With the planned reform of the public procurement system, it would potentially be possible to save 2–4% of public procurement expenditures, Finance Minister Arvils Ašeradens (JV) announced at a press conference on Thursday.
The key proposals of the Ministry of Finance (MoF)-led working group for the structural reform of the public procurement system include abandoning small-scale national-level procurement, retaining only the EU-level public procurement thresholds – 143,000 euros for goods and services and 5.538 million euros for construction works.
The planned reform also proposes to review the rules for excluding procurement bidders, keeping only two of the 12 mandatory criteria: exclusion for corruption and criminal offences, and exclusion for tax debts. At the same time, the reform would allow a bidder to settle their tax liabilities instead of being automatically excluded from the procurement, as is currently the case.
Ašeradens emphasized that this reform could shorten public procurement procedures by 25% and reduce public sector expenditure by 2–4%. Meanwhile, OECD practice shows that savings can reach up to 7%.
The minister explained that the aim of the reform is to ensure maximum value for public budget investments
while increasing competition in procurement, reducing bureaucracy, promoting transparency and efficiency, as well as developing procurement centralization and introducing modern digital solutions for managing public procurement.
Ašeradens acknowledged that public procurement is an essential part of the Latvian economy. Over time, however, focus has been lost, with attention given to the cleanliness of documents rather than maximizing the return on budget funds, and it is now time for change.
In his view, the structural reform of public procurement developed by the working group will remove unnecessary administrative processes, speed up procedures, ensure greater competition, and help guarantee that every taxpayer euro delivers maximum benefit to society.
In 2024, more than 11,000 procurements were announced in Latvia,
resulting in over 21,000 contracts worth a total of 5.451 billion euros, excluding the 3.699 billion euros contract concluded by SIA “European Railway Lines” for the construction of the main “Rail Baltica” line in Latvia, which accounts for around 13% of Latvia’s GDP.
In 2024, when more than 182,000 companies were operating in Latvia, only 4,321 unique companies won procurement contracts – about 2.4% of the total number of companies.
The Director of the Public Procurement Monitoring Bureau (PPMB), Artis Lapiņš, said at the press conference that over the past decade public procurement has been used to pursue a variety of EU and Latvian national policy goals, including combating the shadow economy.
“These goals are good and necessary.
The flip side is that all these measures have made public procurement significantly more complex, creating additional administrative burdens for all involved. It is now important to find the best way to reduce this administrative burden and speed up procurement processes, eliminating the unnecessary while maintaining the core objectives and ensuring the sustainability of procurement,” Lapiņš said.
The development scenario for the public procurement system supported by the MoF-led working group focuses on giving contracting authorities maximum flexibility in conducting procurements, focusing on core objectives, emphasizing the application of sustainability principles, and complying only with the mandatory additional requirements laid down in EU legislation.
The working group concluded that over time this focus has been lost, and the complexity of procurement procedures and the large number of additional requirements for implementing sectoral policies significantly limit the achievement of the main goals of public procurement. Practical experience of stakeholders has shown that procurement processes are often characterized by excessive bureaucracy, lengthy timelines, and insufficient competition.
In many cases, only one bidder participates or only a limited number of offers are received.
State Audit Office (SAO) Board Member Gatis Litvins pointed out that the SAO’s audit of the public procurement system, published in November last year, clearly showed deficiencies that require significant changes to legislation, procurement management, and overall system planning, including the introduction of a results-oriented policy.
Litvins stressed that the MoF’s reform proposal is bold and ambitious in a positive sense, addressing several problems identified in the audit. “These changes should be implemented as a single, interconnected set of measures, as each change requires corresponding risk mitigation measures,” Litvins emphasized, explaining that liberalization of the procurement system will create many new risks that will need to be controlled and prevented.
The working group was established in March this year, with representatives from state and municipal institutions, oversight bodies, industry professionals, and business organizations. It focused on two main directions: increasing the economic efficiency of public procurement (“value for money”) and evaluating procurement effectiveness.
The first direction involved
analyzing current practice and good examples to identify opportunities for significant savings
while maintaining quality and ensuring that procurements fully meet actual needs and requirements.
The second direction included evaluating contract value thresholds, bidder exclusion rules, opportunities for procurement centralization, and other procedural matters.
After several rounds of discussion and detailed analysis, the working group proposed two possible development scenarios – improving the existing system or implementing a structural reform of public procurement – the latter receiving unanimous support from members.
The structural reform would significantly raise procurement thresholds to the EU’s contract value limits – from the current 10,000 euros to 143,000 euros for goods and services, and from 20,000 euros to 5.538 million euros for construction works. Substantial changes would also affect the operating principles of the system, focusing on maximum flexibility, core objectives, and data-driven management. Thus,
procurement could become a strategic tool for national development rather than a bureaucratic obstacle.
The reform provides that procurement regulations would apply only to transactions above the EU thresholds, while for nationally regulated procurements below the thresholds, “ex-post” supervision would apply. It would also be mandatory to publish information on procurement plans, concluded contracts, and actual spending even below the thresholds.
Supervision would be strengthened through performance indicators (KPIs), reference prices, and analytical tools. The contracting authorities’ practices would be monitored, taking into account their efficiency indicators against procurement benchmarks, as well as average and best performance across the EU – for example, competition levels, decision-making speed, and procurement effectiveness.
The reform also includes changes to institutional governance, making the PPMB the central managing authority responsible for maintaining the Electronic Procurement System and the Publication Management System, while the State Digital Development Agency would focus on ICT procurements. Municipalities would manage the procurement system centrally, retaining freedom to choose the most suitable governance model. The range of centrally procured goods and services would be expanded to include insurance, transport, and mobile communications.
To reduce the bureaucratic burden,
the reform would focus on the core objectives of procurement – openness, transparency, and free competition
– by adhering only to the mandatory requirements set out in EU legislation. At the same time, the MoF plans to focus on sustainable procurement by embedding sustainability principles into regulation and enabling the creation of competence centers in specific fields, as well as developing procurement standardization and centralization.
According to the MoF, the reform is expected to deliver benefits at all levels – giving contracting authorities more flexibility, providing opportunities for businesses, and ensuring transparency for society.
The working group also compiled best practice recommendations, including conducting market research and timely procurement planning, informing suppliers about planned and announced procurements, setting proportionate requirements in tenders and contracts, conducting joint and centralized procurements, ensuring quality management of procurement teams, and continuously improving the professional capacity of procurement specialists. Key prerequisites for an effective process also include choosing competition-enhancing procedures and contract types, and carefully analyzing contract terms in cases where competition is insufficient.
The planned changes to the public procurement system would be phased in starting from 2026, the MoF notes. Before that, the development scenario must be approved by the Cabinet of Ministers and amendments to the Public Procurement Law and other relevant laws adopted by the Saeima, as well as the necessary amendments to Cabinet regulations developed and approved.
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