About Public Procurement
Public procurement is the purchasing process used by public sector organisations. There are rules governing how this is conducted. Public procurement can also be used to contribute to sustainable societal development.
Shall safeguard tax funds and ensure healthy competition
Public procurement shall ensure that organisations within the public sector open their purchasing to competition. This is to ensure that tax funds are used as effectively as possible and that businesses within the European Union can trade with public sector stakeholders on equal terms.
For major procurements, which entail a duty to advertise, the public is also given insight into the process and how their taxes are being used. In other words, it is easier to check whether purchases are made for business rather than personal reasons.
Differences between public procurement and private-sector purchases
The procuring organisations finance their purchases with public funds. For this reason, they must abide by stricter procurement rules than private stakeholders. For example, procuring organisations cannot directly contact a previous supplier, or someone recommended to them, when purchasing goods or services.
A public procurement often takes longer than a private-sector purchase, particularly for major procurements. Depending on the value of the procurement, different rules apply. Minor transactions, so called direct awards, are more similar to private-sector purchases than major transactions, where more procurement rules apply.
Contributing to sustainable development in society
Swedish public procurements amount to more than 800 billion krona each year. This corresponds to almost one fifth of Sweden’s GDP.
When public procurements are used strategically there is every opportunity to
- drive developments to a more sustainable society by demanding socially and environmentally sustainable products and services
- using suppliers’ capacity for innovation in order to develop new solutions.
Public purchases are subject to certain rules
More or less all purchasing done within the public sector, including rent and leasing, constitutes public procurement and is therefore subject to procurement legislation. Depending on what will be procured and how much the procurement is valued at, different sections of the procurement legislation will be applicable. Even a purchase worth 1 krona is a public procurement as per the legal definition.
The Swedish procurement legislation consists of four laws:
- The Public Procurement Act (LOU)
- The Act on Procurement in the Utilities Sector (LUF)
- The Act on Procurement of Concessions (LUK)
- The Defence and Security Procurement Act (LUFS)
Most procurements are conducted in accordance with LOU. The Act on System of Choice in the Public Sector (LOV) can be used as an alternative to procurement in accordance with LOU for healthcare and social services.
The organisations that shall follow the procurement legislation primarily include:
- state or municipal agencies
- governing bodies in a municipality or region
- publicly governed bodies such as most municipal and some state companies
- associations of one or more authorities, assemblies or publicly governed bodies.
Companies that conduct operations within water, energy, transport or postal services with an exclusive right or a specific right are also obligated to follow the procurement legislation.
In the legislation, these procuring organisations are called contracting authorities or entities.
The procurement legislation is a regulatory framework that is aimed at procuring organisations. A supplier who wishes to submit a tender in a public procurement process is not obligated to follow the procurement legislation, but the supplier must follow the instructions in the tender documents for the individual procurement. The tender documents comprise the documents used by a procuring organisation to describe and stipulate the contents of a procurement.
Irrespective of which law is applicable to the procurement, there are five basic principles that the procuring organisation must consider at all stages of the public procurement. Most of the legal provisions are basically an expression of these principles.
The basic procurement principles are:
- equal treatment
- mutual recognition
They mean that procuring organisations must always remain objective and neutral to the stakeholders that wish to become suppliers, and the entire procurement process must be characterised by transparency and proportionality.
In direct awards, there are no specific rules regarding how to carry out the procurement. For example, there are no requirements on how to draft a tender or that the procurement must be advertised.
However, even a direct award is subject to certain aspects of the procurement rules. Among other things, the basic procurement principles shall be observed, and the value of a direct award shall be added to any other similar direct awards that the procuring organisation has carried out in the same financial year.
The most common situation when direct awards are used is when the item to be purchased has a value that does not exceed the so-called limit for direct awards.
There are exemptions for certain products and services which means that these do not need to be procured in accordance with the procurement rules. These exemptions include renting or purchasing property and purchasing certain financial or legal services.
How to conduct public procurements
Below is a general description of what a public procurement might look like.
A procurement begins when a public body has a need that they are not able to or cannot meet themselves. The organisation therefore decides to make a purchase – a public procurement.
The procuring organisation analyses their needs in order to formulate requirements for what needs to be purchased. The needs, in combination with the value of the procurement, will impact the requirements that can be specified in the procurement as well as how the procurement will be conducted.
In order to find out which requirements may be relevant, the procuring organisation can contact companies and experts in the market in question. There is no obligation to have these discussions but it can often be both appropriate and necessary. A prerequisite for the discussion is that the procuring organisation treats all suppliers the same and does not give any supplier a competitive advantage.
The procuring organisation outlines their requirements in the so-called tender documents. These documents contain all the relevant information required by the suppliers in order to submit tenders in the procurement. Terms that are frequently used in a procurement include mandatory requirements (must have) and non-mandatory requirements (nice to have).
Procuring organisations must advertise all procurements that are not direct awards in an advertising database registered with the Competition Authority (from January 1, 2021). If the value of the procurement exceeds the so-called threshold, it must also be advertised in the joint EU advertising database, the Tenders Electronics Daily (TED).
There is no national advertising database for procurements taking place in Sweden. For that reason, anyone wishing to conduct business with public sector stakeholders should register with several Swedish advertising databases as well as subscribe to an advertising monitoring service.
Any suppliers interested in participating in the procurement respond to the advertisement by submitting a tender. In the tender, the supplier describes the various requirements in the tender documents.
During the advertising period, the procuring organisation is obligated to provide additional information about the tender documents no later than six days before the listed tender closing date, provided that the supplier has asked their questions well in advance. For that reason, it is important that the supplier asks their questions within the time limits that apply to questions and answers, and which are listed in the tender documents. The answers shall be provided in writing and made available at the same time to everyone participating in the procurement, for example by publishing the answer in the procurement tool.
After the time limit for submitting tenders has expired, the procuring organisation examines the submitted tenders based on the requirements in the tender documents.
The organisation shall award the contract to the supplier that submitted the most financially beneficial tender based on one of the three grounds for assessment:
- best price-quality ratio
It shall be apparent from the tender documents which ground for assessment will be used. It is the procuring organisation that assesses which ground is the most appropriate for each individual procurement.
The procuring organisation decides which supplier or suppliers will be awarded the contract and sends information about the decision to all tenderers.
In most procurements, there is a so-called standstill period during which the procuring organisation cannot conclude a contract with the new supplier. During this period it is possible for the suppliers that were not awarded a contract to request a review by a court of law. When the standstill period expires a contract may be concluded, provided that the procurement is not under review.