Cost Estimate in Public Procurement 2026

Cost estimate in public procurement: estimating the contract value to determine thresholds – methods, prohibition of manipulation and consequences of incorrect estimates.

Definition: The cost estimate (estimation of contract value) is the realistic assessment of the expected total value of a contract that the public contracting authority must carry out before initiating a procurement procedure; it is decisive in determining whether and which procedural rules of public procurement law apply.

Last updated: January 2026 · Legal basis: §§ 3–3b VgV; Art. 5 Directive 2014/24/EU; § 13 BVergG 2018

Significance of the cost estimate

The cost estimate is the legal starting point of every procurement: it determines whether the EU thresholds are exceeded and thus whether the full public procurement rules of the above-threshold regime apply or the simplified rules of the below-threshold regime. An incorrect, in particular a too low, cost estimate may lead a contracting authority to award unlawfully below the thresholds – with the consequence of the contract being challengeable and potentially void.

The cost estimate must be carried out before the procurement procedure is initiated pursuant to § 3 VgV; it must be realistic and methodologically traceable.

Methods of estimating contract value

Directive 2014/24/EU and the VgV do not prescribe a specific method for the cost estimate; what is required is an objectively traceable, careful estimate based on the available market information.

Common methods:

Market enquiry / market consultation: Price enquiries with suppliers and service providers.
Comparison with previous contracts: Prices from comparable earlier contracts as a reference.
Cost-element method: Breakdown into individual items and their valuation.
Functional estimate: Estimate on the basis of performance parameters.
Expert opinion: Obtaining an external technical estimate (especially for construction and engineering services).

Prohibition of manipulation

Public procurement law expressly prohibits the artificial lowering of the estimated contract value with the aim of falling below the thresholds and circumventing EU-wide procurement law. Art. 5 (3) Directive 2014/24/EU and § 3 (2) VgV make clear that the choice of estimation method must not serve to circumvent procurement rules. Splitting up contracts (lot division) for the purpose of falling below thresholds is not permitted.

Calculation rules for special contract types

Public procurement law contains specific calculation rules for estimating the contract value of framework agreements, lots, continuous services and recurring services.

Framework agreements: Estimated total value of all envisaged individual contracts over the duration.
Lots: Individual lots are added up to form the total contract value; if the sum exceeds the threshold, EU procurement law applies to all lots (with an exception for de minimis lots).
Service contracts without a total price: Monthly price multiplied by 48 (for contracts of indefinite duration).
Construction works: Estimated total value of the entire construction project including ancillary services.

Consequences of an incorrect cost estimate

If it transpires that the cost estimate was too low and the actual contract value exceeds the thresholds, an unlawful direct award has taken place. The legal consequences are:

Challengeability of the award by unsuccessful bidders
Potential finding that the concluded contract is void
Claims for damages
Risk of recovery of funds in EU co-financed measures

FAQ

When must a cost estimate be carried out? Before the procurement procedure is initiated, i.e. before the contract notice is published or bids are solicited.

What happens if the actual bids substantially exceed the cost estimate? If there has been no manipulation and the estimate was methodologically correct, this does not constitute a procurement infringement; the contracting authority may cancel the procedure and re-plan it.

Can lots be artificially split small in order to fall below thresholds? No, this is expressly prohibited; all lots of an overall construction project or overall procurement must be added together for the threshold calculation.

Last updated: January 2026 All information provided without guarantee. For legally binding advice, please consult a law firm specialising in public procurement law.