New European Procurement Threshold Values to Apply Across Europe from 1 January 2016

InternationalFrom 1 January 2016, the threshold values that trigger the need for a regulated public procurement process by which public or government authorities purchase work, goods or services from companies across Europe will increase.

However, because of movements in exchange rates between the euro and some other currencies, the equivalent values in non-euro EU currencies – especially UK pounds sterling – have fallen.

A series of three European Commission regulations published on 25 November 2015 amend the existing European directives that set out the EU public procurement rules.  The new regulations will come into force on 1 January 2016.

Under the EU public procurement rules, all requirements leading to a contract awarded by a public or government body – including utilities and public concession contracts – must follow openly advertised tendering and contract award procedures, and comply with principles of transparency, fairness and equality.  A number of exceptions exist, including that the rules apply to requirements above a certain financial threshold, i.e., small contracts are not required to follow the same rules.

The European Commission updates the EU-wide threshold values every two years in order to make sure they are consistent with the thresholds under the World Trade Organisation’s Government Procurement Agreement.  During the latest biennial review, the thresholds have been increased – although not by much.

The regulations have a direct effect in all EU Member States, and all EU Member States will have to apply the new threshold values to their national procurement rules.

The regulations prescribe the new threshold values in terms of euros, and a separate communication from the European Commission sets out how these new values should be translated into local currencies in EU Member States (such as the UK) that have not converted to the euro.  The pound sterling values are slightly lower than the last issued threshold values, published two years ago.

The new threshold values that apply from 1 January 2016 are set out below.

For contracting authorities such as central government departments/agencies and local authorities, the new thresholds (exclusive of VAT) will be:

  • €135,000 for supply and services contracts and design contests awarded by central government bodies;
  • €209,000 for supply and services contracts and design contests awarded by local or regional government bodies, or for authorities operating in the defence sector; and
  • €5,225,000 for works contracts to be awarded by any contracting authority.

For contracting authorities and other regulated bodies that pursue activities in the utilities sector (e.g., operators of gas/electricity distribution networks and operators of public transport services), the new thresholds (exclusive of VAT) will be:

  • €418,000 in respect of supply and services contracts as well as design contests organised as part of procurement for services; and
  • €5,225,000 in respect of works contracts.

The threshold applicable under the so-called Concessions Directive (covering the right to build and/or use some form of public infrastructure or the right to exploit certain natural resources) will be €5,225,000 and will apply to the award of concessions valued above that figure.