Abstract
The single-most important parameter of a public procurement system is the threshold above which the framework applies. The optimization problem consists of finding a reasonable trade-off between the gains from public procurement and the administrative costs associated with procurement rules. In the present study, based on a sample of central and local government procurement operations in Sweden, an optimal threshold value in the range of 5,000—6,000 EUR is computed based on the requirement that the average gain should supersede the average cost. If a larger proportion of procurements is required to gain from the regulation imposed, a threshold value of 20,000—25,000 EUR should apply. The general conclusion is that there are strong arguments for maintaining procurement rules below the European Union threshold.
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