Guidance

Guidance on using Horizontal Exemptions to Engage GAD Services

Published 27 August 2026

Purpose of this Guidance

This note provides practical guidance for UK public authorities on the horizontal arrangements exemption (Horizontal Exemption) under the Procurement Act 2023 (PA 2023) to contract directly with the Government Actuary’s Department (GAD), without running a competitive procurement.

It is aimed at commercial and finance teams considering whether a proposed arrangement with GAD can be treated as exempt from the main procurement rules. This summary contains general comments only and is not intended to be legal advice, therefore specific legal advice should be taken before reliance is placed upon it in any particular circumstances.

Can we enter into an agreement with GAD without conducting a regulated procurement?

As GAD is a central government department that operates on a cost-recovery basis, a public authority may contract directly with GAD without a competitive tender if the Horizontal Exemption applies. Schedule 2, Part 1, paragraph 3 of the PA 2023 sets out that a horizontal arrangement means an arrangement:

a) entered into -

i. with the aim of achieving objectives the authorities have in common in connection with the exercise of their public functions;

ii. solely in the public interest;

b) in which no more than 20 per cent of the activities contemplated by the arrangement are intended to be carried out other than for the purposes of the authorities’ public functions.

The key concept is that:

• Where a public authority and GAD are working together to deliver or support public functions in the public interest, on a non-commercial, cost-based basis, the arrangement can usually sit outside the standard procurement procedures.

If the arrangement is essentially the purchase of a generic, commercial actuarial service that could be provided by any supplier on the market, and is priced on a profit-making basis, the exemption is less likely to apply, and a competitive procurement may be required.

See also:

• Guidance: Exempted Contracts (HTML) - GOV.UK
• Procurement Act 2023

When the Exemption is likely to apply

The horizontal exemption is more likely to apply where the following conditions are met.

Both Parties are Public Authorities

• The contracting entity is a UK public authority (for example, local authority, devolved administration, non-departmental public body, NHS body, pension fund authority or regulator); and
• The counterparty is GAD, which is itself a central government department and therefore a contracting authority.

The work supports public functions

The arrangement should be about performing or supporting public tasks or statutory responsibilities. For example:

• Valuations and funding advice for public service pension schemes.
• Actuarial analysis and advice on social security, insurance or compensation schemes.
• Risk, modelling and financial analysis to support public policy or the exercise of statutory duties.

You should be able to link the proposed work clearly to your authority’s public functions or statutory obligations.

Working to achieve common objectives, not Commercial Trading

The spirit of the exemption is that the parties are working to achieve common objectives, which both parties are exercising as part of their public functions for the public interest.

Features that may support the exemption:

• The arrangement is governed by the public interest, not by profit.
• Charges are based on cost recovery and reasonable overheads, rather than commercial profit margins.
• GAD is not using the arrangement to gain a special competitive advantage in the wider commercial market.

Practical Steps for Authorities

To rely on the horizontal exemption with confidence when awarding work to GAD, it is recommended that authorities take the following practical steps, but should also seek their own advice to reflect the specific circumstances.

Describe the Cooperation Clearly

Prepare an internal note describing:

• The relevant public function or statutory duty your authority is discharging.
• How GAD’s services will help you perform that function.
• Why GAD is an appropriate partner (for example, its role as the government’s specialist actuarial adviser, its experience with public schemes, or specific statutory roles).

Confirm the “Public-Public” Nature of the Arrangement

Record that:

• Both parties (your authority and GAD) are public bodies.
• The work is for public purposes and is directly connected to your public responsibilities.
• The pricing is based on cost recovery / reasonable overheads, not profit-maximising commercial rates.
• No private sector entity is the main beneficiary of the arrangement.

Put a suitable written agreement in place

Use a written agreement (e.g. a service agreement, Memorandum of Understanding (MoU), or our Letter of Engagement which:

• States the public objectives of the work.
• Describes the roles, responsibilities, risks and costs for each party.
• Confirms that the arrangement is between public bodies and is for public interest purposes.
• Confirms that charges are on a cost-based basis.

Keep a Justification on File

Maintain a record explaining:

• That you are relying on the horizontal exemption under the PA 2023.
• The key facts supporting this, including:
• The public bodies involved.
• The public functions being supported.
• The cost-based nature of the pricing.
• Confirmation that there is no private sector beneficiary.

This documentation will support internal assurance and audit.