orders separately?
Assess whether the requirements can reasonably be aggregated. Separate valuation needs good reasons; seeking a below-threshold value is not a good reason.
Is the factory quote enough to value the contract?
Only if it captures the full contract scope. Request a breakdown of delivery, VAT and optional commitments, and reconcile it to the maximum payable under the proposed contract.