Even if the EC (EU) treaty principles of free movement, equal treatment and transparency apply to all public procurement in the internal market, the detailed provisions of the Procurement Directive 2004/18/EC apply to contracts with more significance for the single market and relevant to the WTO Government Procurement Agreement (GPA).
The rough and ready answer has been to devise monetary thresholds for different types of public contracts, with the amounts originally defined in special drawing rights (SDR), but “translated” into euros in the Procurement Directive. These contract thresholds have to be adjusted from time to time to the changing values of the SDRs to comply with the GPA.
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Revision of the thresholds
The thresholds in euros are set out in Article 7 of the Procurement Directive, based on the system for revision in Article 78. The references to Article 77(2) point to the advisory procedure (Advisory Committee for Public Contracts).
The thresholds are verified (and revised) every two years:
Article 78
Revision of the thresholds
1. The Commission shall verify the thresholds established in Article 7 every two years from the entry into force of this Directive and shall, if necessary, revise them in accordance with the procedure laid down in Article 77(2).
The calculation of the value of these thresholds shall be based on the average daily value of the euro, expressed in SDRs, over the 24 months terminating on the last day of August preceding the revision with effect from 1 January. The value of the thresholds thus revised shall, where necessary, be rounded down to the nearest thousand euro so as to ensure that the thresholds in force provided for by the Agreement, expressed in SDRs, are observed.
2. At the same time as the revision under paragraph 1, the Commission, in accordance with the procedure under Article 77(2), shall align:
(a) the thresholds established in (a) of the first subparagraph of Article 8, in Article 56 and in the first subparagraph of Article 63(1) on the revised threshold applying to public works contracts;
(b) the threshold established in Article 67(1)(a) on the revised threshold applying to public service contracts awarded by the contracting authorities referred to in Annex IV;
(c) the thresholds established in (b) of the first subparagraph of Article 8 and in Article 67(1)(b) and (c) on the revised threshold applying to public service contracts awarded by contracting authorities other than those referred to in Annex IV.
3. The value of the thresholds set pursuant to paragraph 1 in the national currencies of the Member States which are not participating in monetary union is normally to be adjusted every two years from 1 January 2004 onwards. The calculation of such value shall be based on the average daily values of those currencies expressed in euro over the 24 months terminating on the last day of August preceding the revision with effect from 1 January.
4. The revised thresholds referred to in paragraph 1 and their corresponding values in the national currencies referred to in paragraph 3 shall be published by the Commission in the Official Journal of the European Union at the beginning of the month of November following their revision.
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Revised thresholds from 2008
The thresholds were revised by Commission Regulation (EC) No 1422/2007 of 4 December 2007 amending Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the award of contracts (OJEU 5.12.2007 L 317/34).
The Regulation entered into force on 1 January 2008.
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Amended Procurement Directive
Based on Commission Regulation 1422/2007, Article 7 of the Procurement Directive 2004/18/EC appears like this in the consolidated version (of 15 September 2008):
CHAPTER II
Scope
S e c t i o n 1
Thresholds
Article 7
Threshold amounts for public contracts
This Directive shall apply to public contracts which are not excluded in accordance with the exceptions provided for in Articles 10 and 11 and Articles 12 to 18 and which have a value exclusive of value-added tax (VAT) estimated to be equal to or greater than the following thresholds:
(a) EUR 133 000 for public supply and service contracts others than those covered by point (b), third indent, awarded by contracting authorities which are listed as central government authorities in Annex IV; in the case of public supply contracts awarded by contracting authorities operating in the field of defence, this shall apply only to contracts involving products covered by Annex V;
(b) EUR 206 000
— for public supply and service contracts awarded by contracting authorities other than those listed in Annex IV,
— for public supply contracts awarded by contracting authorities which are listed in Annex IV and operate in the field of defence, where these contracts involve products not covered by Annex V,
— for public service contracts awarded by any contracting authority in respect of the services listed in Category 8 of Annex IIA, Category 5 telecommunications services the positions of which in the CPV are equivalent to CPC reference Nos 7524, 7525 and 7526 and/or the services listed in Annex II B;
(c) EUR 5 150 000 for public works contracts.
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Other threshold provisions
The thresholds appear in Article 8(1) on contracts subsidised by more than 50 % by contracting authorities, in Article 56 regarding public works concessions, in Article 63(1) on advertising public works concessions and Article 67(1) on design contests.
In addition, sums of EUR 80 000 and 1 000 000 with regard to lots are mentioned in Article 9(5)(a) and (b).
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Thresholds in national currencies
The euro thresholds apply directly in the (from tomorrow) 16 eurozone countries, but this still leaves us with the amounts in national currencies of the countries outside the euro area (cf. Article 78(3) above).
The Commission has published the Corresponding values of the thresholds of Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council in the Official Journal of the European Union 13.12.2007 C 301/1. The sums were correct, but the reference bewildering.
After the corrigendum published in the OJEU 20.12.2007 C 310/77, the corresponding values in the national currencies other than euro of the thresholds of Directives 2004/17/EC and 2004/18/EC refer to the Directives as last amended by Commission Regulation (EC) No 1422/2007 (OJEU 5.12.2007 L 317/34).
When reading the Procurement Directive, you can easily find the corresponding value in the desired national currency:
EUR 80 000
BGN New Bulgarian Lev 156 464
CZK Czech Koruna 2 274 915
DKK Danish Krone 596 444
EEK Estonian Kroon 1 251 728
GBP Pound Sterling 54 327
HUF Hungarian forint 20 587 272
LTL Lithuanian Litas 276 224
LVL Latvian Lats 55 792
PLN New Polish Zloty 310 171
RON New Romanian Leu 276 865
SEK Swedish Krona 742 196
SKK Slovak Koruna 2 906 438
EUR 133 000
BGN New Bulgarian Lev 260 121
CZK Czech Koruna 3 782 045
DKK Danish Krone 991 589
EEK Estonian Kroon 2 080 998
GBP Pound Sterling 90 319
HUF Hungarian forint 34 226 339
LTL Lithuanian Litas 459 222
LVL Latvian Lats 92 755
PLN New Polish Zloty 515 660
RON New Romanian Leu 460 289
SEK Swedish Krona 1 233 901
SKK Slovak Koruna 4 831 953
EUR 206 000
BGN New Bulgarian Lev 402 894
CZK Czech Koruna 5 857 905
DKK Danish Krone 1 535 844
EEK Estonian Kroon 3 223 200
GBP Pound Sterling 139 893
HUF Hungarian forint 53 012 225
LTL Lithuanian Litas 711 277
LVL Latvian Lats 143 665
PLN New Polish Zloty 798 691
RON New Romanian Leu 712 928
SEK Swedish Krona 1 911 155
SKK Slovak Koruna 7 484 078
EUR 412 000
BGN New Bulgarian Lev 805 789
CZK Czech Koruna 11 715 810
DKK Danish Krone 3 071 689
EEK Estonian Kroon 6 446 399
GBP Pound Sterling 279 785
HUF Hungarian forint 106 024 450
LTL Lithuanian Litas 1 422 554
LVL Latvian Lats 287 331
PLN New Polish Zloty 1 597 381
RON New Romanian Leu 1 425 856
SEK Swedish Krona 3 822 309
SKK Slovak Koruna 14 968 156
EUR 1 000 000
BGN New Bulgarian Lev 1 955 798
CZK Czech Koruna 28 436 432
DKK Danish Krone 7 455 555
EEK Estonian Kroon 15 646 600
GBP Pound Sterling 679 090
HUF Hungarian forint 257 340 898
LTL Lithuanian Litas 3 452 800
LVL Latvian Lats 697 404
PLN New Polish Zloty 3 877 139
RON New Romanian Leu 3 460 816
SEK Swedish Krona 9 277 450
SKK Slovak Koruna 36 330 475
EUR 5 150 000
BGN New Bulgarian Lev 10 072 362
CZK Czech Koruna 146 447 623
DKK Danish Krone 38 396 109
EEK Estonian Kroon 80 579 990
GBP Pound Sterling 3 497 313
HUF Hungarian forint 1 325 305 627
LTL Lithuanian Litas 17 781 920
LVL Latvian Lats 3 591 633
PLN New Polish Zloty 19 967 267
RON New Romanian Leu 17 823 204
SEK Swedish Krona 47 778 869
SKK Slovak Koruna 187 101 944
***
Comments relevant to the subject are appreciated.
Ralf Grahn
Wednesday, 31 December 2008
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Interesting one this - in the UK we obviously have the thresholds as being in pounds, at the exchange rate against the Euro. What happens when these change as significantly as has been the case during the last year? I believe the threshold would be the current excahnge rate calculation, not that from 01/01/08. However, it would appear no-one recalculates it here, so the thresholds as GBP remain the same in the UK.
ReplyDeleteNowtas,
ReplyDeleteThe exchange rates have been fluctuating a lot lately, but I imagine that the British thresholds in pounds have not changed after the beginning of 2008.
As far as I remember, the procurement thresholds are set for two years.
Grahnlaw
ReplyDeleteThe GBP versions of the thresholds remain the same for the two years, despite exchange rate changes – I have checked. I still think this should not be the case when the value in exchange has fallen so much, but the fact remains that what would be the cost of such a procurement within the UK would still be the same corresponding level of value, so the exchange rate changes do not impact on the “familiar” cost.
Of course, this all leads to very different price offers from prospective suppliers working under the Euro, and this in turn suggests the competiveness has changed. This is precisely what the EU regulations should be preventing, but cannot if the UK does not trade in Euros and the exchange rate is not reapplied during the two years between reviews of thresholds.
Despite the change, I suppose it could be argued that the majority of tendering activities that would have been required a year ago would still be required now – and international offers for services, for example, would still be over the threshold.
I do find this an interesting issue, which must make me quite disturbingly boring.
Nowtas,
ReplyDeleteOn the contrary, the question is fascinating.
There are many, more or less relevant issues. Here are some of the thoughts I had as a result of reading your comment.
Legal rules are often fairly rough and ready, because some order is better than none. The thresholds belong to this group (as do speed limits and many other limits or amounts).
The EU thresholds are an imperfect expression of the Special Drawing Rights (SDRs) referred to in the WTO GPA, but it is much more user friendly to express the thresholds in euros (and revise them every two years).
The values in other currencies is a consequence of there being member states which have not yet qualified for the common currency and the UK which has opted out.
But procurement procedures and execution of for instance building contracts are lengthy affairs. Wouldn't continuous tinkering with the thresholds cause more disturbances than joy?
(The really important issues have to do with how the parties protect themselves against currency risks.)
Nothing prevents a contracting authority from publishing tender notices even if the presumed contract value is below the threshold.
Nowtas and Grahnlaw - very interested to read your exchange as same issue has just arisen. I agree that threshold in sterling is set for 2 years at the amount publised in OJEU. However this appears to be contradicted by EU guidance on ERDF Interreg IV which says:
ReplyDelete"the sterling equivalent is also indicated but based on an assumed average rate. This is only set as a guide and the exchange rate prevalent at the date on which the tender is advertised should be used to calculate the correct sterling equivalent.."
The UK Public Contract Regulations 2006 are very clear though (8)(6) that the value in pounds sterling is calcuated by reference to the rate from time being applied for these purposes and published from time to time in the OJEU.
It seems upto the Commission to publish rates more frequently if exhange rates are wildly fluctuating.