Rules of procurement

The public procurement of goods, services, and construction work is regulated by the rules of procurement. These rules apply to the public sector, a range of semi-public institutions, and substantial parts of the utilities sector. Public contracting authorities are obligated to adhere to the procurement rules, and for companies seeking to secure public contracts, it is essential to be familiar with these rules.

Why do we have procurement laws?

The idea behind the procurement law is that through effective competition, the authorities can ensure the best possible use of public funds. This means that contracts of the state and other semi-public and fully public authorities should be awarded to the companies offering the best products or services at the best prices, regardless of which EU country they come from, and without the authorities taking irrelevant considerations into account.

The rules aim to ensure equal opportunities

The procurement rules consist of procedural rules designed to ensure clarity and fair treatment of bidders, which the state and other public authorities must use when procuring products or services above certain amounts.

Procurements must, therefore, adhere to general principles of equal treatment, transparency, and proportionality. Public procurements must not be formulated in a way that aims to exclude them from the procurement rules or artificially restrict competition.

There is also a prohibition on discriminating against bidders based on nationality. This means that a contracting authority must not provide actors or services from Denmark with favorable treatment than actors and services from other countries.

Four forms of procurement

Companies considering submitting a bid should be aware that there are four types of procurement: Public procurement, restricted procurement, negotiated procurement, and competitive dialogue. Each of these procurement forms has its distinct characteristics that bidders should be aware of and consider in their bid.

Importance of knowing the procurement rules

As a supplier, a company is not initially subject to the procurement rules. However, the procurement rules set the framework for what contracting authorities may do in relation to the procurement. Therefore, it is important to examine the rules for companies that wish to:

• Submit a bid for a contract with a public contracting authority as the contracting party.
• File a complaint regarding a public contracting authority's conducted procurement or lack thereof.
• Modify an already concluded contract with a public contracting party. à Establish collaboration with a public contracting authority.
• Engage in a business transfer where the target company has contracts with public contracting parties.

When should a purchase be subject to procurement?

The procurement rules apply to purchases above certain values, while small purchases can be conducted without procurement. However, this presupposes that they are individual purchases, and their value should not be combined with other purchases made by the contracting authority. As a general rule, EU procurement must be carried out for all public purchases exceeding the following threshold values:

• Approx. DKK 1 million or DKK 1.6 million for the procurement of goods and services, depending on whether the contracting authority is a government authority or not.
• Approx. DKK 40 million for construction works. Additionally, special Danish rules apply to obtaining bids for construction works valued between DKK 300,000 and approx. DKK 40 million, in accordance with the Tender Law.

Amendments to the Procurement Act from 1 July 2022

• In certain types of procurements, there are requirements for the supplier to use apprentices to perform a part of the contract.
• Companies registered in tax havens cannot participate in procurement. This rule does not apply to subcontractors.
• Longer exclusion periods for serious omissions and provision of significantly incorrect information.
• Possibility to terminate a contract if the supplier becomes subject to an exclusion ground and cannot demonstrate its reliability.
• Easier access to negotiated procurement in case of unsuccessful procurement.
• Limitations on selection based on turnover.

Tips for a successful procurement process

• Participate in the prequalification application and, if necessary, establish relevant constellations with other suppliers.
• Thoroughly review the procurement documents and stay updated on any updates, including risk balance and commercial red flags.
• Identify the suitability requirements, minimum requirements, formal requirements, and documentation requirements of the procurement.
• Ask questions to the contracting authority in a timely manner if something is unclear or if there is doubt about a condition.
• Avoid reservations unless allowed in the procurement documents.
• Ensure that your bid meets the requirements specified in the procurement.
• Quality check your bid and thoroughly check for punctuation and spelling errors.
• Adhere to the application or bid deadline.
• Plan for the post-decision phase if your bid is selected, including negotiation, documentation, and contract signing.
• Review the contracting authority's justification for its decision regarding prequalification or award.
• Request access to documents and consider filing a complaint if your request is denied.

This article was originally published in Ind§igt #27 in December 2022.