Public Procurement & Government Contracts 2021

Last Updated April 07, 2021

Switzerland

Law and Practice

Authors



Homburger is a leading Swiss business law firm based in Zurich. Homburger advises and represents companies and executives in all aspects of corporate and commercial law, regulation, tax and dispute resolution, both in a domestic and a global context. Homburger offers clients comprehensive legal advice as well as support in negotiations, and represents them before courts, arbitral tribunals, agencies, and in administrative proceedings. Homburger's practice in the public procurement sector involves advising clients on all issues of public procurement law and representing them in court proceedings. Special areas of focus involve, inter alia, construction services, IT procurements, energy, infrastructure and transport services. Homburger's procurement specialists are members of the relevant industry associations, such as the Swiss association for public procurement law.

Switzerland is a signatory to the WTO Government Procurement Agreement (GPA) and the Bilateral Agreement between the EU and Switzerland on Certain Aspects of Government Procurement (BilA). The GPA and BilA contain congruent rules applicable to public procurements in signatory states.

These basic rules have been implemented in Switzerland by a set of national statutes. For procurements at the federal, ie, central state, level, the rules are included in the Law on Public Procurement (Bundesgesetz über das öffentliche Beschaffungswesen) and have been further detailed in the Ordinance on Public Procurement (Verordnung über das öffentliche Beschaffungswesen).

For procurements at cantonal and municipal level, the rules are included in the Intercantonal Agreement on Public Procurement (Interkantonale Vereinbarung über das öffentliche Beschaffungswesen), which has been implemented by each canton in its own set of rules.

Generally, all procurements by Swiss public entities are subject to the rules on public procurement law. Further, the rules apply also to certain non-public entities if they are performing public tasks and are subsidised with public funds.

The entities subject to procurement law include:

  • the federal government and its ministries;
  • cantons and municipalities;
  • institutions of public law at cantonal and municipal level (eg, public building insurance or association of municipalities);
  • public and licensed private "sector enterprises" in the water, energy, transport, and telecommunication sectors;
  • other holders of cantonal or municipal functions; and
  • suppliers of goods, services and construction services that are subsidised with public funds to more than 50% of the overall costs.

Cantons and municipalities, institutions of public law at cantonal and municipal level, and other holders of cantonal or municipal functions are exempted from the rules of public procurement law insofar as the procurement pertains to the commercial or industrial activities of these entities with which they are in full competition with other private providers.

All contracts entered into by public entities, who themselves are subject to the procurement regulations, by which these entities procure goods or services fall into the scope of the applicable procurement rules. Contracts by which these entities sell goods or services are not subject to the procurement regulations. However, the applicable procurement procedure is different depending on the value of a procurement.

Procurements in Scope of the International Thresholds

Based on the applicable international agreements, ie, the GPA and BilA, procurements meeting the following thresholds require the open or selective procedure. These thresholds are subject to adaptations by the government and are partly different for "sector enterprises". For procurements at federal level, the thresholds are set as follows:

  • for deliveries, at CHF230,000;
  • for services, at CHF230,000; and
  • for construction services, at CHF8.7 million.

For procurements at cantonal and municipal level, the thresholds are set as follows:

  • for deliveries, at CHF350,000;
  • for services at CHF350,000; and
  • for construction services at CHF8.7 million.

Procurements below the International Thresholds

For procurements with a value below these thresholds, the international agreements and the rules provided therein are not applicable. However, when implementing the international rules into Swiss law, the Swiss legislator has decided to lower the international thresholds. These national thresholds, which are also subject to adaptations by the government, are as follows:

  • Free-hand awards can be made:
    1. for deliveries under CHF150,000;
    2. for services under CHF150,000;
    3. for secondary construction work under CHF150,000; and
    4. for primary construction work under CHF300,000.
  • Awards on invitation must be made:
    1. for deliveries as from CHF150,000 to under CHF230,000 (federal level) or CHF 250,000 (cantonal and municipal level);
    2. for services as from CHF150,000 to under CHF230,000 (federal level) or CHF 250,000 (cantonal and municipal level);
    3. for secondary construction work as from CHF150,000 to under CHF250,000 (only relevant on cantonal and municipal level); and
    4. for primary construction work as from CHF300,000 to under CHF2 million (federal level) or CHF500,000 (cantonal and municipal level).
  • Open or selective procedures must be chosen:
    1. for deliveries as from CHF230,000 (federal level) or CHF250,000 (cantonal and municipal level);
    2. for services as from CHF230,000 (federal level) or CHF250,000 (cantonal and municipal level);
    3. for secondary construction work as from CHF250,000 (only relevant on cantonal and municipal level); and
    4. for primary construction work as from CHF2 million (federal level) or CHF500,000 (cantonal and municipal level).

Note that certain cantons have further lowered these thresholds in their cantonal legislation.

Interested parties from other jurisdictions have a right to participate in a Swiss award procedure if their state of origin applies the same right to Swiss parties. This is, at least, the case for all signatory states of the GPA and BilA to the extent that the thresholds of applicability of these international agreements are reached.

The legislation aims at an economic use of public funds. Therefore, it is designed to increase competition between bidders, while assuring their equal treatment and the transparency of the award procedure. These main principles – ie, the economic use of funds, the equal treatment and the transparency of the procedure – govern the entire public procurement law and serve as interpretation guidelines for the implementation of the legislation.

As a result of these main principles, the rules applying to an individual public tender procedure must be set from the beginning in the call for tender and cannot be materially changed thereafter. Further, they must be set in a way that assures equal treatment of bidders. Therefore, it is prohibited to design them in a manner giving advantages to a particular bidder. Price negotiations with individual bidders are prohibited.

Calls for tender and the subsequent awards must be published on the official webpage (simap.ch). The publication of the call for tender must include the identity of the awarding entity, a description of the object procured, the deadline for submitting offers and the address where the tender documentation can be obtained. The publication of the award must mention the applicable procurement procedure, the object procured, the awarding entity, name and address of the winner of the award, and the price of the winning offer.

It is not generally excluded that an awarding entity carries out preliminary market consultations before launching the contract award procedure. However, it will have to assure that it complies with the principle of equal treatment. In particular, it will have to exclude all offerors from the award procedure who participated in the preparation of the award procedure if their competitive advantage cannot be compensated adequately in order to assure the equal treatment. Therefore, both awarding entities and potential offerors will have to act very carefully in a market consultation if they want to avoid that consulted offerors must be excluded from the future award procedure.

The relevant Swiss legislation provides for four different types of award procedures:

  • the open procedure;
  • the selective procedure;
  • the procedure on invitation; and
  • the free-hand award.

Open and Selective Procedures

The most commonly used procedure is the open procedure, where the awarding entity publishes a call for tender. Each interested bidder can participate in the open procedure.

The selective procedure also starts with the publication of a call for tender. The call for tender includes, however, criteria on the pre-selection of bidders. Only bidders that apply for pre-selection and fulfil the respective criteria will be allowed to submit bids.

The open and selective procedures are strongly formalised in order to assure the equal treatment of the bidders. After the call for bids has been published, the awarding entity regularly invites bidders to a meeting at which questions can be discussed. Thereupon, bids need to be submitted in an anonymised format and within the deadline set in the call for bids. After the opening of the bids, which must be documented in minutes, the awarding entity analyses the bids according to the pre-defined award criteria. The result will be formally notified to the bidders. The conclusion of the contract with the winning bidder must not take place before the applicable appeal deadline has expired.

Procedure on Invitation and Free-hand Awards

The procedure on invitation is less formal. While the awarding entity must generally invite at least three bidders, it has a high margin of discretion in selecting the bidders it wants to invite.

The free-hand award is the most informal procedure. The awarding entity can simply choose, at its discretion, the company with which it wants to conclude a contract.

The Applicable Procedure and Exceptions

The applicable tender procedure is defined by the value thresholds (see 1.3 Type of Contracts Subject to Procurement Regulation). The awarding entity cannot freely choose the type of procedure. There are three exceptions.

  • The first exception pertains to the open and selective procedure. These two types of procedure are perceived as being equivalent. Therefore, the awarding entity can freely choose either the open or selective procedure. In practice, the choice is predominantly for the open procedure.
  • The second exception covers the case that the awarding entity decides to choose a more formal type of procedure than the applicable thresholds provide for, eg, an open procedure instead of a procedure on invitation. The awarding entity has the discretion to do so but, once it has chosen the more formal type of procedure for a certain procurement, it cannot switch back to the less formal type.
  • As a third exception, the applicable rules allow under certain conditions that a free-hand award be made even though the threshold for a more formal procedure has been met. This includes cases where only one possible supplier is able to perform the work due to technical reasons, where the procurement is urgent due to unexpected events non-attributable to the awarding entity, or where replacing or supplementing an existing good or service would lead to substantial additional costs if a different supplier were chosen from the one that delivered in the past. Legally, these free-hand exceptions must be construed restrictively – although, in practice, they are often used broadly by the awarding entities in order to avoid burdensome formal award procedures.

Negotiations and Auctions

The possibility for awarding entities to negotiate contracts are very limited. As a general rule, awarding entities have to award the contract to the bidder that offered the economically most advantageous bid. The assessment of the bids must be made exclusively based on pre-defined award criteria. There are two exceptions:

  • in free-hand award procedures, awarding entities are free to negotiate prices; and
  • the new procurement law introduced, as per 2021, the use of electronic auctions.

These auctions take place without disclosing the bidders. In turn, the possibility in award procedures of federal entities to make price negotiations under certain conditions has been deleted from the new procurement law.

The applicable tender procedure is defined by the value thresholds set by the legislation. The awarding entity cannot freely choose the type of procedure (see 2.3 Tender Procedure for the Award of a Contract).

Except for free-hand awards, the awarding entity generally needs to provide all information and specifications relevant to make a bid in the documentation accompanying the call or invitation for tender. Generally, the relevant documentation also includes a template agreement, which serves as a basis for the award.

For reasons of equal treatment and transparency, the awarding entity is prohibited from changing the relevant specifications and terms of the procurement in the course of the award procedure. Therefore, it can generally not negotiate individual contract terms with bidders. Rather, it states unilaterally at the beginning of the procedure what the applicable terms are.

The legislation stipulates that the time limit to submit offers or requests for participation must be set by the authority in a manner that gives offerors ample time to review the tender documentation and prepare the offer. The authority must in particular have regard to the complexity of the procurement when setting the time limit.

For open and selective procedures, the legislation sets explicit minimum time limits. In the open procedure, the minimum time limit is 40 days as from the publication of the call for tender. In selective procedures, the minimal time limit for submitting a request for participation amounts to 25 days as from the publication of the call for interest and 40 days for submitting the offer as from the date of invitation. These time limits can be shortened, in the case of great urgency, to ten days. In practice, authorities often set the time limit at two months or more.

There are only very limited legal conditions which interested parties must meet in order to be eligible for participating in a procurement process.

  • First, the awarding entity is prohibited to grant an award to a bidder that does not comply with the applicable laws on the protection of employees or that discriminates against staff according to gender. These rules are particularly relevant in the building sector where contractors often use subcontractors with staff coming from abroad. The employee protection rules contain minimum wages in order to prevent "wage dumping" (ie, foreign staff being hired for much lower wages). These minimum wages are not always complied with and awarding entities increasingly hold the main contractor liable for infringements by its subcontractors.
  • Second, bidders can be excluded from the award procedure if they do not pay imposed taxes and social security contributions or if they are in bankruptcy proceedings.
  • Third, bidders may be excluded if they have entered into anti-competitive agreements. Given the increasing detection of competition law infringements in various sectors, this right to exclusion gains relevance. This is particularly true in the building sector where several anti-competitive agreements have been detected in the past years.

Apart from these legal conditions, it is for the awarding entity to set the criteria that interested parties must meet in order to be able to participate in a procurement process. It can define so-called suitability criteria that a bidder must fulfil in order that the offer be assessed. These suitability criteria pertain to factors such as the financial good-standing or technical performance levels. They are designed to assure that only those bidders can be granted an award that are apt to fulfil the relevant tasks.

These criteria must be objective and verifiable, and must assure the equal treatment of all bidders. The applicable law provides for the possibility to set up directories of bidders that are suitable for a certain type of bid. Companies included in these directories are deemed to be suitable and must only demonstrate that they are in the directory. If a company is excluded from the directory against its will, it can challenge this decision in court.

The number of suppliers that can participate in a procurement process can be restricted only under limited circumstances. No such restriction is possible in the open procedure. The selective procedure indirectly allows limiting the number of suppliers in that the interested parties need to apply for participation and have to show that they fulfil the suitability criteria.

By including strict qualitative standards, the authority will often be able to reduce the number of participants. Further, the legislation allows that the awarding entity limits the number of bidders in selective procedures that reach the second stage of submitting an offer as long as a sufficient level of effective competition is maintained; in general, at least three participants should be allowed to submit an offer.

In invitation procedures, the authority is requested by law to invite, if possible, at least three bidders. However, it is free to select these. For free-hand awards, the legislation has not set a minimum number.

Based on the principle of the economic use of public funds, the procurement must be awarded to the most economical offer. While the price of the offer is an important criterion in the award process, it is often supplemented by additional criteria. Such additional criteria may include quality aspects, ecological factors, customer service, expedience of the service, aesthetics, or technical value.

However, these additional factors must be designed so as not to discriminate against non-local bidders as opposed to local bidders. Further, according to the case law under the former procurement law, the price-related criteria must be generally allocated at least 40% of the weighing factors for the award.

It is yet to be seen whether this case law will remain applicable under the new procurement law of 2021, which has increased the possibility of taking quality aspects into consideration.

The suitability and evaluation criteria must be disclosed in the call for bids or the tender documentation. Further, the evaluation criteria need to be listed in order of their importance. Based on the principle of transparency, the authority must not change the criteria, or their importance, after the call for bids.

All formal decisions of the awarding authority, including the call for bids, the decision on selecting interested parties in the selective procedure, or the award, must be published on the official website (simap.ch). In practice, the authority often notifies the interested parties in addition by letter. The decision must contain a summary reasoning. Upon request of an interested party that has not been selected for participation, the authority is obliged to inform it of the most material reasons for its non-selection.

All formal decisions of the awarding authority, including the award, must be published on the official website (simap.ch). In practice, the authority generally notifies the bidders in addition by letter. The publication of the award must contain a summary reasoning. Upon request of a bidder whose offer has not been selected, the authority is obliged to inform it of:

  • the most material reasons for its non-selection;
  • the name of the selected bidder;
  • the price of the selected offer or, exceptionally, the highest and lowest offer; and
  • the decisive properties and advantages of the selected offer.

The awarding authority must not conclude the awarded contract before the deadline for appeals is expired. The deadline starts with the publication of the award and amounts to 20 calendar days. In the case of an appeal, the courts have the right, upon request, to suspend the awarding authority's right to conclude the contract for the duration of the procedure.

In the absence of such an interim order, the awarding authority is entitled to enter into the contract. In this case, it cannot be obliged at a later stage to terminate the contract, even if it were decided by the competent court that the award was incompliant with the law.

The competence to decide appeals depends on whether the awarding entity belongs to (i) the federal or (ii) the cantonal or municipal level. The competent court for orders of federal awarding authorities is the Federal Administrative Court. The competent court for an order of the cantonal or municipal level is the cantonal court of the canton to which the awarding authority belongs. The cantons have often allocated procurement matters to the cantonal administrative court.

The decisions of the first-instance court can be appealed before the Federal Supreme Court. However, the appeal will only be heard if, cumulatively:

  • the value of the award exceeds the thresholds of the GPA and BilA; and
  • the appeal brings a fundamental legal question forward that has not been answered yet.

The appellant has to plead and show in detail that these conditions are fulfilled. If they are not fulfilled, the Federal Supreme Court will not review the appeal. If they are fulfilled, the Federal Supreme Court will review the appeal and will not only answer the fundamental legal question but also any other relevant legal question. However, it does not deal with questions of fact. The decision of the Federal Supreme Court is final and binding.

The courts generally have the right to annul orders of awarding entities or to substitute the decision of an awarding entity by their own decision. With regard to awards, however, based on the Federal Supreme Court's case law, the courts are only entitled to annul the award and cannot award the tender directly to another offeror, eg, the appellant. The reason for this is that the awarding entity might be entitled to discontinue the award procedure and, therefore, it is for the awarding entity to make a new decision. The same has to apply to cases where the call for bids has been appealed. In this case, the courts will not be entitled to change the content of the call for bids but will only have a right to annul it and give the awarding entity the possibility to amend it in a compliant way.

If the contract has already been concluded by the awarding entity, the legislation only entitles the courts to annul the award but it cannot terminate the contract. However, some cantonal courts have started to deviate from the wording of the law in cases where unpublished free-hand awards were made, even though the authority would have had to use an open or selective procedure and the contract was already concluded before the appeal was made. In that case, the court ordered that the contract be terminated by the awarding authority at the earliest possible event.

Interim measures of courts are very important in appeal procedures in Switzerland because they are the only means to prevent the awarding entity from concluding the contract with the recipient of an award. The appeal has no suspensive effect unless such effect is granted by the court. This means that the awarding entity is entitled to conclude the contract with the recipient of the award unless it is prohibited to do so by the court. If it is not prohibited, the contract would remain binding even though a court, at a later stage, would come to the conclusion that the award was unlawful. The appellant's right would then be limited to a compensation of the costs incurred by preparing the offer. Therefore, it is of utmost importance to ask the court explicitly in the appeal that a suspensive effect be granted. If a suspensive effect is requested, the competent court makes a prima facie decision on the merits of the case and, in the case of a prima facie infringement of procurement law, weighs the interest in compliance with procurement law against the interest of the awarding entity in a swift performance of the awarded work or service. In order to be successful with a request for suspensive effect, it is important to demonstrate convincingly in the appeal that there has been a prima facie infringement of procurement law.

For procurement procedures of federal entities, it is important to note that the courts will only be allowed to annul an order of the awarding authority if the procurement falls into the scope of the GPA or BilA; for all other procurements, the court can only state that the order infringes the law. Hence, a decision of annulment requiresthat the procurement value is above the thresholds of the GPA and BilA, ie, for deliveries, at CHF230,000; for services, at CHF230,000; and for construction services, at CHF8.7 million. Further, appeals in the procurement of services can only lead to an annulment of the order if the procured type of services is listed on the so-called positive list of appendix 1 annex 4 of the GPA. Third, procurements of the Swiss military can only lead to annulments of the order if they are listed on the positive list.

The right to appeal is depending on the type of order issued by the awarding authority.

  • The call for bids can be appealed by those interested parties that can demonstrate that they would want to participate in the bid and are a potential offeror that could supply the relevant good or perform the relevant service.
  • The right to appeal against an award is generally limited to those parties able to demonstrate that they would have been awarded the contract if the awarding entity had complied with the law. All other parties of the award procedure are not entitled to appeal.
  • There is an exception to this rule pertaining to free-hand awards. If a free-hand award is challenged with the argument that the awarding entity would have had to conduct an open or selective procedure, the appeal can be lodged by each potential offeror that could supply the relevant good or perform the relevant service.

The deadline for filing appeals is very short and non-extendable. It amounts to 20 calendar days. The deadline starts to run with the publication of the award or, when no publication is made, such as for free-hand awards, with the appellant acquiring sufficient knowledge of the award in order to be able to lodge an appeal.

Further, it is important to note that parties must appeal the call for tenders itself if they want to challenge a condition of the tender. This might be the case, eg, where the object of a tender has been designed in a way that is to the advantage of a certain offeror, where the published assessment criteria are not legally compliant, or where the deadline for submitting bids is too short. In these cases, the parties cannot wait until the award is made to challenge the content of the call for bids. Hence, appeals against the award can only be directed towards legal issues that could not already have been challenged at the time of the call for bids.

Procurement appeal procedures generally last between six months and two years, depending on the complexity of the case.

Appeals procedures in Switzerland are still relatively rare, but have constantly increased over the past few years. The main business areas likely to experience appeals are construction and IT. Further, larger cantons see more appeals than smaller, more rural cantons. On average, it is assumed that first-instance courts review between five and 20 procurement appeals per year. Only very few of these go to the Federal Supreme Court, which hears on average about five to ten procurement cases per year.

The typical costs for court expenses and attorneys in first-instance appeals are estimated to amount to between CHF15,000 and CHF25,000.

The principle of equal treatment and transparency requires that the object of a procurement remains the same during the whole award procedure and does not change following the award. Hence, legally speaking, there is only very limited room for modifications to procurement contracts after the award. Any modification that has an influence on the price would not be legally permissible but would rather require that the procedure be re-started. However, it sometimes happens that the authority, or the awarded company, initiates contractual discussions following the award.

The legislation permits under certain circumstances that free-hand awards are made although the value thresholds of a more formal procedure, eg, an open procedure, are reached. These exceptional circumstances must be applied restrictively and it is for the awarding entity to prove that the applicable conditions are fulfilled. Further, the awarding entity is obliged to publish the award, which gives interested parties the possibility to appeal against the award by asserting that the conditions for a free-hand award were not fulfilled.

The main cases of permissible exceptional free-hand awards are:

  • based on technical reasons or for reasons of protection of intellectual property rights, only one specific supplier can provide the object of the procurement and no appropriate alternative exists;
  • the procurement becomes, through no fault of the awarding entity, very urgent due to unforeseen events;
  • goods or services already lawfully supplied require a replacement or extension which can only be provided by the original supplier because only this ensures compatibility with the existing goods or services; and
  • goods can be sourced in the framework of a temporary opportunity for a price which is significantly below the ordinary price.

In summer 2019, the Swiss Supreme Court decided that publicly owned hospitals were subject to public procurement law because they do not operate in an environment of full competition. While the reasoning only concerned publicly owned hospitals, it can also apply to privately owned hospitals that are on the so-called hospital list and, therefore, receive subsidies from the state.

In June 2019, the Swiss parliament adopted a revision of the procurement legislation that entered into force by 1 January 2021 on the federal level and will enter into force on the cantonal and municipal level once two cantons have adopted the new law, which is expected for the first half of 2021. This article reflects the newly introduced rules. It is important to note that the former rules remain applicable for procurement procedures that have been initiated under the former law.

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Trends and Developments


Authors



Walder Wyss Ltd has around 220 legal experts and offices in six locations and is one of the most successful Swiss commercial law firms and one of the few with a dedicated team of public procurement specialists. The firm's clients benefit from its renowned specialist knowledge and wealth of experience, which cover all stages and aspects of a procurement project. Walder Wyss is well versed in sector-specific needs and offers customised solutions for infrastructure and construction projects, complex IT projects and procurements in the energy, healthcare and pharmaceutical sectors. The firm's services include court representation, legal advice and legal training with respect to the structuring and implementation of procurement projects, tender offers, as well as assistance in related contractual, intellectual property and competition law issues. The firm's public procurement specialists are members of the Swiss Association for Public Procurement and have initiated the publication of the commentary of the revised Swiss Public Procurement Act.

Introduction

On 1 January 2020, the revised Federal Act on Public Procurement (rPPA), regulating government contracts on the federal level, entered into force. In parallel, all Swiss cantons (ie, states) are expected to join the revised Intercantonal Convention on Public Procurement (rICPP), which applies to procurements on the sub-federal level. These adjustments paved the way for the ratification and implementation of the Revised WTO Agreement on Government Procurement (GPA 2012) and for the harmonisation of the yet heterogeneous Swiss public procurement landscape. In addition, the new laws strengthen competition among suppliers, reduce the complexity of the Swiss procurement regime and allow for new procedural instruments, including electronic auctions and competitive dialogue.

The next section of this contribution provides an overview of the key aspects of the revised law and their implications for procuring entities and suppliers. Under Important Decisions and Developments, we discuss recent landmark cases that will continue to shape Swiss public procurement practice under the revised law.

The Revised Swiss Procurement Law

The current Swiss procurement landscape

The Swiss procurement regime is divided into a federal and a sub-federal level. Since 1 January 2021, contracts of federal procuring entities are governed by the revised rPPA. The rPPA implements the GPA 2012 as well as Switzerland’s obligations arising from the Bilateral Agreement with the European Union on Public Procurement of 1999 (BilatAgr). In contrast, the legal situation on the sub-federal, ie, cantonal (state), district and municipal level, is more complex as it is currently in a transition phase.

Since 1994, procurements of cantonal and municipal entities have been governed by the Intercantonal Convention on Public Procurement (ICPP) of 25 November 1994 and, in addition, by individual cantonal procurement laws. On 15 November 2019, the cantons approved the revised Convention on Public Procurement (rICPP). While the former ICPP has the character of a framework convention leaving the cantons a lot of room for individual regulations, the rICPP is not only more detailed but also largely assimilated to the rPPA. This allows for a harmonisation among the (previously heterogenous) cantonal procurement regimes on one side and between the federal and the cantonal level on the other side. This harmonisation is intended to reduce costs, facilitate market entry for domestic and foreign suppliers and thus enhance competition.

All cantons are expected to join the rICPP within the coming two years. They will do so on an individual basis and in accordance with their cantonal ratification processes. In cantons joining the rICPP the previous cantonal legislation will become largely obsolete. In contrast, public procurements of cantons which are not yet members of the rICPP are still subject to the previous ICPP and the cantonal legislation. This transitory phase leads to a complex situation where the previous ICPP (plus individual cantonal legislation) will exist, temporarily, in parallel with the rICPP. For this reason, it is important for suppliers to determine the status of the cantonal ratification process and the applicable law before participating in a tendering process.

Revision

Scope of application: procuring entities

The GPA 2012 applies to central entities of the federal government, to cantonal entities, and to certain public and private entities operating in the business sectors of water supply, electric power supply, public transport, air traffic and inland waterway transport (GPA 2012 Appendix I Annexes 1-3). By virtue of Article 2 et seq BilatAgr, the application of the GPA is extended to:

  • authorities and public entities of the districts (Bezirke) and municipalities;
  • authorities and public enterprises engaged in the railway, telecommunications and energy supply sectors; and
  • private entities carrying out public service in the fields of water supply, electric power supply, local rapid transport systems and supply of air or waterway traffic enterprises.

The scope of application of the rPPA is aligned with Switzerland’s international obligations und the GPA 2012 and the BilatAgr as mentioned above. In contrast to the scope of the former PPA, however, the scope of the rPPA comprises all authorities and public entities of the central and decentralised federal government by dynamic reference (Article 4 paragraph 1 litera a rPPA). Thus, the related list of government entities subject to procurement law contained in the Swiss Appendix 1 Annex 1 Section I GPA 2012 is not comprehensive. In addition, the revised law newly extends to the federal courts, the Federal Prosecutor and the Parliamentary Services.

As regards the sub-federal level, the GPA 2012 and rICCP operate with an abstract definition of procuring entities subject to procurement rules, as is the case under the GPA 1994 and the ICCP. In essence, centralised or decentralised authorities and administrative units at cantonal, district and communal level are covered. This definition includes bodies governed by public law, or associations formed by one or more of such authorities or bodies governed by public law.

Cantonal procurement may thus even apply to private companies operating in the public sphere (eg, hospitals) if certain criteria are met. In addition, entities active in select business sectors and endowed with special and exclusive rights are also covered by both the rPPA and the rICCP irrespective of their legal form or shareholder structure.

Exemption procedure

Certain business sectors in which, according to the judgment of the Swiss Competition Commission, there is an adequate level of competition can be exempt from the scope of public procurement rules. Under the previous procurement law, this exemption mechanism has only been available to those procuring entities covered by the scope of the BilatAgr. Under the revised law, however, the exemption mechanism is extended to the sectoral markets covered by the GPA 2012 (Article 7 rPPA/rICCP). If the Federal Council wishes to exempt further business sectors under the rPPA/rICCP, it will first need to consult the Competition Commission, the cantons and the industries concerned. To date, exemptions have only been granted to the telecommunication services sector and the standard gauge railway freight transport sector.

Scope of application: transactions subject to procurement rules

While the PPA did not circumscribe the kinds of transactions subject to procurement rules, the rPPA sets forth that procurement rules shall be applied to public procurement (öffentliche Aufträge) and – explicitly – to the outsourcing of public services to private suppliers as well as to the award of public licences (Article 8 et seq rPPA/rICCP).

The term “public procurement” is now defined in the rPPA/rICCP in line with court practice as a contract concluded between the procuring entity and the supplier serving the fulfilment of a public task. The contract is characterised by an exchange of performance and counter-performance whereby the characteristic performance is rendered by the supplier in return for payment.

For suppliers, the inclusion of the outsourcing of public services and the award of public licences in the scope of procurement law bring along new opportunities. The new law makes explicit that, for instance, outsourcing contracts in the fields of waste disposal, maintenance of national roads, and collection of fees in accordance with the Radio and Television Act will be subject to public tender.

With the GPA 2012, the positive lists of covered procurement were extended to include various services as well as construction services not previously within scope. The same holds true, for example, for legal services. However, an exception applies to the representation of the federal government or public enterprises by lawyers in court, arbitration or conciliation proceedings, and to related services (Article 10, paragraph 1 litera g rPPA).

Special rules for non-treaty procurements

The rPPA and rICCP apply to both procurements covered by international treaties (Staatsvertragsbereich) and procurements regulated solely by national law (Nichtstaatsvertragsbereich) whilst setting forth a set of special rules for the second category. The types of procurement covered by international treaties are listed in Annexes 1-3 of the rPPA but only fall under this category if the procurement reaches or exceeds the thresholds set out in Annex 4 of the rPPA. Procurement regulated by national law only, as well as the special provisions applying thereto, are set out in Annex 5 to the rPPA.

The special rules applying to procurement only regulated by national law involve some facilitations; for instance, the option to conduct a tender invitation procedure (Einladungsverfahren, Article 20 rPPA/rICCP). Furthermore, foreign suppliers are only admitted to the tender:

  • if their country of origin grants reciprocal rights; or
  • with the consent of the contracting authority (Article 6 paragraph 2 rPPA).

Finally, on the federal level, legal protection is limited (see Legal Protection below).

General principles and objectives of public procurement

The general principles of public procurement are set out in a separate chapter in the rPPA, with only a few changes compared to previous law. The principles of non-discrimination, equal treatment of competitors, transparency and competition remain the pillars of the Swiss procurement law regime.

The few substantive changes follow the direction of the GPA 2012, one of the main objectives of which is to combat corruption. Against this background, procuring entities are now explicitly obliged to take measures against conflicts of interest, unlawful non-compete agreements and corruption (Article 11 litera b rPPA). In addition, bidding rounds – ie, pure price negotiations – are henceforth prohibited not only at the cantonal, but also the federal level (Article 11 litera d rPPA).

Finally, the violation of corruption provisions may lead to the exclusion of a supplier from future tenders by procuring entities for a maximum duration of five years and to revocation of an award (Article 44, paragraph 1 litera e in conjunction with Article 45 paragraph 1 rPPA).

New instruments

Under the revised law, the basic types of tender procedures (open tender, limited tender, tender invitation and direct award) remain unchanged. However, the rPPA presents a set of new instruments to make the tender procedure more flexible and to use the advantages of recent technological progress. These instruments will not constitute alternatives to the four above-mentioned procedures, but may rather be embedded therein if deemed appropriate. New instruments include the following:

Electronic auctions

This means an automated evaluation of certain parameters of a tender, namely the price (if the contract is awarded to the lowest price), or other quantifiable components (such as weight, purity, quality), whereby the contract is awarded to the most economically advantageous offer. Electronic auctions are only be available for the procurement of standardised goods and services. The electronic auction is preceded by a (non-electronic) prequalification phase during which the suitability of the bidders is verified and an initial evaluation of the bids are made. The actual electronic auction of the tenders that passed prequalification follow in a second step (Article 23 rPPA/rICCP).

Competitive dialogue

This instrument enables the procuring entity and the tenderers to jointly define the object of procurement and to identify possible solutions thereto (Article 24 rPPA/rICCP). It is available for complex, intellectual and innovative services but must not be abused to conduct pure price negotiations.

Framework contracts

The revised law contains a new legal basis for the conclusion of framework agreements between a supplier and the procuring entity (Article 25 rPPA/rICCP). Framework contracts allow the contracting authority to award individual agreements to its framework contract partners during a given period without a new invitation for tender. The most important contract parameters (in particular, price, type and amount of services) must be specified in the framework contract.

If framework agreements are concluded with more than one supplier, the call on services may be made either under the terms set out in the framework contract (without a new invitation to tender) or by means of a call-on-services procedure in which the parties to the framework contract are invited to submit a specific offer (so-called mini-tender).

Electronic tender procedure

The conduct of tender procedures by electronic means are regulated by Article 34 paragraph 2 rPPA/rICCP. Tenders may be submitted electronically if this is communicated in the invitation to tender or in the tender documentation.

Legal protection

With the revised Swiss procurement regime, legal protection in procurement procedures is (moderately) extended. On the federal level, suppliers can now appeal against decisions by the procuring entity in procedures concerning tenders for goods or services reaching or exceeding the threshold value applicable to the invitation tender procedure; ie, CHF150,000 for procurement by federal authorities. In relation to tenders for construction services, the threshold value will be CHF2 million (Article 52 paragraph 1 rPPA). Cantonal procurements are subject to the same principles although different threshold values apply (Article 52 paragraph 1 rICPP). Prior to the revision, in procedures concerning procurements not reaching the threshold values pursuant to the relevant international treaties, no appeals were possible on a federal level.

Non-treaty procurements

On the federal level, effective legal protection will be restricted for procurements covered by international treaties. In particular, a supplier is not entitled to challenge the tender award itself in court and the procuring entity is allowed to conclude a contract with the supplier immediately after the award has been granted without waiting for it to enter into force (Article 42 paragraph 1 rPPA).

Still, suppliers not winning the award are now, under the revised law, able to (i) request that the court declares the challenged award illegal and, (ii) if necessary, obtain damages for the costs incurred in connection with the tender procedure (Article 58, paragraphs 3 and 4 rPPA/rICCP). However, non-Swiss suppliers are only admitted to such legal action if their country of origin grants Swiss suppliers reciprocal rights (Article 52, paragraph 2 rPPA/Article 52, paragraph 3 rICCP).

Appeal of tender documentation

Article 53, paragraph 2 rPPA/rICCP clarifies that a supplier needs to challenge unlawful instructions in the tender documents, the significance of which is apparent along with the invitation to tender. This means that if the supplier fails to bring forward such complaint immediately, the complaint is forfeited. Practically speaking, under the revised law, suppliers are required to study the tender documents thoroughly immediately after publication, address any inconsistencies to the procuring entity without delay and, if necessary, file the complaint with the court within the time limit for appeal.

Time limits

The revision has brought about a harmonisation of the time limits for appeal. A 20-day time limit for appeal is applicable at both the federal and the cantonal level (Article 56, paragraph 1 rPPA/rICPP) while the ICPP only provides for a ten-day period. In return, no court holidays apply to complaints under the revised law, regardless of their subject matter (Article 56, paragraph 2 rPPA/rICPP). This is an important contribution to an acceleration of tender procedures. By contrast, under the previous ICPP that will remain in force for a while in several cantons, court holiday only applies to proceedings about injunctive measures.

Important Decisions and Developments

Scope of application – foundation under private law

Determining the (personal) scope of application of procurement law belongs to the most challenging tasks for procuring entities. In a judgment of 20 October 2020, the Swiss Federal Supreme Court had to assess this question with respect to a foundation for the construction of social housing which had been established by a municipality under private law. The court confirmed that the foundation falls within the definition of “a body governed by public law” contained in Swiss Appendix 1 Annex 3 to the GPA 2012 (see section “scope of application” above). The court held that:

  • the foundation was established for the specific purpose of performing tasks of a non-commercial nature in the general interest, ie, the construction of social housing;
  • it has, as a foundation under private law, legal personality; and
  • the majority of its supervisory body (Stiftungsrat) consists of members appointed by a body governed by public law.

Hence, according to the Swiss Federal Supreme Court, the foundation is subject to public procurement law and must put its contracts out to public tender, providing that the relevant thresholds are met (BGer 2C_1060/2017).

Evaluation criteria – travel time

In a decision of 24 April 2019, the Swiss Federal Administrative Court dealt with the question of whether and in what circumstances a contracting authority may evaluate the "transfer time" or the travel route of the staff of a supplier. The challenged procurement included architecture, engineering and planning services with respect to gasoline stations run by the Swiss military throughout Switzerland. The court, referring to previous case law, held that the admissibility of such evaluation criterion must be assessed in light of the principle of equal treatment. More specifically, such criterion must be based on an "objective reason"; eg, if a standby service from the provider is required. According to the court, however, no such objective reason exists if the nature of the procurement and other evaluation criteria do not imply the necessity of urgent interventions (BVGer B5601/2018).

Scope of application – hospitals

In a landmark decision of 21 February 2019, the Swiss Federal Supreme Court put an end to a long-time controversy in procurement practice. It confirmed that Swiss hospitals are subject to government procurement law if they:

  • are controlled by the (cantonal or municipal) government; and
  • have a public mandate allowing them to directly charge Swiss healthcare insurances (Obligatorische Krankenpflegeversicherung) for medical treatments (Listenspital).

While the court decision focused on a public hospital (controlled by a group of municipalities), the court’s findings are relevant for all Swiss listed hospitals, including hospitals that are fully controlled by private entities. Hence, whenever a listed hospital intends to purchase goods or services (eg, medicinal products) that are designated to contribute to the execution of the public mandate and provided the relevant procurement thresholds are reached, it is obliged to make a public call for tender.

However, whilst all Swiss listed hospitals (including private ones) are subject to domestic procurement law, only hospitals controlled by the government are subject to the WTO Agreement on Government Procurement (GPA). In contrast, procurements of hospitals that are fully controlled by private investors fall outside the scope of the GPA. With respect to these hospitals, non-Swiss providers are entitled to participate in the tendering procedure only to the extent their country of residence grants market access to Swiss suppliers in a reciprocal way (principle of reciprocity) (BGE 145 II 49).

Admission to tender – cross-subsidies

For many years, there had been an extensive doctrinal debate about whether and under what circumstances public entities, such as universities or other companies controlled by the government, are entitled to participate in tendering procedures as bidders. In 2017, the Swiss Federal Supreme Court examined a claim brought by a private telecommunications company against the Federal Office of Communications (OFCOM) (the procuring entity).

OFCOM had awarded a service contract to the University of Zürich, which is entirely controlled by the Canton of Zürich. The claimant criticised the award on the basis that OFCOM had acted in contravention of public procurement law by ignoring the fact that the University of Zürich is funded by the government and that such funding leads to an unlawful competitive advantage of the University in relation to private bidders. The court found that bidders financed by the government must behave neutrally from a competition law perspective. In particular, such providers are required to completely separate their commercial from their monopolistic activities, failing which, they are not entitled to participate in tendering procedures.

According to the court, contracting authorities are required to seek additional clarifications if they obtain offers from such providers. In addition, public service providers must be excluded from the tendering procedure in the case of specific evidence of a distortion of competition. The judgment may have a significant impact on future procurement practice and the behaviour of publicly financed bidders. However, the scope of the procuring entities’ duty to gather additional information is far from clear since the courts have not yet provided any guidance on this aspect (BGE 143 II 425).

Walder Wyss Ltd

Seefeldstrasse 123
P.O. Box
8034 Zurich
Switzerland

+41 58 658 58 58

+41 58 658 59 59

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Law and Practice

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Homburger is a leading Swiss business law firm based in Zurich. Homburger advises and represents companies and executives in all aspects of corporate and commercial law, regulation, tax and dispute resolution, both in a domestic and a global context. Homburger offers clients comprehensive legal advice as well as support in negotiations, and represents them before courts, arbitral tribunals, agencies, and in administrative proceedings. Homburger's practice in the public procurement sector involves advising clients on all issues of public procurement law and representing them in court proceedings. Special areas of focus involve, inter alia, construction services, IT procurements, energy, infrastructure and transport services. Homburger's procurement specialists are members of the relevant industry associations, such as the Swiss association for public procurement law.

Trends and Development

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Walder Wyss Ltd has around 220 legal experts and offices in six locations and is one of the most successful Swiss commercial law firms and one of the few with a dedicated team of public procurement specialists. The firm's clients benefit from its renowned specialist knowledge and wealth of experience, which cover all stages and aspects of a procurement project. Walder Wyss is well versed in sector-specific needs and offers customised solutions for infrastructure and construction projects, complex IT projects and procurements in the energy, healthcare and pharmaceutical sectors. The firm's services include court representation, legal advice and legal training with respect to the structuring and implementation of procurement projects, tender offers, as well as assistance in related contractual, intellectual property and competition law issues. The firm's public procurement specialists are members of the Swiss Association for Public Procurement and have initiated the publication of the commentary of the revised Swiss Public Procurement Act.

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