We read with interest the other week “The EU’s public procurement inception error” a blog by Dr Pedro Telles over on his excellent Telles.eu site. A Senior Lecturer in Law at Swansea University, UK, we have read all of his works on the public procurement podcasts where he interviews various experts/academics on all aspects of public procurement today – the challenges/anomalies/mistakes and innovations. And we know him to be knowledgeable enough not to shirk from ‘taking the public sector to task’ over aspects he doesn’t agree with or finds ‘nonsensical.’
So we liked his candid look at EU financial thresholds – in which he says they hold no sense in this day and age! And that there is no specific reason why their value is what it is. They just are. They just exist. The only reason he can see for certain ‘high’ thresholds is pure protectionism.
It reminded us of something he said a while ago about how thresholds could easily go up or down in the future, and that the value at present is completely arbitrary. Such that only 18% of public procurement expenditure is actually covered by EU rules (unless there is cross-border interest), the rest falling below the threshold and subject to national laws, rather than the full might of the EU rules. Which has led him to question somewhat the logic of the system – ‘why would we focus the most important rules in just a small subset of contracts?’
It’s a good question. It’s a tricky business understanding the logic behind EU thresholds – they change (are refreshed) every two years and could go down – or up. The current ones, which stay in effect until end of 2017, are higher than last time’s, but are, in fact, lower than before for the UK because of currency conversion rates – so more competition can be expected there. On that note, it is better for suppliers. So the effect of whether the amounts go up or down, is dependent on where you live or operate from, and whether you are a supplier or a buyer! And exactly when you apply the principles of EU threshold law depends on where you are in your procurement. So we thought we’d take a look at some of the most common questions the novice might come across when applying threshold changes and the confusion they can cause:
- What do you do when you have started a procurement, and the contract notice has gone out, but the award won’t be made until the following year? Do you adjust it to take into consideration the new thresholds?
- The answer is of course No. The relevant date for the application of regulations is the date when you sent the call for competition.
- But if you are scoping a contract and the notice is not yet sent, the current thresholds do not apply.
- The answer is that you have to apply the thresholds that will apply when the notice is published – of course we all have a crystal ball to do that — we told you they were tricky!
- And if the threshold changes by just a small amount (and it still seems elusive to us what governs that change – are improvements in productivity costs over the years or reductions in transaction costs involved?) how precise must we be when valuing a contract that will come under the new threshold?
- As precise as possible apparently – if you get it badly wrong – there could be legal implications.
Do take a look at Dr Telles’ blog though – he makes some rather good analogies to prove his point that the logic of thresholds, in this day and age, is madness!