Public Procurement Financial Thresholds in the EU and Their Relationship with the GPA

Abstract

The regulation of procurement within the European Union is binary: above certain financial thresholds, contracts are subject to full EU regulation, whereas below they are only subject to national rules (in general). First introduced in the 1970s, the financial thresholds are arbitrary without a clear justification for their specific values. Thresholds remained fairly stable in nominal terms and over the years became solely dependent on the commitments assumed in the various revisions of multilateral procurement agreements, currently the Government Procurement Agreement (GPA) 2014. In consequence, the external market access commitments accepted by the EU in the GPA determine today the size of public procurement internal market.

While it is true that inflation and currency fluctuations have progressively reduced the real term value of thresholds, no proactive reductions have been undertaken by EU lawmakers, contrary to what was done with trade tariffs. In consequence, current threshold levels do not reflect any productivity improvements or transaction cost reductions achieved during the last 40 years. By remaining stable in nominal and changing only due to external pressures and inflation inertia, the thresholds have effectively functioned as a ceiling and a floor to the concept of internal market in public procurement within the EU.

Keywords: Public procurement, government procurement, WTO, GPA, EU, thresholds

JEL Classification: K00, K10, K21, H57