10. June 2024 By Tina Sänger and Marcel Penstorf
New thresholds for contract awards until 2025 and hidden opportunities
Where do the thresholds come from and who sets them?
It is now two years since we at Proposal Management presented the definition of the threshold values. The EU Commission has once again published the thresholds for 2024 and 2025 in a euro value. In the "Agreement on Government Procurement", the World Trade Organisation has defined the thresholds in a fictitious currency or a mixture of currencies. This mixture of US dollars, euros, Chinese yuan, Japanese yen and British pounds was defined by the International Monetary Fund (IMF). This fictitious currency is called "special drawing rights" and will remain constant until 2027. As mentioned at the beginning, the EU Commission has now reviewed and published the conversion into euros.
New EU thresholds 2024 and 2025
In the services sector, there are three thresholds for contracting authorities that determine when a Europe-wide invitation to tender is required.
The lowest threshold applies to the highest and upper federal authorities, such as our customers from the federal ministries. These authorities must tender EU-wide from a threshold value of 143,000 euros/net. The highest threshold of 443,000 euros/net applies to the sector area as well as to defence and security authorities. The sectoral area includes, for example, Deutsche Bahn or the numerous municipal utilities and the four public electricity grid operators. For all other authorities, the threshold value of 221,000 euros/net applies. These regulations are important in order to ensure transparent and non-discriminatory procurement practices in the services sector.
Figure 1: EU thresholds for 2024/2025
The threshold values reached historic highs in 2018 and 2019.
Figure 2: Development of EU thresholds for public clients from 2006 to 2025
National value limits
As described above, the EU thresholds regulate the application of EU public procurement law, which is set out for supplies and services in the
- Regulation on the Award of Public Contracts (VgV) or the
- Sector Procurement Regulation (SektVO) or
- Defence and Security Procurement Regulation (VSVgV).
If the estimated contract value is below the EU threshold, national regulations apply, most of which are set out in the Sub-Threshold Procurement Ordinance (UVgO). One exception is Saxony, where the Public Procurement and Contract Regulations for Services - Part A (VOL/A) continue to apply.
The UVgO is regulated individually in each federal state and is often integrated into special laws, such as the Hessian Procurement and Collective Bargaining Act (HVTG).
At first glance, it seems time-consuming to examine 16 individual state procurement laws. This is because each federal state determines the so-called state value limits for the application of sub-threshold award types and thus the choice of procedure types itself (see Figure 1).
Figure 3: UVgO, value limits by federal state and choice of procedure interact
Some of these types of procedure are simplified and enable a higher chance of success for the bidding market in question when there is little competition. The characteristics of subthreshold award procedures are summarised in the following overview.
Figure 4: Simplified overview of the characteristics of the underlying process types
Hidden opportunities
The "restricted invitation to tender without a call for competition" and "negotiated award" procedures allow the contracting authority to write directly to a previously selected group of qualified bidders. This reduces the workload for bidders and contracting authorities and allows contracts with a low financial volume to be awarded more quickly.
Examples from the federal states
During the coronavirus pandemic, some federal states temporarily raised their value limits for simplified procurement procedures. This was intended to ensure the ability of administrations to act in times of crisis and at the same time to promote the economy. These temporary increases were extended in some cases due to other external factors (such as the conflict in Ukraine).
An overview of the status of collective bargaining and procurement laws in the federal states can be found on the forum vergabe website:
Taking into account the country-specific value limits, it is possible to award small contracts with little or no competition. It is also possible to make contracting authorities aware of these regulations in order to handle small contracts efficiently and in compliance with the law.
Conclusion and tips for reviewing procurement documents
The current procurement regulations offer both contracting authorities and interested companies a number of advantages. Firstly, the EU threshold regulates the application of EU public procurement law, which guarantees transparency and standardisation in the award procedures. If the estimated contract value is below this threshold, national regulations come into force, which are enshrined in the Sub-Threshold Procurement Regulations (UVgO).
Each federal state has the option of setting its own value limits. Regularly checking the current value limit decrees on the relevant websites helps to maintain an overview and to better understand the procurement law requirements of the respective federal state.
This variety of regulations may seem complex at first glance, but it also offers decisive advantages. The different types of procedure that can be used in the individual federal states open up opportunities for simplified award procedures with little competition. In particular, the "restricted invitation to tender without a call for competition" and "negotiated award" procedure types enable contracting authorities to target qualified bidders and organise the award process efficiently.
A review of the contract notice and the tender documents provides an initial indication of the estimated contract value (above or below the EU threshold) and explains the application of the simplified procedure types. It pays to take a close look!
The temporary increase in value limits during the coronavirus pandemic also demonstrates the flexibility and adaptability of the system in times of crisis. These measures help to ensure the administrative authorities' ability to act and at the same time provide economic stimulus.
The value limit regulations can also be temporarily adjusted during regional crises. Smaller direct contracts can then be awarded more easily.
Overall, the current procurement regulations enable the efficient and legally compliant processing of contracts, particularly for smaller projects with little competition. Taking into account the country-specific value limits, bidders can maximise their chances of being awarded a contract and public clients can optimise their award processes.
You can find more exciting topics from the world of adesso in our previous blog posts.
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