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SWEDEN: An Introduction to Public Procurement

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Contributed by Fredrik Linder and Viktor Hård af Segerstad, Advokatfirman Schjødt

Public Procurement in Sweden 

Each year, the Swedish public sector purchases goods, services and public works at an estimated value of EUR70 billion. The legislation on procurement in Sweden generally 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 procurement 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.

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

When it comes to welfare services contracts (mainly healthcare and social services), which represent a value below the EU threshold values, Sweden has adopted more flexible rules which came into force in January 2019. The main requirements for the contracting authorities in procurement of welfare services contracts are to publish a procurement notice, to inform the bidders of the award decision and to document the conduct of the procurement procedure. In addition, the same remedies are applicable as above the EU threshold values.

Direct awards of contracts (i.e. without tenders in a certain form) are permitted in Sweden in certain circumstances, such as if the contract value is below certain thresholds stipulated in the Swedish legislation (approximately EUR60,000 for contracts covered by LOU, approximately EUR205,000 for welfare services, approximately EUR110,000 for contracts covered by LUF and LUFS and approximately EUR260,000 for contracts covered by LUK).

Current market and legal issues 

There is widely expressed criticism that Swedish public procurement has a clear legalistic bias towards rule enforcement, whilst neglecting the commercial aspects of reaching 'a good deal'. Indeed, Swedish procurement legislation is perceived as complex and inflexible and is sometimes applied in this way, causing unnecessary 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 an issue of competence and resources within the contracting authorities. In 2018, a government report was published containing proposals for comprehensive changes and amendments for the purpose of simplifying the rules for procurement below the EU threshold values and for social and other specific services. These proposals have not yet been implemented.

An obstacle against 'good deals' in Swedish public procurement is inadequate follow-up of public contracts and framework agreements, which opens the way for abnormally low tenders designed to win the contract/framework agreement but in fact speculating on subsequently not complying with its terms. In accordance with LOU and LUF, it is mandatory for contracting authorities to reject all abnormally low tenders (more far-reaching than the EU Directives) where the supplier does not submit a satisfactory explanation for the low tender.

Follow-up of contracts and framework agreements is essential in order to ensure good value for money and has become a high priority in Sweden. Framework agreements in particular may be difficult to follow up, often due to inadequate transparency when it comes to the volumes of the agreement. In this regard, the judgment from the European Court of Justice in case no C-216/17, Coopservice, has been the subject of vigorous debate in Sweden over the last year. Particularly the requirement for stating a maximum volume/value, beyond which the agreement will no longer have any effect, has created interpretation problems for the contracting authorities. Both the Swedish Competition Authority and the Swedish National Agency for Public Procurement have recently published guidelines with respect to Coopservice. It is clear that Coopservice will have a large impact on procurement of framework agreements in Sweden – not least for the large central purchasing bodies. The courts will most likely have the opportunity to give further guidance in this regard.

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 challenge before the Swedish administrative courts the effectiveness of an agreement preceded by an illegal direct award. This is a risk for both the contracting authorities and the suppliers in these contracts. If an agreement is considered ineffective, all contractual obligations are cancelled, not only those which are still to be performed. However, even in cases of an illegal direct award, the contract might be saved from ineffectiveness due to overriding reasons relating to the public interest. This exemption has been applied by Swedish administrative courts for, inter alia, contracts regarding maintenance of public roads, certain medtech equipment and support services for certain forms of public transportation.

The Swedish Competition Authority has in recent years taken several actions against illegal direct awards through 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. However, the fine may not exceed 10% of the value of the contract in question and the maximum fine that can be imposed is SEK10 million (approximately 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 procurement procedure.

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 review of an on-going procurement. Accordingly, the number of legal review proceedings in relation to the total number of procurement procedures in Sweden is high, compared to most other EU countries. In 2018, more than 2,800 cases were registered by the administrative courts regarding review applications filed by disadvantaged bidders. The success rate for court complaints stands at almost 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 several practical procurement issues not answered in the Swedish procurement legislation.