Annual Turnover Requirement

The annual turnover requirement is the most widely used financial standing criterion in European public procurement. It is a simple numerical gate: a contracting authority specifies a minimum revenue figure that suppliers must have achieved in their most recent financial years, and suppliers that fall below it are excluded from the competition.

What is an Annual Turnover Requirement?

Under Article 58(3) of Directive 2014/24/EU, contracting authorities may require a minimum annual turnover as part of economic and financial standing criteria. Turnover is typically assessed over the last two or three financial years, and the requirement may apply either to total company turnover or to turnover in the specific sector relevant to the contract.

The directive includes a proportionality safeguard: if the required turnover exceeds twice the estimated annual value of the contract, the contracting authority must provide specific justification in the procurement documents. This rule prevents buyers from setting arbitrarily high financial bars that exclude capable but smaller suppliers.

For example, a two-year contract worth EUR 3 million has an annual value of EUR 1.5 million. A turnover requirement of EUR 3 million (twice the annual value) needs no justification. A requirement of EUR 6 million or above must be justified with reference to specific contract risks or delivery requirements.

In the UK under the Procurement Act 2023 and accompanying guidance, the same proportionality principle applies. Central government procurement policy has additionally set specific expectations that turnover requirements should not unnecessarily exclude SMEs, and buyers must document their rationale for any requirement that could have that effect.

Why Annual Turnover Requirements Matter for Bidders

Turnover requirements are the most common reason suppliers are excluded at the selection stage. They affect smaller businesses disproportionately and are a primary driver of the gap between SME aspiration and actual win rates in public procurement across Europe.

Before committing bid resources, check the annual turnover requirement in the pre-qualification questionnaire (PQQ) or selection questionnaire (SQ). If your organisation's turnover falls below the threshold, consider the following options:

Parent company guarantee. A financially stronger parent or group entity issues a letter of support committing to make its resources available. The authority then assesses the group's combined financial standing. This falls under reliance on other entities.

Consortium arrangement. Multiple suppliers bid jointly, pooling their turnover figures. Each member's turnover contributes to the collective assessment.

Challenging a disproportionate threshold. If the requirement appears to exceed twice the annual contract value without adequate justification, suppliers may raise a formal query during the procurement or, in more serious cases, lodge a pre-award challenge.

Example

A Swedish software development company with annual turnover of EUR 1.2 million bids for a two-year public sector digital transformation project valued at EUR 1.8 million. The selection questionnaire requires minimum annual turnover of EUR 2 million. The company's turnover falls short. Its parent company, with annual turnover of EUR 15 million, issues a formal financial support letter. The contracting authority accepts the parent guarantee as satisfying the economic and financial standing criterion, and the company proceeds to the technical evaluation stage.

Frequently Asked Questions

Does turnover from all sectors count, or only from the relevant sector?

It depends on what the buyer specifies. Many buyers require total company turnover; some require minimum turnover specifically in the area covered by the contract (for example, minimum IT services revenue for an IT contract). The procurement documents will specify which measure applies.

Can a jointly-owned entity or joint venture use the parent's turnover?

Generally yes, provided the parent commits to making its financial resources available for the contract. A pure ownership relationship without a commitment letter is typically insufficient. The commitment must be credible and specific to the contract in question.

What financial documents are used to verify annual turnover?

At the bid stage, self-certification is normally sufficient. The winning bidder is then required to produce audited annual accounts, certified management accounts, or equivalent statements for the specified years. Newly established companies may substitute projected turnover statements or bank guarantees where accounts are not yet available.