Public procurement basics: how selling to the public sector works

Every year, public bodies in the EU spend a huge amount of money buying things: road repairs, school renovations, laptops, cleaning, software, consulting, food for hospitals. The European Commission estimates that more than 250,000 public authorities spend around 14% of the EU's GDP this way.

That spending is called public procurement, and a lot of it is open to companies like yours. This guide explains how it works, who the buyers are, which rules apply and what it takes to win.

What is public procurement?#

Public procurement is the process public bodies use to buy works, supplies and services from the market. Unlike a private company, a public buyer can't simply call its favourite supplier. Because it spends taxpayers' money, it must treat suppliers equally, be transparent about what it wants and how it will choose, and pick the best offer according to criteria it announced in advance.

In practice this means the buyer publishes a tender (also called a call for tenders or a contract notice), companies send bids (tenders, offers) before a deadline, and the buyer evaluates them and awards the contract.

There are three types of public contract:

• Works: building, renovating or demolishing, for example a new sports hall or a bridge repair.

• Supplies: buying or leasing products, such as medical equipment, vehicles or office furniture.

• Services: everything else that is done for the buyer, from IT development and cleaning to training and legal advice.

Who are the public buyers?#

The rules call buyers contracting authorities. They include:

• national ministries and agencies (often called central government authorities);

• regions, counties and municipalities;

• bodies governed by public law, such as public hospitals, universities and social housing companies;

• associations formed by any of these.

Utilities, meaning organisations in water, energy, transport and postal services, follow their own, slightly more flexible set of rules. They are called contracting entities.

Large buyers often use central purchasing bodies that run big framework agreements for many organisations at once. Examples are Consip in Italy, UGAP in France and Hansel in Finland.

Which rules apply?#

Public procurement in the EU is governed by three directives that each member state has written into its own law:

• Directive 2014/24/EU for the public sector (the "classic" directive);

• Directive 2014/25/EU for utilities;

• Directive 2014/23/EU for concessions, where the supplier is paid by running the service or works (for example a car park or a canteen) rather than by a fixed price.

Defence and security purchases fall under Directive 2009/81/EC, and the Remedies Directives give bidders the right to challenge unlawful decisions.

The directives apply in full only to contracts above the EU thresholds. For 2026–2027, for example, the threshold for supplies and services bought by municipalities is €216,000 and for works it is €5,404,000 (excluding VAT). Below the thresholds, national rules apply. They are usually simpler, but the basic principles of equal treatment and transparency still hold.

Public sector directive

2014/24/EU

Utilities directive

2014/25/EU

Concessions directive

2014/23/EU

Works threshold 2026–27

€5,404,000

Where EU tenders are published

TED (ted.europa.eu)

Standard self-declaration

ESPD

The core principles#

Everything in procurement law flows from a few principles. Knowing them helps you understand why the rules look the way they do, and when a buyer might be breaking them:

• Equal treatment and non-discrimination: every bidder gets the same information and is judged on the same criteria. A buyer can't require a local office just to submit a bid.

• Transparency: the opportunity, the requirements and the award criteria are published in advance.

• Proportionality: requirements must be relevant to the contract. A buyer asking for a turnover of five times the contract value for a small cleaning contract is probably going too far (under the directive, minimum turnover normally can't exceed twice the contract value).

• Mutual recognition: certificates and standards from other member states must be accepted if they are equivalent.

How does a tender work, step by step?#

The details depend on the procedure, but most tenders follow the same arc:

1. 1

   Planning and market consultation.

   The buyer defines its need. It may publish a prior information notice (PIN) or hold a market consultation to hear from suppliers.

2. 2

   Publication.

   The buyer publishes a contract notice with the procurement documents: the specifications, the instructions to tenderers, the award criteria and the draft contract.

3. 3

   Questions.

   Bidders ask clarification questions through the e-procurement platform. Answers are shared with everyone.

4. 4

   Bid submission.

   Companies submit their bids electronically before the deadline, usually with a self-declaration (the ESPD) instead of full certificates.

5. 5

   Evaluation.

   The buyer checks exclusion grounds and selection criteria, then scores the compliant bids against the award criteria.

6. 6

   Award and standstill.

   All bidders are told who won and why. Above the thresholds, a standstill period follows before the contract is signed.

7. 7

   Contract and performance.

   The winner delivers. A contract award notice is published, and the contract end date tells you when the next tender is likely.

Why should an SME bid for public contracts?#

Public contracts have a reputation for paperwork. That's partly deserved, but they also have real advantages for small and medium-sized companies:

• Reliable customers. Public buyers pay their invoices, and EU rules on late payment apply to them.

• Long contracts. Service contracts and framework agreements often run for two to four years, which gives you predictable revenue.

• Open competition. You don't need contacts or a long sales relationship. If you meet the requirements and make the best offer, you can win.

• References. A successful public contract is a strong reference for both public and private customers.

• Lots. Buyers are encouraged to split large contracts into lots so smaller companies can bid for the part they can deliver.

A quick example: a small IT company#

Imagine a ten-person software company in Lyon that builds booking systems. A regional council publishes a tender for a new sports facility booking platform, split into two lots: development and three years of maintenance. The company qualifies on turnover and references for lot 2 only, so it bids for maintenance alone. It loses lot 1 to a large integrator, but wins lot 2 with a strong quality score on its support model. Three years later, it's an incumbent with a public reference.

And a construction SME#

A family-owned builder in Austria sees a municipality's tender for renovating a kindergarten. The works are far below the EU works threshold, so the tender is published on the national portal under national rules. The builder already has the trade registration, insurance and tax certificates it needs, submits a one-envelope bid, and wins on price.

What do you need before your first bid?#

You don't need much to start, but a few things take time to set up, so do them before a tender with a tight deadline appears:

• Accounts on e-procurement platforms in the countries you target. Some take days to verify.

• An electronic signature if the countries you target require one (Italy and Spain usually do, for example).

• Standard company documents: trade register extract, tax and social security certificates, insurance, financial statements, quality certificates such as ISO 9001.

• References: short descriptions of similar contracts, ideally with a contact person or a certificate of good performance.

• CVs of the key people you'd put on a contract.

Common misconceptions#

"Public tenders are always won on lowest price." Most contracts above the thresholds are awarded on the most economically advantageous tender (MEAT), which often combines price with quality. A well-written quality section can beat a cheaper bid.

"The winner is decided in advance." Sometimes an incumbent has an advantage, and it's fair to weigh that when you decide whether to bid. But buyers must follow the published criteria, and losing bidders can ask for the reasons and challenge unlawful decisions.

"You need to be big." Selection criteria must be proportionate, you can rely on partners' capacities, and you can bid as a consortium. Many winners are small companies.

Where to go next#

The best next step is to see what is being bought in your field right now. Read how to find relevant tenders, then learn how to read a notice so you can decide quickly whether one is worth your time.