Estimated Value
The estimated value (hankinnan ennakoitu arvo) of a procurement determines which rules and procedures apply. It is the total value of the contract over its entire duration, including options and extensions. Correct calculation of the estimated value is crucial for determining the applicable threshold and procedure. For suppliers, understanding estimated value calculation helps predict the procedural framework for upcoming procurements and assess competitive dynamics. A procurement just above the EU threshold will follow more formal procedures than one just below. Estimated value also provides a useful benchmark for pricing: while the estimated value is not always published, the applicable procedure and lot structure provide clues about the expected contract magnitude. Incorrect estimation is one of the most frequent procedural errors in Finnish procurement, and suppliers who spot potential miscalculations can protect their interests by raising the issue during the tender period. The estimated value rules also prevent artificial splitting of procurements to avoid threshold requirements, ensuring fair competition across the market.
Definition
The estimated value is the total estimated remuneration payable under the contract, excluding VAT, calculated at the time the contract notice is sent or the procurement procedure is initiated. It includes the value of option periods, extensions, bonuses, and any fees payable by users. For framework agreements and dynamic purchasing systems, it is the total estimated value of all contracts to be awarded during the entire duration. The contracting authority must not split a procurement artificially to avoid threshold requirements. Calculation methods are defined in Sections 27-31 of the Public Procurement Act (1397/2016), implementing Articles 5-6 of EU Directive 2014/24/EU. Section 27 establishes the general principle that the estimated value is the total remuneration excluding VAT. Section 28 covers recurring procurements, where the estimate is based on the total value over the preceding 12 months or the anticipated value over the next 12 months. Section 29 addresses procurement divided into lots: the estimated value is the combined total of all lots. Section 30 deals with framework agreements and dynamic purchasing systems, where the estimated value includes all contracts anticipated over the full duration. Section 31 prohibits artificial splitting. The estimate must be valid at the time the contract notice is dispatched or the procedure is otherwise initiated. If more than 12 months elapse between the estimate and the start of the procedure, the authority should reassess whether the estimate remains valid. Market price changes, inflation, and scope changes may necessitate recalculation.
Practical Example
A Finnish government agency plans a procurement for management consulting services (CPV 79411000-8). The base contract runs for three years at EUR 120,000 per year, with two one-year option periods at the same annual rate. The agency also includes a EUR 50,000 contingency reserve for additional project work and a EUR 15,000 annual performance bonus. The estimated value calculation: base period (3 x EUR 120,000 = EUR 360,000) + options (2 x EUR 120,000 = EUR 240,000) + contingency (EUR 50,000) + bonuses (5 x EUR 15,000 = EUR 75,000) = EUR 725,000 total. This significantly exceeds the EU threshold for central government authorities (EUR 143,000), requiring full EU procedures. A bidder reviewing this procurement can deduce from the EU-level publication that the total value exceeds EUR 143,000 and should plan for a competitive field of potentially international bidders.
Common Mistake
Contracting authorities sometimes forget to include option years and extensions when calculating the estimated value. This can lead to using incorrect procurement procedures, which may be grounds for a Market Court appeal. The error is particularly common in recurring service contracts where option years are considered 'unlikely to be exercised' but must still be included in the estimate. Another frequent mistake is excluding bonuses, contingency reserves, or user fees from the calculation. The Procurement Act requires including all forms of remuneration payable under the contract. Suppliers who suspect the contracting authority has underestimated the value and used an insufficiently rigorous procedure can raise this concern during the question period or, if the error is clear, file a Market Court appeal.
Frequently Asked Questions
Should VAT be included in the estimated value?
No. The estimated value is always calculated excluding VAT. This is consistent across all EU member states and ensures comparability across different national tax systems. Section 27 of the Procurement Act explicitly states 'excluding value added tax.' In Finland, the standard VAT rate is 25.5% (since September 2024), and the reduced rates are 14% and 10%. Excluding VAT prevents distortions that would arise from different tax treatments of different goods and services. For cross-border procurements, this ensures that bidders from different EU countries compete on equivalent terms regardless of their home country's VAT rate. The exclusion applies to all forms of taxation, not just VAT.
How is the estimated value calculated for lots?
When a procurement is divided into lots, the estimated value is the combined total value of all lots. Individual lots cannot be treated separately to avoid exceeding thresholds. However, Section 29 of the Procurement Act (implementing Article 5(10) of EU Directive 2014/24/EU) provides a small lots exception: lots below EUR 80,000 (services/supplies) or EUR 1,000,000 (works) may be exempted from EU procedures if they total no more than 20% of the combined value. For example, a procurement with a total value of EUR 500,000 divided into five lots of EUR 100,000 each must follow EU procedures. But if one lot is worth only EUR 70,000 (14% of total), the contracting authority may use national procedures for that specific lot while applying EU procedures to the rest. This exception encourages contracting authorities to create small lots accessible to SMEs.
What happens if the contracting authority significantly underestimates the value?
If the underestimation is made in good faith based on reasonable market research, the procedure remains valid even if actual bids exceed the estimated threshold. However, if the underestimation was negligent or intentional to avoid more demanding procedures, the procurement can be challenged in the Market Court. The Court of Justice of the EU (CJEU) has held in cases such as C-16/98 that the estimate must be made using a method that is not manifestly incorrect. In practice, Finnish contracting authorities should document their estimation methodology, including market consultations, previous contract values, and price index adjustments. If all received tenders significantly exceed the estimate, the authority may cancel the procedure and re-launch with a corrected estimate and appropriate procedural level.
Related Terms
Contract Notice
Learn about contract notices in Finnish public procurement. The official announcement published on Hilma and TED to invite tenders from suppliers.
Contract Period
Learn about contract periods in Finnish public procurement. How sopimuskausi duration, options, and extensions work under procurement law.
EU Threshold
Learn about EU procurement thresholds in Finnish public procurement. The value limits above which EU-wide tendering rules apply under hankintalaki.
National Threshold
Learn about national procurement thresholds in Finnish public procurement. The minimum values above which hankintalaki applies to public contracts.
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