In Norway, the Public Procurement Act regulates the general principles for public procurement, accompanied by several regulations that set out more detailed rules of each sector. These regulations are as follows:
In addition, there is a separate Regulation on the Complaints Board for Public Procurement. This regulates the procedural rules applicable to the Norwegian Complaints Board.
Public procurement applies to:
When contracting authorities mentioned above enters into contracts regarding works, supplies and services, the contracts are subject to public procurement regulation if the estimated value is equal to or exceeds NOK100,000, excluding VAT. The minimum value thresholds for all contracts that are subject to procurement regulation are NOK100,000, excluding VAT.
When it comes to establishing what part of the public procurement regulation applies to an individual contract, it depends on the estimated value of the contract.
In the utility sector the threshold is NOK4.1 million for supply and service contracts. For works contracts in the utility sector, the threshold is NOK51.5 million, and NOK9.6 million for health and social care contracts. Aside from the latter, the threshold is the same in the defence and security sector.
Any interested party from any jurisdiction can attend a regulated contract award procedure.
However, right holders of the public procurement regulation are, according to the Public Procurement Act, businesses that are established in accordance with the legislation of an EEA state and have their main administration or principal place of business in such a state. The same applies to businesses that are granted rights under the WTO agreement on public procurement or other international agreements that Norway is obliged to follow.
There are several key obligations of note under the public procurement legislation. The first to highlight is the obligation is to ensure that public funds are utilised as well as possible, and that the purchases contribute to a competitive business sector. It is important that contracting authorities act with integrity so that the public has confidence that public procurement takes place in a socially responsible manner.
A second obligation to highlight is that the contracting authorities are obliged to publish a contract notice for all contracts that have an estimated value over the national threshold. This obligation ensures transparency in the public sector while stimulating competition in the business sector.
When it comes to the key obligations of the public procurement legislation, it is equally necessary to highlight the general principles. The general principles are competition, equal treatment, foreseeability, verification and proportionality. Essentially, the general principles can form an independent basis for duties and rights for contracting authorities and bidders, which means that the general principles must be observed.
For contracts subject to the Procurement Regulation part II (exceeding the national threshold), tender procedures shall be published in the Norwegian Database for Public procurements ("Doffin").
For contracts subject to the Procurement Regulation part III (exceeding the EU threshold), the tender procedure must be published in Doffin and Tenders Electronic Daily (TED).
The publication must as a minimum include a description of the procurement, a deadline for receipt of requests for participation, registration of interest, or submission of tender, and must comply with the relevant Doffin publication form.
Contracting authorities may also make known their planned procurement procedures by way of a “guiding publication”. This must include a brief description of the planned procurements and may be published in TED, Doffin or through the contracting authority’s user profile.
The contracting authority may carry out preliminary market consultations before launching the tender procedure in order to prepare the procurement procedure and to inform the suppliers of their plans and needs.
The contracting authority may seek advice from independent experts, suppliers or other market players. The advice may be used in the planning of and during the procedure provided that the advice does not distort the competition or lead to breach of the principle of equal treatment.
For contracts subject to the Procurement Regulation Part II (exceeding the Norwegian threshold), the contracting authority may use an open or restricted procedure and is free to clarify and negotiate, unless they have informed that they will not.
For contracts subject to the Procurement Regulation Part III (exceeding the EU threshold), the open or restricted procedure shall be used. Provided that certain conditions are met, the negotiated procedure, the competitive dialogue procedure and innovative partnership may also be used.
The choice of tender procedures other than the open and restricted procedure is subject to the fulfilment of certain conditions as stipulated in the Procurement Regulation. For example, the negotiated procedure may be used if the procurements character, complexity, legal or financial composition or inherent risk makes it necessary to negotiate.
The procurement documents shall be made available from the day of publication of the tender procedure in Doffin/TED or the date of invitation to participate in the procedure/confirm interest. These shall include a description of the product or service to be procured, the contractual terms, the requirements set for the tender and tenderer.
Contracts Subject to Procurement Regulation Part II
For contracts subject to the Procurement Regulation Part II (exceeding the Norwegian threshold) there are no minimum time limits for the receipt of expressions of interest in a contract award procedure or the submission of tenders. However, the contracting authority must, when setting the deadline, take into account the complexity of the contract and the time it will take for the suppliers to provide their reply.
Contracts Subject to Procurement Regulation Part III
For contracts subject to the Procurement Regulation Part III (exceeding EU threshold), the Regulation stipulates various time limits for expressions of interest in a contract award procedure and the submission of tenders depending on the situation. The most important are mentioned below, but please note that these are subject to exemptions.
For open procedures the minimum time limit for the receipt of tenders is at least 30 days after publication. For restricted procedures and negotiated procedures, the minimum time limit for receipt of requests to participate shall be 30 days after publication, and the time limit for submitting tenders shall be at least 25 days after the invitation to tender has been sent. For a competitive dialogue and innovation partnership the minimum time limit for requesting participation is 30 days after publication, time limit for tender submission is not regulated.
These are minimum limits, the contracting authority must always when setting a deadline take into account the complexity of the contract and the time that the supplies will need.
The Procurement Regulations sets out mandatory and optional criteria which interested parties must meet in order to be eligible for participation in a procurement process.
Contracts Subject to Procurement Regulation Part II
For contracts subject to the Procurement Regulation part II (exceeding the Norwegian threshold) the contracting authority may set criteria related to the supplier’s qualifications, including requirements related to economic and financial capacity and technical and professional qualifications. The requirements must be connected, and proportionate, to the delivery and be relevant in order to secure that the suppliers have the necessary qualifications to fulfil the contract.
Contracts Subject to Procurement Regulation Part III
For contracts subject to the Procurement Regulation part III (exceeding the EU threshold), the contracting authority may only demand that the suppliers fulfil qualification requirements related to the following: registration, authorisations, economic and financial capacity and technical and professional qualifications. The requirements must be connected to and proportional to the delivery.
The contracting authority may limit the number of participants in the restricted procedure, the negotiated procedure, in a competitive dialogue and in an innovation partnership. The Procurement Regulation sets out a minimum number of tenderers in order to secure competition. For procedures subject to the Regulation part II the contracting authority must include at least three tenderers. For procedures subject to the Regulation part III, the contracting authority must include at least five tenderers in a restricted procedure and at least three tenderers in a negotiated procedure, a competitive dialogue and in an innovation partnership.
The selection of tenderers must be done on the basis of objective and non-discriminatory criteria set out in the tender publication. They must be verifiable and relevant for the specific procurement and may not lead to arbitrary discrimination of the tenderers. The criteria may be, but is not limited to, the criteria for qualification and must be accompanied by documentation requirements.
The evaluation of tenders shall be based on certain award criteria set by the contracting authority, and requirements related to the documentation of these. The award criteria must be objecting, non-discriminating and suitable to identify the best tender.
Contracts Subject to Procurement Regulation Part II
For procedures subject to the Procurement Regulation part II (exceeding the Norwegian threshold) the criteria may be for example price, quality, life-cycle costs, environment, social elements and innovation. The contracting authority may use the same criteria as qualification criteria and award criteria provided that they are connected to the delivery.
Contracts Subject to Procurement Regulation Part III
For procedures subject to the Procurement Regulation part III (exceeding the EU threshold), award of contract must be based on either the price, cost (using a cost-effectiveness approach such as life-cycle) or the best price-quality ratio, which shall be assessed on financial and qualitative criteria such as quality, availability, organisation, service or technical capacity.
In the tender documentation, the contracting authority is ordered to disclose both the qualification requirements and the award criteria of which tenders are evaluated. The qualification requirements need to be fulfilled by the bidder in order for the bidders to participate in the contract award procedure. If the contracting authority uses the contract award procedures restricted procedure, negotiated procedure, competitive dialogue and innovation partnership, the contracting authority can set a lower, or upper, limit to numbers of already qualified bidders by using objective and not-discriminatory selection criteria. The selection criteria must be disclosed in the public notice or in the tender documentation.
When it comes to the evaluation methodology, the contracting authority is not obliged to disclose this in the public notice or the tender documentation. However, the contracting authority needs to stipulate the evaluation methodology within the opening of tenders.
The qualification requirements, the selection criteria and the award criteria need to be disclosed in the tender documentation, which is published at the same time as the public notice.
If the chosen contract award procedure is restricted procedure, negotiated procedure, competitive dialogue or innovation partnership, the contracting authorities can, by the use of selection criteria, choose to not invite interested bidders to submit tenders. The contracting authority is obliged to provide the bidders that are not selected with a written notice of the selection. The notice shall include the reasons for the selection. Such selection is not relevant for open procedure, where the contracting authority have no authority to select just some of the interested bidders to submit tenders. All interested bidders can submit tenders in an open procedure.
Before the contract is concluded, the contracting authority is obliged to notify to bidders the contract award decision. The notification to the bidders has to include a reason for the contract award decision and a standstill period. The notification also needs to include the name of the chosen bidder, and a statement of the characteristics and relative benefits of the selected tender in accordance with the award criteria.
There has to be a standstill period between the notification of the contract award decision and the conclusion of the contract. The minimum standstill period is ten days, counting from the day after notification of the choice of bidder is sent.
There is no body generally responsible for overseeing or reviewing awarding authorities’ decisions where a decision is not challenged by a third party. However, complaints may be filed before the Complaints Board for Public Procurement for review and decisions may be challenged before the courts, eg, in conjunction with damages claims or interim injunctions. Although not a common procedure, complaints may also be filed before the EFTA Surveillance Authority for review. The Complaints Board, the courts and the EFTA Surveillance Authority may only set aside awarding authorities’ decisions, but do not have the authority to make a new decision.
Decisions of the Complaints Board are only advisory and thus no appeal procedure applies, but the dispute may nonetheless be brought in before the courts. Decisions of the Norwegian courts may be appealed before the appeal courts and a decision of the EFTA Surveillance Authority may be appealed before the EFTA court.
A supplier may file a complaint before the Complaints Board for an advisory decision on the contracting authority’s compliance with the procurement legislation. The Complaints Board may also impose penalty fines on the contracting authority in cases of illegal direct awards.
Further, the general courts may award damages, decide a contract without effect and shorten the term of the contract, in addition to granting interim injunctions during the standstill period to suspend the signing of contract.
Interim measures are available. If the supplier files an application for interim injunction before the court and the application is served on the contracting authority during the standstill period, the application itself will suspend the contract signing. The courts may grant interim injunction to suspend the contract signing as long as the contract is not yet signed. The suspension applies until the dispute is settled in court.
Anybody with a legal interest and genuine need to have the lawfulness of the decisions, actions and/or omissions of the awarding authority assessed, has a standing to challenge the awarding authority’s decision, eg, unsuccessful tenderers or tenderers who would otherwise participate for a contract which has been (illegally) awarded directly.
As the courts may not grant interim injunction if the contract has already been signed, an application for interim injunction has to be filed during the standstill period. The standstill period is normally ten days from the day after the date of award letter publication.
An application before the courts for declaring a contract without effect, shortening the term of the contract or imposing penalty fines must be filed within two years after the contract was signed. However, if the awarding authority has published a contract award notice in accordance with applicable procurement regulations or otherwise notified affected suppliers of the entering into contract, a 30-day time limit applies commencing from the day after the notice/notification. The 30-day time limit is suspended if a complaint concerning illegal direct award is filed before the Complaints Board, whereby a new 30-day time limit applies from the day after the date of the Complaints Board’s decision.
A three-year general limitation period applies to damages claims.
The length of complaint proceedings before the Complaints Board varies depending on the caseload, but the processing time is currently 12 months. The contracting authority may, however, accept to suspend the contract signing awaiting the Complaints Board’s decision and, if so, the complaint is prioritised with a current processing time of two months.
The length of proceedings before the courts (damages claims) also depends on the caseload of the relevant court and the complexity of the case at hand, but the dispute shall, as a main rule, be concluded within seven months if not appealed.
An application for interim injunction will automatically suspend the contract signing if served on the contracting authority within the standstill period. A court hearing normally follows an application for interim injunction and the interim injunction process is normally concluded within two to four weeks.
The number of procurement claims (both damages claims and interim injunction cases) considered by the courts each year varies greatly, and not all decisions are publicly available. Based on publicly available court decisions from the years 2012–19, the average number is 20.
Disregarding complaints withdrawn by the complainant, the Complaints Board has considered an average of 176 procurement claims in the years 2012-19. Only counting the years 2017–19, the average number is 139, showing a significant decrease of cases before the Complaints Board the previous years.
In addition to any costs to legal counsel, the complainant/plaintiff must pay a fee of NOK8,000 (NOK1,000 in cases of illegal direct award) when filing a complaint before the Complaints Board. Under certain circumstances the fee may be reimbursed by the Complaints Board, but otherwise the parties bear their own costs.
The court fee is currently NOK2,997 for interim injunction cases, while the court fee for damages claims is currently NOK5,995 (with an additional NOK3,597 for each day in court). As a main rule, the successful party shall be reimbursed its costs from the other party, including any court fees and costs to legal counsel.
Modifications of contract are regulated in the Procurement Regulation Chapter 28, which implements the EU Directive Article 72 and the Pressetext judgement (C-454/16). The contracting authority may modify contracts pursuant to a change clause in the contract and if the changes do not cause a price increase exceeding the threshold values or 10% of the contract value for product and service contracts, provided that the overall nature of the contract is not altered.
In some cases, changes may also include necessary additional deliveries, changes that are necessary due to circumstances that a diligent contracting authority could not foresee or changes on the supplier side if the contract. The following modifications shall always be deemed as substantial, and thus illegal:
The contracting authority may, in some cases, award a contract directly. This can occur when the procurement legislation is not applicable, such as when the public authority has awarded an exclusive right, when public contract are entered into between entities in the public sector, when the contract value is below the threshold and the product or when the service is exempted, such as real estate.
Furthermore, the Procurement Regulation provides for the possibility to award a contract directly (without a published procedure) for example when there is only one possible supplier, in cases where it is impossible to carry out a procedure due to urgency, after a failed procedure and substitute purchases. The main rule, however, is that there shall be competition and, therefore, the requirements for awarding a contract directly are fairly strict.
As mentioned in the previous submission, the ECJ’s ruling in C-216/17 (ATE Markas) attracted national attention in the Norwegian public procurement community. The decision concerns framework agreements and states that there is in fact an obligation to state the maximum value under a framework agreement. The ECJ further stated that, once the maximum quantity estimate has been reached, "the agreement will no longer have any effect" (paragraph 61). The implementation of this judgement was anticipated.
The Complaints Board recently ruled (advisory decision) that by exceeding the maximum value of a framework agreement of NOK10 million (by NOK29 million) the contracting authority was in breach of the regulation (case No 2020-1). As a result, the Complaints Board imposed penalty fine to the contracting authority as it was deemed an illegal direct award.
Yet, the relationship to the above-mentioned ECJ ruling was not clarified due to the fact that the Complaints Board only based its decision upon that the call-offs exceeding NOK10 million constituted a significant amendment to the framework agreement. The Complaints board did not explicitly state that the framework agreement "no longer was in effect" once the maximum quantity estimate had been reached. This means that the implementation of the ECJ judgement is still anticipated.
There are no legislative amendments currently under consideration.
However, the Norwegian government recently issued additional guidance at national level on applicable rules to address the COVID-19-crises (only available in the Norwegian language). In brief, the guidance concerns how Norwegian public bodies may exploit the flexibility that already exists under the regime for the purchase of the supplies, services, and works needed to respond to the COVID-19 pandemic (including measures such as immediate direct awards, reduction of applicable bid deadlines, extending existing contracts, etc).
In March 2020, the eruption of the COVID-19 pandemic showed how unpredictably and quickly society can change. Affecting people, companies, whole of industries and nations. The pandemic's impact on the society and industries and the difficulties deriving therefrom, has also affected the public sector and their public procurement, what concerns their concluded contracts, ongoing and future procurement procedures.
The industry and the companies taking part therein, have had to face sudden changes, uncertainty, and major disruptions in their practice. Some have experienced bankruptcy. Others have experienced drastic fall in demand for their products and errors in their supply chains of production and facilitations. In an instant, many well-established companies have experienced sudden and unpredicted economic difficulties due to changed market conditions, which again may cause issues when participating in public procurement procedures. Other pandemics, natural disasters, or other unpredictable events may in the future cause similar, sudden and severe changes to markets and the economy of companies, also affecting the public sector and the potential tenderers in public procurement.
Procedures such as negotiated procedures or competitive dialogues may, if the contract in question is complex, last over a long period of time. A tenderer might subsequent to the submission of request for participation, but before the award of contract, face sudden financial difficulties with the result that the tenderer does no longer meet the selection criteria relating to economic and financial standing, alone.
Companies may therefor during the procurement procedure for this reason, be in the sudden need to relying on the capacity of another entity in order to still meet the selection criteria related to the economic and financial standing at the time of the award of the contract. However, in order to rely on the capacity of other entities in order to meet a selection criterion related to economic and financial ability, it is a prerequisite that it was submitted some form of declaration of commitment (or similar) and separate ESPD for the other entity, along with the submission of request for participation.
Will non-fulfilment on the stage of award of contract automatically lead to rejection, or is it possible for the tenderer to repair this situation by introducing a new entity for the tenderer to rely on the capacity of?
In the light of this, the purpose of this article is to address this issue that is currently of note in the market, and to provide valuable considerations for a tenderer who wish to participate in two staged procurement procedures such as negotiated procedures and competitive dialogue in Norway.
Selection Criteria: Economic and Financial Standing
In uncertain and unpredictable times, it is especially important for contracting authorities to identify challenges and risks before they arise. It is necessary to take precautionary actions before putting contracts out to tender, to ensure that the tenderer it enters into a contract with, are able to fulfil its contractual obligations of the contract in question.
A mechanism ensuring this, is the use of selection criteria. Selection criteria are requirements the suppliers must meet, in order to be able to take part in the procedure, and to be awarded the contract. The purpose of selection criteria is to ensure that the tenderer being awarded the contract, has the necessary ability and capacity to carry out the performance of the contract in question during the contract period.
In a procedure above EU-threshold, the contracting authority may use selection criteria relating to the tenderers economic and financial standing. An example of such a criterion is that the tenderer must have “sufficient financial capacity”. The tenderer may rely on the capacity of another entity in order to fulfil a selection criterion related to economic and financial standing. Proper documentation on the fulfilment of this criterion, may in example be presentation of financial statements, appropriate statements from banks, or issued assurance/guarantee from a mother company declaring that it will provide the necessary resources for the tenderer to be able to carry out the contract.
The tenderers fulfilment of all selection criteria is a prerequisite for being awarded the contract. In two staged procedures such as negotiated procedures and competitive dialogue, it may also be a prerequisite for being invited to further participation and the submission of tenders. The fulfilment of selection criteria is mandatory, and if they are not met, the contracting authority is not given a right, it is obliged, to reject the tenderer from further participation in the procedure.
Submission of Documentation
The tenderers shall state in the ESPD-form a self-declaration as preliminary evidence that it meets the selection criteria set out in the procedure, and that there is no other reason for exclusion. Full or parts of the documentation supporting the tenderers statement on fulfilment of selection criteria in the ESPD, may be requested by the contracting authority at any stage of the procedure.
In a two staged procedure, it is common that contracting authorities request the submission of complete documentation on fulfilment of selection criteria with the request for participation. Where the contracting authority make use of the possibility to limit the number of candidates invited to submit tender, requiring submission of the documentation already at this stage could be justified to avoid invitation of candidates which later prove unable to meet the criteria at the time of award, depriving otherwise qualified tenderers from participation.
Even though an examination on whether tenderer meets the selection criteria was carried out and confirmed in the first phase of a procedure, the contracting authority shall, before award of the contract, require the tenderer nominated for the award of the contract to submit updated documentation on the fulfilment of the selection criteria. This to ensure that at the time of award, the tenderer still has the necessary ability and capacity to carry out the performance of the contract in question during the contract period.
Time of Fulfilment
Where it is stated in the procurement documents that the assessment on which tenderers are to be invited to a later phase is based on fulfilment of the selection criteria, it is required that those criteria are fulfilled at this time of the procedure. And further, a prerequisite for being awarded the contract, is that the tenderer submits upon request updated means of proof for the fulfilment of selection criteria prior to the award.
In the extension of this, a situation that might occur is that a tenderer who was assessed and confirmed to meet the selection criteria of economic and financial standing at an early stage of a procedure, may suffer from financial struggles at a later stage of the procedure, and changed financial standing could results in that this selection criterion is no longer met at the time of the award of contract.
Reliance of the Capacity of Other Entities in Order to Meet the Selection Criteria of Economic and Financial Standing
In principle, the contracting authority shall reject the tenderer where a selection criterion is no longer met at the time of award of the contract.
Where subsequent changes in the tenderers financial standing results in non-fulfilment of the selection criteria prior to the award of the contract, this could be repaired if the tenderer would be able to provide sufficient means of proof that it is relying on the capacity on another entity. In example, where a bank would agree to provide a sufficient bank guarantee or a mother company would be able to issue a financial guarantee or similar, guaranteeing the financial ability of the tenderer to carry out the performance of contract in question.
For contracts above EU-threshold, in order to rely on the capacity of other entities to fulfil selection criteria of economic and financial standing, it is a prerequisite that it is stated in the tenderers ESPD that it relies on the other entity’s capacity, and that a declaration of commitment (or similar) and a separate ESPD of the other entity is provided along with the request for participation. This does also apply where a tenderer wishes to rely on the capacity of a mother company or other companies in the same company group.
In principle, this implies that if a tenderer is to rely on the capacity of another entity in order to fulfil selection criteria, this has to be formalised and submitted at the time of deadline for submission of request for participation. However, does the Norwegian procurement legislation open up for the possibility to introduce a new entity to rely on the capacity of in order to fulfil selection criteria at the time of award of contract?
Extension of the possibility to request the submission of documentation
After the previous Norwegian procurement regulation in the classic sector, the contracting authority’s right to request the tenderer to submit or supplement the relevant information or documentation on the fulfilment of selection criteria, was limited to submission of public information or to supplement information already included in the tender documentation. With the new procurement regulation of 2016, the possibility to request submission of documentation has been extended. To which extent this possibility has been extended, has not been legally clarified.
In the practice of the Norwegian Public Procurement Complaint Board, it follows that non-fulfilment of selection criteria at the stage of submission of request for participation/tender, cannot be repaired by submitting documentation which introduces a new entity for the tenderer to rely on the capacity of, in order to fulfil a selection criterion subsequent to the deadline for submission. Where a selection criterion is not met at the time of submission of request for participation, the contracting authority is obliged to reject the tenderer.
However, the practice of the Norwegian Public Procurement Complaint Board on this issue, concerns the tenderers possibility to submit subsequent declaration on commitments of other entities for the fulfilment of selection criteria, where the tenderer was not considered qualified in the first place, at the time of deadline for submission of request for participation. If this was permitted, it would represent a breach of the principle of equal treatment, as it would enable tenderers that were not qualified for participation in the first place to participate in the procedure.
Fully qualified tenderers at the point of request for participation
The same does not necessarily apply in a situation where the tenderer in fact were considered qualified at the time of submission of request for participation. In this situation, the premise for equal treatment of the tenderers is not distorted, as the tenderer was in fact fully compliant and permitted to proceed in the procedure on the same conditions as the other participating and qualified tenderers.
However, in order for this arrangement to not be in breach with the principles of equal treatment and transparency, it is a prerequisite that the contracting authority has not stated anything in the procurement documents prevailing this. Further, it is a prerequisite that the new entity fulfils the relevant selection criterion, and that there are no other grounds of exclusion present.
It is the tenderers ability to fulfil its contractual obligations that is decisive, not how this ability arises. Were the tenderer did fulfil the selection criteria in the first place, the permission to rely on the capacity of another entity subsequent to the deadline for submission of tenders to still fulfilment, will merely uphold the state that was already present and sufficiently proven as a condition for participating in the procedure, not subsequently enable it to do so. Allowing this arrangement will therefor likely not have had any impact on whether other tenderers would have participated if they were aware of such a possibility.
In the absence of legal clarification on the extent of the contracting authority’s ability to request for supplementary information regarding fulfilment of selection criteria, it can be argued that it should be possible to submit declaration of commitment (or similar) subsequent to the deadline for submission of request for participation under the assumption that: