Why do we have thresholds in public procurement? Why do they exist? This is an answer I tried to answer a couple of times in the past and was not particularly happy with the result (here and here). In short, we have them today because…we have always had them. The why, however, can be peeled out when we think back at the origins of public procurement regulation within the EEC in 60s and 70s and how member States wanted to open up their markets while - you guessed it - not opening too much. To the point that the first international attempt to open up procurement markets, the GATT Code on Public Procurement from 1979 included lower thresholds than those of the Directives applicable within the EEC at the time. Could you guess what happened to intra-EEC thresholds afterwards? They were simply lowered to match the international commitment, showing that the size of the procurement single market is not determined by an internal intra-community dimension. These external commitments put a floor on the size of the internal public procurement market.

From then on the die was cast and the public procurement market within the EU divided into two halves: above thresholds, subject to the full regulatory might of EU law; below, up for the member States to do as they pleased. At least, that was how things went until Telaustria decided to muddle the matters even further by stating that contracts below thresholds might be subject to EU primary law under some circumstances. In subsequent cases the Court of Justice painted itself into the c has been unable to clearly devise a test that can be applied safely by contracting authorities before a procurement procedure is launched.

So why should we get rid of them?

The logic of the system

The first reason to get rid of thresholds altogether is one of system logic: why are we determining by value if a contract belongs to the single market in the first place when we do not do it in other areas? Is freedom of establishment dependent on the size of the undertaking interested in exercising it? Or free movement of capital only available for transactions over a certain value? Or freedom of movement dependent on the salary being offered? Ironically a minimum salary to allow foreigners to immigrate is a barrier commonly used by countries which want to control their migration, but the EU and the member States have always been adamant in defending (rightly) free movement of workers without controls. But somehow, we accept a different logic when it comes to public contracts.

Allow me to use an even more ridiculous scenario. I can buy a book from anywhere in the EU without trouble because of free movement of goods and the single market, but a contracting authority can discriminate and decide to buy the same book nationally even if it can be found at a cheaper price elsewhere in the EU.

Or let's do a thought exercise: imagine that no thresholds had ever been implement for public contracts. Can you imagine how odd it would look in 2025 to argue for their implementation and the curtailment of the single market? This is a good example of the power of defaults and inertia.

In conclusion, makes no logical sense from the perspective of the single market as a system to impose this artificial barrier between what is and is not part of the single market based on contract value. And there is plenty of evidence of contracting authorities bunching up contracts just below thresholds (here, here, here) to ensure they follow national rules and not those pesky, pesky EU ones. If it weren't for the thresholds, this artificial bunching would simply not occur. And there is evidence as well that this bunching is neither free nor efficient: contracts just above the thresholds have 12% more bids and prices are lower by 8% and the Commission itself warned back in 2004 against thresholds being increased precisely for this reason.

Expanding the single market

In connection with the comment above, the obvious way to expand the single market in public procurement is to make do with the thresholds and consider all contracts as being part of the single market and treated as such. I think it is unsurprising that the import penetration in public procurement is way below that of the private sector (7.4% vs 19.6%) that of internal trade figures (23.6% for goods, services only 7.6%). It is unsurprising when a not-insignificant part of public sector expense is ring fenced and treated as off limits from the internal market. Yes, if contracts have a 'certain cross-border' interest then they are technically subject to the general principles, but even if that could be determined with (legal) certainty in advance of launching a tender that would still leave all other contracts as off limits from the single market.

This is particular relevant for smaller companies. At the moment, SME (and startup) participation rate in public procurement is probably not great and, if I had to guess, horrendous cross-border. The vast majority of contracts they may want to tender are going to be of a value below thresholds and so as such they are effectively restricted to their home market when it comes to public procurement. Yes, they may bid in joint bids or subcontracted elsewhere or start bidding abroad after a growth period but not by themselves earlier on. As the Commission wrote stated in the Competitiveness Compass, the upcoming revision is also to make life easier for these economic operator to take part in public procurement so this expansion of the single market would go hand in hand with that commitment.

Ironically, the EU economy is way more integrated today than it was in the 1980s when the thresholds were last lowered, but for procurement it does not seem to be the case due to the thresholds.

(Partially) solving the data conundrum

One added advantage of getting rid of thresholds is an immediate increase in the amount of data related to public procurement that gets captured, providing a much more complete perspective of procurement activities across the Union than at the moment. For example, last time I checked Portugal is capturing the data on eForms but for the contracts below thresholds the data gets sent to the national repository and not TED and the Public Procurement Data Space. This is possible since there is no obligation to forward that data on because, you guessed it, the contracts they pertain to are not covered by the EU Directives. Ergo, there is no obligation to do so.

If how procurement data is captured does not change however, then the same problems we have above thresholds will apply and probably more intensely than thus far. I have more to say about data in public procurement as I've written a fair bit about it over the years, so that must be left for another entry. I hope the upcoming reform understands that public procurement is part of the wider public administration and doesn't do as in 2014 assume it operates in its own technical silo.

Pushback: wouldn't it make the system unmanageable?

The usual pushback I hear for this solution is that it makes no sense bring the above thresholds practice to below thresholds in terms of procedures and, frankly, bureaucracy. I agree with this critique and that is why before the 2014 Directives I designed and trialled a simplified open procedure for contracts below thresholds in the UK. And it is not as if member States have not 'rolled their own' to regulate below thresholds procurement. I bet that there are now 27 different approaches to solve this problem so there is plenty of inspiration to choose from on how to regulate these contracts below thresholds.