Part 1: Key definitions Section 2: Contracting authorities
This section sets out the definition of a "contracting authority". The section sets out which entities are covered, and the criteria to determine whether a person is such an entity, and which entities are specifically excluded from the definition. All entities that are contracting authorities are subject to the rules set out in the Act.
	Subsection (1) sets out that a contracting authority is either a "public authority"; or, in relation to a utilities contract, a public authority, "public undertaking" or "private utility", other than an "excluded authorities". These terms are defined in subsections that follow.
	Subsection (2) defines a "public authority" as a "person" that is wholly or mainly publicly-funded, or subject to public authority oversight. A person is defined in Schedule 1 to the Interpretation Act 1978 and is indivisible for the purpose of the legislation - i.e. it is a body of persons corporate or unincorporate and is to be treated for the purpose of the legislation as a single entity regardless of its internal makeup or function.
	However, subsection (2) also provides that if a public authority "operates on a commercial basis" then it will not be a contracting authority (regardless of whether it is wholly or mainly publicly funded or subject to oversight). The definition of a public authority is subject to subsections (9) and (10).
	Subsection (2) also defines a "public undertaking" as a person that is subject to public authority oversight and operates on a commercial basis; and a "private utility" as a person that carries out a "utility activity" and is not a public authority or public undertaking. (See section 6 (Utilities contracts) for the definition of a utility activity.)
	Subsection (3) explains the meaning of "public authority oversight" (used in the definitions of public authority and public undertaking) as being where a person is subject to management or control by one or more public authorities, or where more than half its board members are appointed by one or more public authorities. Under normal circumstances simple oversight by a regulator would not amount to "management or control".
	Subsection (4) clarifies what is meant when a person "operates on a commercial basis" by providing examples of matters to be considered in determining whether this is the case:  If a person directly or indirectly relies on a public authority to ensure its ongoing operation, or to bear its losses; or if it benefits from contracting on more advantageous terms than would be available to another person because of its connection with a public authority, then such factors might indicate that it is not operating on a commercial basis. If a person operates on a market that is subject to fair and effective competition (e.g. it competes for contracts alongside others in competitive procurements), then that might indicate that it is operating on a commercial basis. The list in subsection (4) is not exhaustive.
	Subsection (5) lists the authorities that are excluded from the definition of a contracting authority ("excluded authorities"). This allows the intelligence agencies listed and the Advanced Research and Invention Agency (ARIA), together with (in each case) any person subject to their oversight, to carry out their procurement activity outside the regime established by the Act. Devolved Scottish authorities, together with any person subject to public oversight only by a Devolved Scottish authority, are also excluded but are regulated under separate legislation.
	Subsection (6) defines the term "devolved Scottish authority" as any authority which exercises functions only in or as regards Scotland, where none or some of those functions relate to "reserved matters" (defined in subsection (12)).
	Subsection (7) explains that public undertakings and private utilities are to be treated as devolved Scottish authorities if they operate only in or as regards Scotland, where none or some of their activities relate to reserved matters. This is similar to the definition of a devolved Scottish authority, but refers to activities rather than functions. Linked to subsection (7), subsection (8) provides that a reference in the Act to a devolved Scottish authority includes a reference to an authority that is to be treated as a devolved Scottish authority (i.e. it includes an authority referred to in subsection (7)).
	Subsection (9) makes clear that a reference in the Act to a public authority includes the Common Council of the City of London, but refers to Schedule 2, paragraph 38, which, notwithstanding subsection (2) and the definition of a public authority, provides that contracts entered into by the Common Council of the City of London other than for the purposes of its public functions are exempt from the Act.
	Subsection (10) serves as an anti-avoidance mechanism. Notwithstanding subsection (2) and the definition of a public authority, the subsection provides that, where a contract is awarded in reliance on the vertical arrangement exemption in paragraph 2 of Schedule 2 to a controlled person that operates on a commercial basis, any subcontract substantially for, or contributing to, the performance of that contract or any part of it (a "relevant sub-contract") that the controlled person enters into must be awarded in accordance with the Act.
	Subsection (11) makes it clear that the Act does not apply to His Majesty in his private capacity.
	Subsection (12) provides definitions for the terms "relevant sub-contract" (which is referred to at paragraph [58] above) and "reserved matters" (which means the same as in the Scotland Act 1998).