UK and EU Procurement Thresholds

• United Kingdom

• Litigation and dispute management
• Public procurement

02-12-2021

Divergence between UK and EU public procurement thresholds from January 2022

On 10 November 2021, the European Commission revised the thresholds (applicable from 1 January 2022) above which the provisions of Directive 2014/23/EU (Concessions Directive), Directive 2014/24 (Public Contracts Directive), Directive 2014/25 (Utilities Directive) and Directive 2009/81/EC (Defence Contracts Directive) will apply. Full details of the current and new EU thresholds (exclusive of VAT) are set out below:

The thresholds for “light touch” services remain unchanged: EUR 750,000 for social and other services listed in Annex XIV of the Public Contracts Directive; and EUR 1,000,000 for social and other services listed in Annex XVII of the Utilities Directive.

The amendments to the EU thresholds follows the announcement of the new thresholds under the Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 laid before Parliament on 1 November 2021 applicable in England, Wales and Northern Ireland. A significant change is that the new thresholds are calculated inclusive of VAT. Full details of the current (exclusive of VAT) and new (inclusive of 20% VAT) thresholds from the regulations are set out below, together with the exclusive of VAT calculations for the purposes of comparison:

Again, the base thresholds for “light touch” services remain unchanged and, in addition, the base thresholds under the Defence and Security Public Contracts Regulations 2011 are unchanged. However, these thresholds are now inclusive of VAT and therefore in reality new, lower, thresholds are created as follows: 

Comment

As the UK now operates its own independent public procurement regime, this is the first time that the UK Government has carried out a review of its procurement thresholds independently of the EU.

The position in relation to VAT is clearly an important distinction between the picture in England, Wales and Northern Ireland and the EU. In practice, this means that all of the threshold values for procurers in the UK have reduced, meaning that a wider range of contracts will be covered by the domestic public procurement regime than across Europe. It is also the case that, when converted into EUR using the prevailing rate, the new UK thresholds are in fact lower than those that will apply in the EU. This latter point is difficult to reconcile with the Government’s position that leaving the EU would mean less bureaucracy for UK procurers.

Note that the UK published Regulations contain transitional provisions confirming that the new thresholds will not apply to any procurements which commenced before 1 January 2022. From 1 January onwards, contracting authorities and utilities conducting procurements within England, Wales and Northern Ireland will be required to take into account VAT when estimating contract values for the purposes of determining whether the relevant procurement rules apply.

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