Public Contract

The public contract is the central legal object of public procurement law. The definition determines whether an arrangement between a public body and a supplier is subject to the full procedural requirements of the procurement directives. If an arrangement qualifies as a public contract above the applicable threshold, the contracting authority must run a formal competitive process. If it does not qualify, or if an exemption applies, the authority may contract directly.

What is a Public Contract?

Article 2 of Directive 2014/24/EU defines public contracts as contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities, having as their object the execution of works, the supply of products, or the provision of services. Each element of this definition matters.

Pecuniary interest means that the contract involves payment, either from the authority to the supplier or vice versa, or both. An arrangement where the authority receives services for free is not a public contract in the directive's sense, though grant agreements where EU funds are passed to a beneficiary follow a different legal framework.

Concluded in writing means there must be a formal agreement. Informal arrangements or understandings that are not documented as contracts fall outside the definition, though in practice public bodies in most European countries are required by their own governance rules to contract formally.

Between an economic operator and a contracting authority means both a qualifying buyer and a qualifying seller must be present. Arrangements between two contracting authorities may fall outside the directive entirely if they qualify as public-public cooperation.

The subject matter determines which type of public contract is involved. Public works contracts cover the execution of construction works. Public supply contracts cover the purchase, lease, or hire of products. Public service contracts cover the provision of services not already covered as works or supplies.

When a contract covers more than one type of subject matter, it is a mixed contract, and the rules determining which directive regime applies depend on the predominant subject matter by value.

Why it matters for bidders

The classification of an arrangement as a public contract is what triggers your entitlement to compete. If a contracting authority is spending money above the threshold on goods, works, or services and concludes a public contract, it must run a competitive process and you have the right to participate. Identifying when a public body is failing to conduct a required competition is the starting point for any challenge to a direct award.

Example

A Swedish county council concludes a multi-year agreement with a staffing agency for the supply of temporary nursing staff. The arrangement meets all the conditions: it is for pecuniary interest (the council pays the agency), it is in writing, it involves a contracting authority and an economic operator, and it has a defined subject matter (supply of services). It is therefore a public contract for services, and if the value exceeds the services threshold, it must be procured through a formal competitive process.

Frequently Asked Questions

Is a framework agreement a public contract?

A framework agreement is a formal agreement that establishes the terms for future call-off contracts but does not itself commit the contracting authority to purchase anything. The framework agreement is procured through a formal competitive process, and the individual call-off contracts concluded under it are public contracts in their own right. The framework agreement itself is subject to the procurement rules, and the call-off contracts benefit from the earlier competition provided the framework was properly established.

What about concession contracts?

Concession contracts, where the operator takes the risk of exploiting the works or services rather than receiving a direct payment, are governed by a separate instrument, Directive 2014/23/EU, rather than Directive 2014/24/EU. The definition of public contract in Directive 2014/24/EU explicitly excludes concessions, which are instead defined and regulated under the Concessions Directive.

What is the threshold above which a public contract must be competitively tendered under EU rules?

The EU financial thresholds are updated every two years by the European Commission. As of 2024, the main thresholds under Directive 2014/24/EU are approximately 5.5 million euros for works contracts and either 143,000 euros (central government) or 221,000 euros (other contracting authorities) for supply and service contracts. Contracts below these thresholds are not subject to the full directive procedures, though they remain subject to general Treaty principles if they have cross-border interest.