Regulation 5 – Threshold amounts

Commentary

Regulation 5 of the Public Contracts Regulations 2015 keeps it simple by creating a referral system to the application of Article 4 of Directive 2014/24/EU. The only major difference is the inclusion of threshold rules related to defence procurement  which naturally were not included directly in Directive 2014/24/EU.

On its part, Regulation 5(4) refers to the conversion of those amounts into pounds sterling according to the rules of Article 6 of Directive 2014/24/EU. Hence, the transposition is rather automatic and ensures that it can be applied in a dynamic way without need for reform each time the European Commission reviews the applicable value thresholds.

The current drafting of Article 4 of Directive 2014/24/EU (amended by Commission Delegated Regulation (EU) 2015/2170) establishes the thresholds applicable to EU public procurement for contracts/contracting authorities covered by Directive 2014/24/EU during the years of 2016 and 2017:

The threshold values in pound sterling applicable in England, Wales and Northern Ireland are set in the Procurement Policy Note: New Threshold Levels 2016 (Information Note 18/15):

By locking the pound sterling threshold values at a given exchange rate set in December 2015, there is a reasonable risk the thresholds applicable in the Member States sporting the euro will deviate from those of the UK as the GBP/EUR exchange rate fluctuates over time.

Regulation 5 may be more important for what it does not do. It does not clarify what rules are applicable to contracts with a value below the relevant threshold, perpetuating a situation whereby the:

United Kingdom had not adopted specific legislation regulating low value public procurement … Consistent with an historical reluctance to regulate low value public procurement, the United Kingdom legislator has not extended the application of the Directives to contracts below EU thresholds … Instead, this field of activity is governed primarily by general policy guidance promulgated at the national level as well as individual rules adopted by procuring authorities” [L Butler,”Below threshold and Annex II B service contracts in the United Kingdom: A common law approach”, in R Caranta and D Dragos (eds) Outside the EU Procurement Directives—Inside the Treaties?, vol. 4 European Procurement Law Series (Copenhagen, DJØF, 2012) 283, 285].

Interestingly, then, and as already pointed out during the drafting of the Public Contracts Regulations 2015,

Contracts worth less than the threshold figures would not, generally, be subject to the new public procurement rules, although a number of Lord Young’s recommendations on opening up public sector procurement opportunities and removing barriers to SME participation are set to be implemented in the new legislation and would apply to ‘below threshold’ contracts that are above certain minimum levels – £10,000 for central government contracts and £25,000 for any other public sector contract [Out-law, 24.09.14, Public bodies can deviate from procurement process under reforms outlined by Cabinet Office, emphasis added].

Now that significant (excessive?) flexibility has been introduced in Directive 2014/24/EU, particularly as the use of procedures involving negotiations are concerned, it seems that the UK has lost an opportunity to re-imagine its procurement rules and create a system applicable to contracts of all values.

Of course, this is a legitimate regulatory strategy. However, it is also one that significantly increases risks of non-compliance in case threshold values are improperly calculated (on that, see our comment to Regulation 6) and, more generally, leaves England & Wales contracting authorities open to legal challenge on the basis of the general principles of EU public procurement law (now in Regulation 18), at least where cross-border interest can be found. On the issues of cross-border interest and thresholds see Telles, “The Good, the Bad and the Ugly: EU’s Internal Market, Public Procurement Thresholds and Cross-Border Interest” (2013) 43 Public Contract Law Journal 3-25 and Telles, “Public Procurement Financial Thresholds in the EU and Their Relationship with the GPA”, (2016) EPPPL, Vol 11, forthcoming.

Last modified: July 4, 2016 by Pedro Telles

5.—(1) This Part applies to procurements with a value net of VAT estimated to be equal to or greater than the following thresholds:—

(a)for public works contracts, the sum specified in Article 4(a) of the Public Contracts Directive;

(b)for public supply contracts and public service contracts awarded by central government authorities, and design contests organised by such authorities, the sum specified in Article 4(b) of the Public Contracts Directive, subject to paragraph (2);

(c)for public supply contracts and public service contracts awarded by sub-central contracting authorities, and design contests organised by such authorities, the sum specified in Article 4(c) of the Public Contracts Directive;

(d)for public service contracts for social and other specific services listed in Schedule 3, the sum specified in Article 4(d) of the Public Contracts Directive.

(2) Where public supply contracts are—

(a)awarded by central government authorities operating in the field of defence, and

(b)concern products not covered by Schedule 4,

the applicable threshold for the purposes of paragraph (1) is the sum specified in Article 4(c) of the Public Contracts Directive.

(3) References in paragraphs (1) and (2) to the Public Contracts Directive are references to that Directive as amended from time to time.

(4) The value in pounds sterling of any amount expressed in euro in any of the provisions of the Public Contracts Directive mentioned in this regulation shall be taken to be the value for the time being determined by the Commission for the purpose of that provision and published from time to time in the Official Journal in accordance with Article 6 of the Public Contracts Directive.