SWEDEN: An Introduction to Public Procurement

Contributed by Fredrik Linder and Mikael Dubois 

Public Procurement in Sweden 

Each year, the Swedish public sector buys goods, services and public works for an estimated value of EUR60–70 billion. The legislation on procurement in Sweden mainly consists of: (i) the Public Procurement Act (LOU), which mainly covers government authorities, municipalities, county councils and certain public companies; (ii) the Utilities Procurement Act (LUF), which covers certain entities and activities within the water, energy, transport and postal services sectors; (iii) the Concessions Procurement Act (LUK), which covers procurements of service and public works concessions; and (iv) the Defence and Security Procurement Act (LUFS), which covers certain contracts within the defence and security industry.

LOU, LUF and LUK came into force on 1 January 2017, as a result of the implementation of the 2014 EU directives on procurement and concession contracts. Before 1 January 2017 there was no specific act on concessions procurement in Sweden.

Considering that the regulatory framework for public procurement is based on EU directives, the Swedish procurement legislation mainly corresponds to such legislation in other EU countries. At least, this applies to contracts which represent a value above the EU threshold values, where the EU directives in their entirety are applicable. When it comes to contracts which represent a value below those thresholds, and contracts regarding social and certain other services (regardless of value), Sweden has adopted procurement rules which correspond to the EU directives to a large extent. In effect, the Swedish procurement legislation actually goes beyond what is required by the EU.

Direct awards of contracts (i.e. without tenders in a certain form) are permitted in Sweden under certain circumstances, for example if the contract value is below certain thresholds stipulated by the Swedish legislature (approx. EUR60,000 for contracts covered by LOU, approx. EUR115,000 for contracts covered by LUF and LUFS, and approx. EUR275,000 for contracts covered by LUK).

Current market and legal issues 

There is a rather wide criticism in Sweden that public procurement has a clear bias towards law enforcement, whereas aspects of 'a good deal' are neglected. Indeed, the Swedish procurement legislation is perceived as difficult and inflexible and is sometimes applied in this way, causing unnecessary legal review procedures, delays and difficulties in providing public services. However, such difficulties are generally not a consequence of the legislation as such, but more often a matter of competence within the contracting authorities.

In June 2017, a government review was announced with the aim to simplify the procurement rules below the EU threshold values and to consider measures in order to decrease the number of court cases regarding public procurement. It remains to be seen whether or not appropriate changes to the legislation will meet these goals.

Another obstacle against 'good deals' is inadequate follow-up of public contracts. Insufficient follow-up opens the way for abnormally low tenders, designed to win the contract but in fact speculating on non-compliance with the terms of the contract. The negative effects of such tenders can for example be mitigated by using a model for contract award which gives more weight to criteria based on quality in relation to price, or even using a model where the price is fixed and the competition is based on quality criteria only. In LOU and LUF, a mandatory requirement for contracting authorities to reject all abnormally low tenders is stipulated (more far-reaching than the EU Directives), where the supplier does not submit a satisfactory explanation for the low tender.

Still, follow-up of a contract is essential in order to ensure good value for money and has become a high priority in Sweden. In this regard, the EU directive rules on modification and termination of contracts - which have been implemented in the Swedish legislation as of 1 January 2017 - have certainly become a welcome additional tool for the contracting authorities.

The function of improving the various conditions for 'good deals' in public procurement is the responsibility of the National Agency for Public Procurement, which has an overall responsibility for developing and supporting public procurement in Sweden. The objective of this agency is, inter alia, to promote efficient and sustainable public procurement, and to promote the participation of small and medium-sized enterprises in public procurement procedures. Furthermore, the agency provides guidelines and support on all aspects of public procurement.

Illegal direct awards are not only obstacles against 'good deals'; they also constitute a serious breach of both EU and Swedish law. It is possible to bring actions in Swedish administrative courts against the effectiveness of agreements preceded by illegal direct awards. This is not only a risk for contracting authorities but also for companies which have entered into such contracts. The Swedish legislature has taken an all-or-nothing approach. Basically, if an agreement is considered ineffective, all contractual obligations are cancelled, not only those which are still to be performed. However, even if a contract is concluded as a result of an illegal direct award, it might be saved from ineffectiveness due to overriding reasons relating to the public interest. This exemption has been applied in some situations by Swedish administrative courts, inter alia, for contracts regarding maintenance of public roads, certain medtech equipment and support services for certain forms of public transportation.

The Swedish Competition Authority, the supervisory authority for public procurement, has in recent years taken several actions against illegal direct awards by legal proceedings regarding imposition of procurement fines on contracting authorities. When calculating the amount of a procurement fine, consideration shall be given to the gravity of the violation. The fine may however not exceed 10% of the value of the contract in question and the maximum fine that can be imposed is SEK10 million (approx. EUR1 million).

The Swedish legislation on public access to information plays an important role in public procurement and is more far-reaching than in most other EU countries. In principle, anyone is entitled to contact public authorities in Sweden (including most municipal companies but not government-owned companies) and request access to an official document, such as the winning tender in a public procurement.

Admittedly, the far-reaching public access to information in Sweden might be seen as a business risk for a tenderer, since the tender may be disclosed to competitors. However, the public authority must consider if the tender contains, inter alia, business secrets which must not be disclosed. Sometimes tenderers request in their tenders that certain parts of the tender shall be treated as confidential. Such requests should be as informative as possible, clearly stating the risk of damage if the information is disclosed.

Business risk or not, public access to official documents in Sweden simplifies the examination of the authorities' compliance with the procurement legislation, and therefore also facilitates meaningful legal reviews of on-going procurements. Accordingly, the number of legal review procedures in relation to the total number of procurements in Sweden is high, compared to most other EU countries. In 2016, almost 4,200 cases were registered by the administrative courts regarding review applications filed by disadvantaged bidders. The success rate for court complaints (i.e. a decision by the court that the procurement shall be corrected or recommenced) stands at around 30% of the total number of cases reviewed by the administrative courts.

The large number of procurement challenges has resulted in a voluminous and steadily expanding case law, which holds the key to many practical procurement issues which are not answered in the Swedish procurement legislation.