Dáil Éireann Debate, Wednesday - 26 February 2014
95. Deputy Andrew Doyle asked the Minister for Public Expenditure and Reform the manner in which contracts offered under EU directives are assessed; if he will explain potential revenues or losses by way of VAT and other taxes that are costed into the contracts; if these factors are applied before contracts are awarded; and if he will make a statement on the matter. [9781/14]
View answerUnder EU Directives on public procurement works, supplies and service contracts above certain thresholds must be advertised on the Official Journal of the EU and awarded on the basis of objective and non-restrictive criteria. For works contracts the threshold is €5.186 million; for supplies and service contracts awarded by Government Departments the threshold is €134,000 and for the remainder of public bodies the threshold is €207,000. The threshold for supplies and service contracts of entities operating in utility sectors (water, energy, transport and postal) is €414,000. The aim of these rules is to promote an open, competitive and non-discriminatory public procurement regime which delivers best value for money. It would be a breach of the rules for a public body to favour or discriminate against particular candidates on the basis where a supplier is liable for tax purposes. There are legal remedies which may be used against any public body infringing these rules.
The main rules that apply to the calculation of the value of contracts are as follows:
- the calculation should be based on the total amount payable or the total value of the contract and, in the case of frameworks and contracts divided into lots, the amount is the total value of all potential contracts to be awarded under the arrangement;
- all financial and non-financial elements that may be paid are counted including payments from third party sources (i.e. co-funded projects); and,
- the estimated value of the contract must take into account the estimated total amount, including all options and renewals (even if those options or renewals are not subsequently exercised) and all other types of payment made to all candidates or tenderers.
In relation to how VAT and other taxes are assessed when tenders are being evaluated, the position is as follows:
- Tender value is assessed exclusive of Value-Added Tax (VAT). This is because of the variety of VAT rates in operation across the EU. In this regard, it is worth noting that where a successful supplier is located in another EU Member State and the annual value of a foreign supplier's distance sales to this State exceeds €35,000 the supplier is obliged to register for VAT in this State.
- All other taxes would be included in tender price.
The Office of Government Procurement (OGP) is responsible for producing annual statistical information in relation to above-EU threshold procurement activity by the Irish public sector and for providing these statistics to the European Commission. The most recent data available on above EU threshold awards relates to 2011 and is as follows:
- Approximately 10% (valued at €240M) of the total known awarded contracts above threshold by the State went to non-domestic companies. This represents less than 5% of the overall annual public procurement spend (approximately €13.1 billion).
It is important to remember that open tendering is a two way street and that it provides Irish companies with opportunities to compete abroad. The public procurement market in the EU is estimated to be valued in excess of €2.4 trillion. In this regard, it is worth pointing out that the open market regime also offers opportunities for Irish companies to win business abroad and reliable EU studies indicate that many Irish businesses are successful in this regard.
