The Swedish legislation on procurement mainly consists of four acts:
These acts implement the EU directives on public procurement (2014/24/EU), utilities procurement (2014/25/EU), the award of concession contracts (2014/23/EU) and the award of certain contracts in the fields of defence and security (2009/81/EC) (the EU Directives).
The sections below will generally consider the rules in LOU and LUF, unless otherwise stated. Some private entities are required to comply with LUF in certain situations, which are generally referred to as "contracting entities" in LUF. In this practice guide, contracting authorities will be used as a general term that includes contracting authorities and entities as applicable.
An authority or entity, which is considered a contracting authority or contracting entity, shall apply the procurement regulations. LOU and LUF contain definitions for the purpose of determining which authorities and entities constitute contracting authorities and entities.
As a general rule, a contracting authority is a state authority or a municipal authority, as well as associations formed by the aforementioned. Also, bodies governed by public law that meet needs in the public interest (unless these needs have an industrial or commercial aspect) are contracting authorities, provided that the body has a certain type of connection to a contracting authority (eg, that the body is financed or controlled by the contracting authority).
In addition, pursuant to LUF, a company that is controlled by a contracting authority, or has an exclusive right to operate within one of the utilities sectors, shall apply LUF (and is referred to as a contracting entity).
LOU and LUF contain rules for contracts with a value above the EU threshold values (for which the EU Directives apply) as well as national rules for contracts with values below the EU threshold values. In addition, there are different EU threshold values depending on, inter alia, which type of contract is to be procured. Therefore, the distinction between the different types of contracts is important to determine which rules are applicable.
In general, procurement contracts fall into three categories: public works contracts, service contracts and supply contracts.
A public works contract is a construction contract where the contracting authority procures the execution or both the design and execution of the works. A "work" is defined as the outcome of building or civil engineering works taken as a whole, if the result in itself fulfils an economic or technical function.
A service contract is a contract for services that are not considered to be public works. In some instances, the subject of a public contract may be both services and public works. If the public works part is the main purpose of the contract then the contract is considered to be a public works contract. That will also be the case if the value of the public works part is higher than the service part.
A supply contract has as its object the purchase, lease, rental or hire purchase of a product. A supply contract may include, as an incidental matter, siting and installation operations.
In addition, framework agreements should be mentioned. A framework agreement is defined as a contract concluded between one or more contracting authorities and one or more suppliers, with the aim of establishing the terms of contracts that are to be awarded during a certain later time period (so-called call-offs). A general characteristic of a framework agreement is that the volumes to be procured are not specified or guaranteed. However, volumes are usually estimated in the procurement documents. Furthermore, in accordance with ECJ case law, the total maximum quantity and amount of services that will be covered by the framework agreement must be stated in the procurement documents.
A framework agreement may only have a term exceeding four years if there are specific reasons for a longer term. A contract that is based on a framework agreement may, however, run longer than four years, depending on the subject matter of the contract.
The contracting authority may use any of the procurement procedures (see 2.3 Tender Procedure for Award of Contract) when procuring the framework agreement, provided that the conditions for the application of a certain procurement procedure are fulfilled.
In Sweden, it is common for contracting authorities to procure and enter into framework agreements with one or several suppliers. There are two main central purchasing bodies in Sweden: the National Procurement Services (Sw: Statens inköpscentral), procuring framework agreements mainly for central government authorities; and the purchasing body within the Swedish Association of Local Authorities and Regions (Sw: SKL Kommentus Inköpscentral), procuring framework agreements mainly for Swedish municipalities and county councils.
The purpose of these framework agreements is to allow contracting authorities to make call-offs, rather than conducting an entire procurement themselves. For many contracting authorities, internal decisions make it mandatory to use these framework agreements. The values of framework agreements procured by the National Procurement Services and the Swedish Association of Local Authorities and Regions are often very large.
The EU threshold values differ between the different types of contracts described above, as well as between the different procurement acts. For certain contracts under LOU, the values also differ depending on the type of contracting authority.
The procurement rules based on the EU Directives apply if the contract value exceeds the EU threshold values. The current EU threshold value for central government procurement of supplies and services in accordance with LOU is approximately EUR139,000 and for other contracting authorities (such as municipalities), the current EU threshold value is approximately EUR214,000. Under LUF, the EU threshold value is approximately EUR428,000, regardless of the type of contracting authority or entity. For works contracts, the current EU threshold value for procurement under LOU and LUF is approximately EUR5,350,000.
The national rules apply to contracts with a value below the EU threshold values and above the so-called direct award threshold. The direct award threshold for contracts covered by LOU is approximately EUR58,000. For contracts covered by LUF, the direct award threshold is currently approximately EUR108,000. For further information about direct awards, see 5.2 Direct Contract Awards.
The Swedish procurement legislation generally applies in the same way to national suppliers as to suppliers from other EU countries or non-EU countries. In light of the EU principle of non-discrimination, it is prohibited to stop suppliers from other EU countries from participating, or to discriminate against such suppliers in any other way. Also, as a party to international agreements such as the Agreement on Government Procurement (GPA), Sweden is generally obligated to allow suppliers from other countries to participate in Swedish procurement procedures.
The Swedish procurement legislation details how contracting authorities must conduct a procurement procedure. However, as a general rule, the fundamental procurement principles, stated in the EU Directives, must always be observed to ensure that all potential suppliers have a fair chance to participate in the procurement. These fundamental principles are stated in LOU and LUF and can be described as follows.
In addition, it is stated in LOU, LUF and LUK that it is forbidden to design a procurement procedure with the intention of limiting competition so that certain suppliers are unduly favoured or disadvantaged. Prior to 2017, this was not expressly stated in the Swedish legislation. However, the principle of equal treatment most likely prohibits contracting authorities from limiting competition in the above-mentioned way.
For procurement above the EU threshold values, the contracting authority must advertise the procurement electronically to the Publications Office of the European Union. The EU information system for public procurement, SIMAP, provides an official standard form to be filed. The Publications Office will then publish the advert in the Official Journal of the European Union (OJEU) and Tenders Electronic Daily (TED).
As a general rule, procurement below the EU threshold values must be advertised in an electronic database open to the public.
The information that must be disclosed differs to a certain extent depending on the type of procurement procedure. However, as a general rule, the advert shall contain, inter alia, information on which procedure will be applied, all selection and award criteria, and the deadline for submitting a tender or tender application.
Market consultations are permitted and are becoming more common in Sweden. If a supplier is involved in preparations of a procurement procedure, the contracting authority must ensure that all suppliers get access to any information of relevance that the involved supplier has been given. If it is not possible to uphold the principle of equal treatment in the procedure due to the involved supplier’s participation in the preparations, the supplier shall be excluded from participation.
Procurement Procedures Above the EU Threshold Values
If the value exceeds the EU threshold values, the procedures stipulated in the EU Directives apply.
Procurement Procedures Below the EU Threshold Values
For procurement below the EU threshold values, which is the predominant type of procurement in Sweden, the provisions are national and the EU Directives do not apply. These national provisions are also applicable for the procurement of social and other specific services, regardless of value (although, see below regarding rules for welfare services contracts). The national rules correspond to the EU Directives to a large extent, which means that the Swedish procurement legislation goes beyond what is required by the EU.
In accordance with LOU and LUF, four main types of procurement procedures may be applied.
LUK does not contain detailed rules on procurement procedures. Pursuant to LUK, a contracting authority is free to organise the procedure as it sees fit, provided that the fundamental principles of procurement are complied with.
In a negotiated procedure with prior publication, in which the suppliers’ tenders form the basis of the negotiations, the aim of the negotiations is to improve the final tenders. The negotiations may not concern the minimum criteria (ie, the criteria that suppliers have to fulfil to be invited to submit a tender) or the award criteria stated in the tender documents.
In a competitive dialogue, the contracting authority may negotiate with the supplier that has submitted the tender with the best price-quality ratio to confirm the supplier’s commitments stated in the tender and to finalise the contractual terms and conditions. The negotiations may not result in significant changes to the tender or the procurement and may also not distort competition or cause discrimination.
In all procurement procedures available for procurement below the EU threshold values, the contracting authority may always negotiate with one or several tenderers, as long as the fundamental procurement principles are complied with.
Welfare Services Contracts
In January 2019, Sweden adopted more flexible rules regarding procurement of welfare services contracts (mainly healthcare and social services) that represent a value below the EU threshold values. The main requirements are to publish a procurement notice, to inform the bidders of the award decision and to document the conducting of the procurement. However, the same remedies are applicable as above the EU threshold values.
Pursuant to LOU, a contracting authority may always apply an open procedure or a restricted procedure. Negotiated procedure with prior publication and competitive dialogue are only allowed if one of the following conditions is fulfilled:
An innovation partnership procedure may be used to find solutions that meet needs that, according to the contracting authority, cannot be met by solutions already available on the market.
Pursuant to LUF, an open procedure, a restricted procedure, a negotiated procedure and a competitive dialogue may always be applied. An innovation partnership procedure is allowed on the same conditions as under LOU.
Regarding the procedures available for procurement below the EU threshold values (ie, the national procurement rules), a simplified procedure and selective procedure may always be applied. If a dynamic purchasing system is used, a selective procedure shall be applied. If a simplified procedure or a selective procedure does not result in the award of a contract, a competitive dialogue may be used.
Regarding conditions for applying a negotiated procedure without prior publication and direct award, see 5.2 Direct Contract Awards.
The timing for the publication of the procurement documents is not regulated in detail. As a general rule, fundamental information concerning the procurement (such as the name of the contracting authority, a summary of the procurement and type of procurement procedure) needs to be provided at the time when the procurement notice is published. In a procedure that is initiated with an invitation to participate (such as a selective procedure), the contracting authority shall invite all interested and qualified suppliers to submit a tender at the same time.
Generally, a draft contract is published as part of the procurement documents.
As a general rule, the timeframe for a tender procedure must be set in relation to the complexity of the procedure and how much time suppliers need to produce a tender application or a tender. In addition, LOU and LUF set out specific minimum deadlines for the different procurement procedures with respect to the submission of a tender or a tender application. These deadlines range between 15 and 35 days. Certain exemptions apply if the stipulated minimum deadlines are impossible to meet due to time constraints.
The criteria that the interested parties must meet can be divided into different categories, namely mandatory grounds for exclusion, voluntary grounds for exclusion and qualification criteria. Also, in this context, the possibility of relying on the capacity of other entities should be mentioned.
Mandatory Grounds for Exclusion
As a general rule, the contracting authority shall exclude a supplier from participation in a procurement if it learns that the supplier has been found guilty of one of several criminal acts, through a judgment that has entered into legal force. Such acts include those that involve:
Most suppliers are legal entities. Therefore, the supplier shall be excluded if a person included in the administrative, management or supervisory body of that supplier has been found guilty of any of the criminal acts listed above. The same applies if the person found guilty of the criminal act has powers of representation, decision or control of the supplier.
Furthermore, a contracting authority shall exclude a supplier from participation in a procurement if it learns that the supplier is in breach of its obligations relating to the payment of taxes or social security contributions in the country in which it is established, or in the country where the procurement takes place. This needs to have been established by a judicial or administrative decision that has entered into legal force. Thus, it is mandatory for the contracting authority to exclude the supplier if there is a final decision where the breach is established.
If no decision has been rendered on a supplier’s breach of its obligations regarding taxes or social security contributions, the supplier may still be excluded from participation in the procurement, provided that the contracting authority can demonstrate by any appropriate means that the obligations have not been observed. If the supplier has fulfilled its obligations in this regard, or has entered into a binding arrangement with a view to payment, the supplier must not be excluded. Regarding unpaid Swedish taxes and social security contributions, it should be adequate that the contracting authority can demonstrate that these are registered as unpaid on the supplier's tax account for the supplier to be excluded.
A contracting authority may refrain from observing an obligation to exclude a supplier if this is motivated by overriding reasons relating to the public interest. This can only be applied in exceptional cases; for example, if certain emergency equipment needs to be procured and it is only possible to acquire the equipment from a supplier for which a mandatory ground for exclusion exists.
Voluntary Grounds for Exclusion
Several voluntary grounds for the exclusion of a supplier from participation in an award procedure are stipulated in the Swedish procurement legislation, as follows:
Before a supplier is excluded, the contracting authority is obligated to provide the supplier with the opportunity to make a statement regarding the circumstances that are considered grounds for exclusion. The supplier should be given a certain timeframe in which to address the grounds for exclusion. A supplier that does not answer within the timeframe or that provides an unsatisfactory answer risks being excluded.
The exclusion of a supplier must comply with the principle of proportionality. In addition, a supplier may prove that it must not be excluded due to the fact that it has taken certain self-cleaning measures. Firstly, the supplier has to have paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct. Furthermore, the supplier must clarify the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities. Finally, the supplier must have taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. As mentioned, the principle of proportionality is to be considered in the assessment of whether adequate self-cleaning measures have been taken by the supplier. Consequently, the measures taken by the suppliers shall be evaluated, taking into account the gravity and circumstances of the criminal offence or misconduct.
A contracting authority can set criteria for the minimum level of a supplier’s economic and financial capacity, and the supplier’s technical and professional abilities. It may also require that the supplier has a right to perform certain professional services. Other qualification requirements are not allowed.
The criteria given should be suitable for ensuring that the supplier has the legal and financial ability, and the technical and professional capacity needed to perform the contract awarded. All criteria must be stipulated in the procurement documents. The criteria must also be related to the subject of the procurement and applied in accordance with the fundamental principles.
A contracting authority may require that the supplier is registered in a registry of limited companies, partnerships, associations or similar in the state where the supplier conducts its operations. The supplier may also be required to have a permit or be a member of a certain organisation when the procurement regards a service, in order for the supplier to be permitted to provide the service in the state where the supplier conducts its operations.
A requirement regarding a supplier’s economic and financial standing may state that the supplier shall have a certain minimum turnover, a certain ratio between assets and liabilities, or suitable professional indemnity liability insurance.
If the contracting authority requires the suppliers to have a certain minimum turnover, the criteria may not be set to a total that is more than twice as high as the estimated value of the procurement, unless there are specific reasons due to the nature of the procured works, services or supplies. In the procurement documents, the contracting authority shall state what the circumstances are that give rise to any such specific reasons.
If the contracting authority requires the supplier to have a certain ratio of assets to liabilities, the methods and criteria for calculating the ratio must be given in the procurement documents.
Requirements on a supplier’s technical and professional capacity may be that the supplier shall have at its disposal the necessary staff and technical resources, and have the experience needed for contract performance in accordance with a suitable quality standard. For this purpose, the contracting authority may demand that the suppliers prove that they have adequate experience by providing suitable references from other performed contracts, among other requirements.
Reliance of the Capacity of Other Entities
In order to fulfil the requirements regarding both economic and financial capacity, and technical and professional capacity, a supplier has the right to rely on the capacity of another entity. This right applies irrespective of the type of legal connection between the supplier and that entity, but the supplier must prove that it will have the resources necessary at its disposal when the contract is to be performed. When the technical or professional capacity relates to certain academic or professional qualifications, the supplier may only rely on the capacity of another entity if that entity will also perform the services or works for which this capacity is needed.
In the event that a supplier invokes another entity's economic and financial capacity, a contracting authority may require the entity that is being relied upon taking on joint and several liability for the supplier’s contract performance.
A limit on the number of qualified suppliers is allowed in a selective procedure, a negotiated procedure with prior publication, a competitive dialogue and an innovation partnership. As a general rule, a limitation on the number of suppliers in these procedures is allowed as long as the contracting authority ensures that effective competition is maintained.
Pursuant to LOU, the number of invited suppliers to submit a tender shall be at least the number stated in the procurement documents. If the number of qualified suppliers is lower than the number stated in the procurement documents, the contracting authority may still invite these qualified suppliers to submit a tender.
As described in the first paragraph above, the number of invited suppliers must ensure that effective competition is maintained (which applies in all four procurement acts). In addition, LOU (but not LUF, LUK or LUFS) specifies a minimum number for the different procedures. In a selective procedure, at least five suppliers must be invited. In a negotiated procedure with prior publication, a competitive dialogue and an innovation partnership, at least three suppliers must be invited.
According to LOU and LUF, a contracting authority shall accept the offer that is most advantageous economically, based on (i) the best price-quality ratio, (ii) cost or (iii) price. The contracting authority is free to choose one of these assessment methods and the chosen method shall be clearly stated in the procurement documents.
The assessment of the best price-quality ratio shall be based on criteria connected to the subject matter of the public contract, such as quality, organisation and experience.
The assessment of cost shall be based on an assessment of the effects of the tender in terms of cost-efficiency, such as an analysis of life-cycle costs. Common types of costs that are considered within the use of life-cycle costs are internal costs, costs associated with the acquisition of the supplies or the service itself and recycling costs or similar costs referring to the end of the life cycle as well as the total work time requirement for the supplies, services or works to be procured. Life-cycle costs are often difficult to evaluate and the use of life-cycle costs is relatively uncommon in Sweden.
When evaluating the best price-quality ratio or cost, the contracting authority shall specify in the procurement documents the relative weighting that it gives to each of the criteria chosen to determine the most economically advantageous tender. The criteria may be weighted within intervals, with a suitable largest allowed range. The government bill regarding LOU and LUF contains the following example of a suitable largest allowed range: 60-70% for criterion one and 30-40% for criterion two. If weighting of the criteria is not possible, the contracting authority shall indicate the criteria in order of priority, in the procurement documents.
When determining the award criteria, the contracting authority must always comply with the fundamental principles.
As a general rule, and in light of the principle of transparency, the tender documents shall contain the selection criteria and the evaluation criteria. It is important that the criteria are clearly stated so that the suppliers can understand what will be taken into account in the contracting authority’s assessment of the bids in the procurement, in order to be able to submit a successful bid.
Disclosure of the selection and/or award criteria shall generally take place when the procurement documents are published.
There is no obligation to notify suppliers that they have not been selected for participating in the award procedure while the procurement procedure is ongoing. However, if a supplier is informed that it has not been selected for participation, the contracting authority shall in writing, upon the supplier’s request, provide the supplier the reasons why the supplier’s tender application or tender has been rejected.
Furthermore, if the contracting authority has concluded that a supplier shall be excluded due to any of the exclusion grounds stated in the procurement legislation (see 2.7 Eligibility for Participation in Procurement Process), the supplier must be informed about the exclusion decision, and the reasons for the decision, in writing as soon as possible.
The bidders must be notified through a contract award notice as soon as possible once the contract award decision is made. The minimum information required in the contract award notice is the reason for the contracting authority’s decision (ie, the choice of supplier(s) based on the award criteria) and the standstill period (see 3.4 Requirement for Standstill Period). The contract award notice shall be provided in writing. It is usually sent via the same electronic system used for the publication of information about the procurement and for the submission of tenders.
The contracting authority is prohibited from entering into a contract within ten days (if the notification of the award decision was made electronically) or 15 days (if the notification was not made electronically) from the day the contract award decision was announced (the standstill period). During the standstill period, a supplier may submit a review application to an administrative court. If a supplier applies for review of the procurement, the standstill period is automatically extended during the court's handling of the review.
A supplier may apply to the administrative court that has the territorial jurisdiction of the contracting authority for review of a public procurement. The review process can be initiated during an ongoing procurement procedure, as well as after the contracting authority has rendered its contract award decision.
If a contract has been concluded, a supplier can apply for review of the effectiveness of the contract (also to the administrative court that has the territorial jurisdiction of the contracting authority).
An appeal against the decision of the administrative court can be lodged with an administrative court of appeal, the rulings of which can be appealed to the Supreme Administrative Court. A review permit is required for judicial review in an administrative court of appeal and in the Supreme Administrative Court.
The court has two options if it finds that the contracting authority has acted in breach of the procurement rules and that the supplier has sustained or risks sustaining harm.
Firstly, the court may order that the procurement procedure may not be concluded until the infringement has been remedied. This can include forcing the contracting authority to perform a new evaluation of the tenders where the winning tender is excluded or a tenderer that has been excluded is evaluated.
Secondly, the administrative court may order that the procurement procedure must be recommenced. If the court should find that the breach of the procurement legislation refers to the phase of the procurement that has affected the tenders (including potential tenders), in accordance with Swedish case law, the court has to order the recommencement of the procurement.
In a review of the effectiveness of a public contract, the administrative court may declare the contract ineffective in certain situations, inter alia, if the conclusion of the contract was preceded by an unlawful direct award. A contract may also be declared ineffective in certain other situations; eg, if it has been concluded in contravention of a standstill period, an extended standstill period or an interim decision by the court. In Swedish case law, the courts have been willing to declare contracts and framework agreements to be ineffective, inter alia, where such a contract or framework agreement was amended in breach of applicable regulations.
If it is justified due to overriding reasons relating to the public interest, a court shall decide that the contract shall remain in effect, even if the criteria for declaring the contract ineffective are met. In certain situations – for example, in the event of a direct award – contracting authorities may announce in advance that they intend to use a direct award procedure, by using a notice for "ex ante transparency". If the contracting authority then observes the applicable standstill period and has stated valid reasons for a direct procurement procedure in the notice, the contract cannot be declared ineffective.
In addition to applying for a review, a supplier may initiate a claim for damages against the contracting authority for breach of the applicable procurement legislation. An action for damages is to be submitted to the district court and has to be filed within one year of the date when an agreement was concluded between the contracting authority and a supplier, or was declared ineffective through a ruling that has entered into legal force. An action that is brought after the given statute of limitation is time barred.
As described under 3.4 Requirement for Standstill Period, the standstill period is automatically extended when a review application of the procurement procedure is submitted to an administrative court; ie, the contract authority may not award the contract during the review process. The court may decide that the extended standstill period shall not apply.
As regards the appeal of the effectiveness of a contract, the court may decide that the contract may not be performed (subject to further decisions), provided that the harm or inconvenience the decision might entail is not greater than the harm that might affect the supplier.
The extended standstill period (see 3.4 Requirement for Standstill Period) is in effect ten days after the administrative court’s final decision. An appeal of the court’s decision to an administrative court of appeal or to the Supreme Administrative Court does not have an automatic suspensive effect. However, the courts can render an interim decision pending the final decision, prohibiting the contracting authority from concluding the contract until further notice.
Any supplier that is of the opinion that it has been caused, or may be caused, harm due to the contracting authority’s alleged breach of the procurement legislation may challenge the awarding authority’s decisions. It is not necessary for the applicant to have participated in the procurement (which could, for example, be the case when the supplier has not been able to submit a tender due to certain requirements in the procurement). However, the Supreme Administrative Court has stated that only a supplier that has an interest in being awarded the contract has the right to appeal a procurement.
The same criteria apply for an appeal of the effectiveness of a concluded public contract.
The time limit for challenging a contracting authority’s award decision is equivalent to the standstill period (in most cases ten days) as described in 3.4 Requirement for Standstill Period.
Regarding the review of the effectiveness of a concluded public contract, the review application has to be submitted to an administrative court within six months after the contract was concluded. This time limit is limited to 30 days if the contracting authority has announced the conclusion of the contract.
The typical length of court proceedings relating to a procurement case depends, inter alia, on the complexity of the case and the workload of the relevant administrative court. In general, the review proceeding in an administrative court takes less than five months.
According to a report published by the National Agency for Public Procurement and the Swedish Competition Authority in December 2019, approximately 6% of all procurement procedures in 2018 were appealed, which is a slight decrease compared to previous years. This can be interpreted as a sign that procurement procedures more often comply with the legislation than in previous years (thereby leading to fewer review procedures). However, this may not necessarily be the case as other factors should be taken into account when interpreting the statistics of the decreasing number of review processes.
Indeed, one of the reasons for the statistical decrease is that the administrative courts have introduced new administrative procedures as to how appeals are registered.
In addition, the report mentioned above shows that the number of cancelled procurement procedures has increased. One common reason for cancellation is that the contracting authority realises that the procurement procedure does not comply with the public procurement legislation and chooses to cancel as a means to avoid a review procedure; it follows that the cancelled procurement procedures have not (at least prima facie) complied with the legislation. For completeness only, it should be noted that a contracting authority may cancel a procurement procedure for various reasons as long as those reasons are objectively justifiable.
There is no application fee or any other legally stipulated costs related to the review process (however, the supplier must, of course, pay its own potential legal costs). It should be mentioned that there is a legislative proposal that, inter alia, suggests the implementation of an application fee and the obligation for the losing party to pay the counterparty’s court costs (see 5.4 Legislative Amendments Under Consideration).
A concluded publicly procured contract may be amended or modified without a new procurement procedure in certain specified situations stipulated in the relevant procurement legislation. Should an amendment or modification of the contract not have been made in compliance with any of the stipulated situations, the contract shall be considered to be a new contract that has been procured through an illegal direct award and can be declared ineffective by the administrative court.
Provided that the overall nature of the contract is not altered, a concluded contract can be amended or modified without a new procurement procedure in several specified situations.
In some specific situations, a concluded contract can be amended or modified without a new procurement procedure, regardless of whether the overall nature of the contract is altered.
Finally, amendments and modifications of a contract that are not substantial are always permitted. An amendment or modification is considered substantial if it introduces new conditions that, had they been part of the original procurement procedure, would have led to other candidates being invited to tender, other tenders being included in the evaluation, or additional suppliers participating in the procurement procedure. In addition, the modification is considered substantial if the economic balance of the contract is altered in favour of the supplier that has been awarded the contract, or if it extends the scope of the contract considerably. A replacement of supplier for other reasons than the above-mentioned is also considered a substantial modification of the contract.
Direct award of a contract is permitted if the value of the procurement does not exceed the direct award thresholds stated in 1.3 Type of Contracts Subject to Procurement Regulation. In addition, a contract may be directly awarded if the conditions for a negotiated procedure without prior publication (described below) are met, or if there are exceptional reasons. The contracting authority shall set internal guidelines for the usage of direct award contracts.
The rules based on the EU Directives also allow direct awards. This procedure is referred to as “negotiated procedure without prior publication” and is allowed to apply under the following conditions.
Regarding the procurement of supplies, there are further possibilities to use the negotiated procedure without prior publication. This exemption is to be used restrictively. Acceptable scenarios include supplies procured purely for the purpose of research under certain conditions and replacement supplies where supplies from another supplier would be incompatible with those already procured. LOU and LUF contain further specific conditions when certain supplies and services or works can be procured through the negotiated procedure without prior publication, which are to be applied restrictively by the contracting authority.
In 2019, the Supreme Administrative Court (SAC) rendered a judgment that concerned contracting authorities’ possibility to use a negotiated procedure without prior publication (ie, direct award), where the original procurement had been subject to a lengthy review process in court (Case HFD 2019 ref. 65). The ruling is important, as it clarifies whether a lengthy review process can constitute a valid reason for direct awards (this issue has been subject to conflicting views).
The SAC found that the lengthy review process at issue constituted the required “extreme urgency”, that the urgency was brought about by unforeseeable events (ie, the lengthy review procedure), and that the lengthy review procedure was not attributable to the contracting authority. As such, the SAC allowed the direct award.
While a related question is how long a review process has to be in order to be considered unforeseeable, the SAC did not specify a period of time in this respect. This is understandable as the length of review procedures may vary substantially depending on the complexity and specific circumstances of each procurement procedure. The test for lengthy review procedures constituting a valid reason for a direct award should therefore be made on a case-by-case basis, in light of the complexity and specific circumstances of the procurement procedure.
Another interesting judgment rendered by the SAC concerned the rules on abnormally low tenders and the contracting authority’s obligation to apply an adversarial procedure in accordance with these rules (ie, ask the tender for an explanation of its tender price if it appears, prima facie, to be abnormally low) (Case HFD 2019 ref. 39). The procurement at issue contained a mandatory criterion implying that bidders should submit a price list with the bidders’ ordinary prices. The prices should not be adjusted for the specific procurement procedure. Rather, the contracting authority should pay a discounted price based on the ordinary price, and the agreed discount should be included as a contractual term in the contract, but not the ordinary prices as such.
When the contracting authority suspected that a bidder had adjusted its ordinary price list, the bidder was asked to explain how the mandatory criterion was fulfilled. As the bidder did not give a satisfactory explanation, the tender was rejected without being evaluated. In its appeal, the bidder argued that the contracting authority did not apply the adversarial procedure correctly with respect to the rules on abnormally low tenders.
The SAC held that the rules on abnormally low tenders only apply to prices that will be included as a contractual term. Consequently, as the price was provided to fulfil a mandatory criterion and would not constitute a contractual term, the SAC considered that these rules were not applicable to the case. Although the contracting authority had applied a similar procedure to the rules on abnormally low tenders, it was not obligated to apply the adversarial procedure in accordance with these rules.
The rules for procurement that are not covered by the EU Directives (ie, the national procurement rules) have been criticised for being too complicated and difficult to apply. In 2018, a government report proposed comprehensive changes and amendments for the purpose of simplifying these rules. The proposal contains suggestions on more flexible rules for the national procurement procedures and fixed direct award thresholds (instead of a percentage of the EU threshold values).
The government report also proposes the implementation of an application fee when filing a review application to the administrative court and that the losing party pay the legal costs of the counterparty (as well as its own legal costs). These proposals concern all procurement; ie, not only procurement with a value below the EU threshold values.
It was suggested that the proposed amendments should enter into force in 2019. However, the legislation procedure is still pending. In addition, there is a government report from 2015 that also contains proposals for amendments to the review procedure. Currently, a final legislative proposal regarding these government reports is expected to be made in 2020.
New Conditions for Public Framework Agreements in Light of Coopservice
Over the last year, the judgment of the European Court of Justice (ECJ) in case No C-216/17, Coopservice (rendered on 19 December 2018), has been subject to lively debate in Sweden as to what extent contracting authorities must specify volumes in framework agreements.
In Coopservice, the ECJ assessed “[w]hether it is possible for contracting authorities that are not signatories to a framework agreement to refrain from determining the quantity of services that may be required when they conclude subsequent contracts or to determine that quantity by reference to their usual requirements.”
A contracting authority can generally predict a recurring need for goods or services, without necessarily being able to estimate, in advance, the volumes needed ‒ especially in the absence of reliable historical purchase data for the goods or services in question. The flexibility of a framework agreement is thus advantageous to a contracting authority as it secures constant access to goods or services under conditions which are generally beneficial; namely, the absence of guaranteed volumes, and the possibility for two or more contracting authorities to be signatories to the same framework agreement with the option to procure goods or services in one single procurement procedure.
The general perception in Sweden used to be that a contracting authority has no obligation to provide a maximum volume to bidders in the procurement documents. Rather, the generally accepted procurement practice in Sweden was that it was sufficient that a contracting authority estimates the total value for a framework agreement (and/or refers to historical purchasing data), to give bidders an idea of the conditions of the framework agreement.
However, this perception has changed. In Coopservice, the ECJ established, firstly, that a contracting party shall “state the total quantity which the subsequent contracts may comprise”; and secondly, that “once that limit has been reached the agreement will no longer have any effect” (Coopservice, paragraphs 60-61).
While the ECJ assessed the issue in the context of contracting authorities that are not signatories to the framework agreement at issue, the ECJ statements are arguably broadly applicable to public framework agreements in general.
Since the term “quantity” is not clearly defined in Coopservice, the ECJ judgment has given rise to conflicting interpretations in Sweden. Namely, the Swedish Competition Authority (SCA) on one hand, and the Swedish National Agency for Public Procurement (SNAPP) on the other hand, have yet to reach a consensus. SCA and SNAPP have announced their inconsistent positions in their respective guidelines.
According to the SCA, contracting authorities are required to specify: (i) the total quantity; and (ii) the highest value, that a framework agreement comprises (SCA’s position paper of 27 June 2019, Sw: Konkurrensverkets Ställningstagande 2019:1).
In contrast, SNAPP refers to: (i) a “maximum volume” (not “total quantity”), and states that a maximum volume shall be stated with reference to quantity as a first resort; or (ii) as long as transparency is ensured, value (SNAPP’s guidelines of 10 December 2019, Sw: Upphandlingsmyndighetens Vägledningnr 2019:3).
Another debated point with reference to Coopservice is that the flexibility of a framework agreement is diminished as it no longer has “any effect” after the total quantity is reached. In practice, this most likely implies that call-offs exceeding the total quantity would be deemed as illegal direct awards.
As a side note, both the SCA and the SNAPP concluded that the requirement of a total quantity is applicable to central purchasing bodies who manage the procurement of framework agreements on behalf of other contracting authorities.
From a Swedish perspective, this is particularly tangible as there are two main central purchasing bodies, the National Procurement Services (Sw: Statens inköpscentral) and the Swedish Association of Local Authorities and Regions (Sw: SKL Kommentus Inköpscentral), whose framework agreements are frequently used by a great number of contracting authorities. It is no understatement to say that the requirement of a “total quantity” creates difficulties for these central purchasing bodies, as they have to ascertain, beforehand, the need of all potential authorities entitled to make call-offs from the framework agreement at issue.
While the SCA’s position paper and the SNAPP’s guidelines are not legally binding, they are nonetheless used as tools to interpret legal issues in Sweden. As such, it could be argued that it is unfortunate that two bodies, both with immense influence on Swedish public procurement, present conflicting views on an ECJ judgment of great impact.
In addition, Coopservice has led to inconsistent findings in the administrative courts. When the lack of total volume has been invoked, the administrative courts’ conclusions have varied despite the circumstances in some cases being similar.
Also, for a successful review procedure, an applicant must establish that it has suffered harm as a result of the contracting authority’s breach of the law. In some cases, the courts have found that the lack of total volume has led to the bidder not being able to submit its most competitive tender. Another way by which applicants have tried to establish harm has been with reference to exclusion from a future procurement. Since a framework agreement, in line with Coopservice, has no effect after the total volume is reached, a contracting authority may most likely no longer make call-offs under that particular framework agreement. It follows that in the absence of a total volume, the contracting authority may (in theory) make an unlimited number of call-offs throughout the agreement term at the expense of prospective bidders that would otherwise be able to participate in a new procurement.
It should be stressed that, at the time of writing, the judgments in which Coopservice was invoked have only been rendered by courts of first instance. It follows that those judgments have limited value as precedents. Pending further guidance from higher courts, contracting authorities should consider always setting forth a total volume in the procurement documents; preferably both as a total quantity and maximum value, with a view to reducing the risk of review procedures.
Ongoing Debate about Floor Prices
Another issue that has been subject to recent debate in Sweden is contracting authorities’ use of minimum tender prices, so-called “floor prices” as a criterion.
The Supreme Administrative Court (SAC) delivered a landmark case in 2018 on the issue (Case HFD 2018 ref. 50). In the case, the contracting authority had applied a mandatory criterion which meant that tenders with a price below a certain floor price were deemed as abnormally low tenders and were therefore automatically rejected. However, according to the rules on abnormally low tenders in the Swedish public procurement legislation, the contracting authority must ask the bidder to explain the low price before rejecting the tender (the so-called adversarial procedure). Only where the explanation is unsatisfactory, shall the tender be rejected. According to the SAC, the adversarial procedure was set aside as a result of the automatic rejection. The mandatory requirement in the form of a floor price was thus found to breach the principle of equal treatment and the rules on abnormally low tenders.
Following the SAC judgment, it has been discussed whether the prohibition of floor prices only relates to mandatory criteria, or if floor prices are also forbidden as evaluation criteria (for example, where an evaluation model means that only tenders with prices above a certain floor price are granted evaluation points).
One suggested argument, in favour of allowing floor prices in evaluation models, is that Article 67.2 of Directive 2014/24/EU (the Directive) provides that the cost element in a contract award criterion may “take the form of a fixed price or cost”, which means that bidders will compete on quality only. Therefore, in the Swedish debate some have argued that since the Directive allows fixed prices in a procurement procedure, there are no obstacles for contracting authorities to apply an evaluation model which limits bidders’ possibilities to compete with low prices, including the use of floor prices.
However, preambles 92-93 to the Directive provide that when identifying the most economically advantageous tender, the decision should include a cost criterion unless national provisions regulate fixed prices for certain supplies or the remuneration of certain services. Thus, the preambles suggest that the fixed prices in the evaluation are limited to situations where the price is determined by external factors, such as national provisions.
In 2019, an evaluation model in a large procurement of IT consultancy services was challenged by several bidders claiming that the model contained an illegal floor price. The contract award criterion was based on best price-quality ratio, where only tender prices offered within a fixed price range were granted evaluation points for the criterion “price” (ie, prices outside the range got zero points). With reference to the above-mentioned SAC judgment, the applicants argued that the evaluation model had the same unequal and anti-competitive effect as floor prices.
The case reached the Administrative Court of Appeal, which found that the reasoning used in the SAC judgment was applicable to the case before it. The Court concluded that the evaluation model, without valid reasons, implied that tenders that were objectively more competitive were treated less favourably than tenders that were less competitive. Consequently, the Court found that the evaluation model breached the principle of equal treatment.
In December 2019, the SAC granted another review permit regarding a case on floor prices (HFD case No 6102-19). In this case, a bidder has challenged a pricing model whereby the contract cannot be awarded to a bidder whose offered unit price for a certain quantity range is higher than the offered unit price for a smaller quantity range. According to the bidder who filed the review application, the pricing model results in relative floor prices that are prohibited. Consequently, the last word has yet to be said in the Swedish debate on floor prices.
Proposed Legislative Amendments with a View to Reduce the Number of Review Procedures
In comparison to other EU member states, the number of review procedures is high in Sweden. According to a statistics report issued by the SCA and the SNAPP in December 2019, the number slightly decreases each year. However, the number is still high ‒ approximately 6% of all advertised public procurement procedures in 2018 were appealed.
In order to curb the number of review procedures, a review of the public procurement legislation has been initiated. This review has resulted in proposed legislative amendments; the main proposed amendments were the introduction of an application fee, a liability for the losing party to pay the counterparty’s legal fees, and a preclusion period (meaning that bidders lose their right to invoke a deficiency unless it has asked for a clarification in the bidding phase).
The Swedish Minister of Public Administration has announced the government's aim to present a final legislative proposal during 2020. However, whether the proposed amendments would achieve the intended result is under question, and whether the proposals will be enacted in their entirety or in part, if at all, remains to be seen.