Requirements for transparency tighten under the Danish Public Procurement Act
On 26 February 2019, the Danish Parliament adopted an amendment to the Danish Public Procurement Act that is intended to increase transparency when evaluating EU tender submissions in Denmark. First, the amendment includes a tightening of the requirements for the description of the evaluation method in the contract documents. Second, the amendment introduces a so-called two-envelope system that will be applied when evaluating large construction projects.
By attorney Stine Grauballe Sheta
FULL DISCLOSURE OF THE EVALUATION MODEL
Following the introduction of section 160 of the Public Procurement Act – which is a special Danish rule on disclosure of the evaluation model – there has been some uncertainty about the extent to which a contracting entity was required to disclose all or only part of the evaluation model.
In the noteworthy decision of 8 August 2017 in the case between the Danish Competition and Consumer Authority and the Central Denmark Region, the Danish Complaints Board for Public Procurement held that section 160 of the Public Procurement Act did not authorise a description of the entire evaluation model already in the contract documents. This meant, in this particular case, that the Central Region Denmark was not required to disclose the gradient of their point model in their contract documents.
The new amendment to the Public Procurement Act will amend section 160 to require contracting entities to disclose all parts of the evaluation model already in the contract documents. Consequently, the transparency requirements in Denmark will tighten even further compared to the case law created by the Central Region Denmark decision.
WHAT IS A TWO-ENVELOPE SYSTEM?
A two-envelope system means that the contracting entity must evaluate the tender bids based on the qualitative criteria without knowing the prices in the individual tenders – contrary to the method of evaluating the criteria of price and quality concurrently and jointly.
According to the Bill, the two-envelope system has been introduced to secure that quality is evaluated more independently in large construction projects put up for tender based on the evaluation criterion "best match between price and quality". The concern is whether a very low (or very high) price may affect the evaluation of the quality. The amendment is therefore the legislator's attempt to ensure that the quality is evaluated independently of the price.
The two-envelope system is limited to construction contracts with an estimated value of more than DKK 350 million which have simultaneously been put up for tender through open or restricted procedures.
The scope of application in practice is therefore quite narrow and may even have no real effect. A search for announcements of signed construction contracts in Denmark in 2018 shows that only two contracts signed after an open or restricted procedure where the award criterion was best match between price and quality exceeded DKK 350 million. In comparison, 2018 saw 189 announcements of Danish construction contracts signed after an open or restricted procedure, and 282 announcements if we look at all tender procedures. Accordingly, the provision would have applied to 2 out of 282 projects in 2018.
The amendment will enter into effect on 1 July 2019 and will apply to all tender procedures announced as of that date. A major evaluation of the Danish Public Procurement Act is still expected in 2020.
Read the adopted Bill on the website of the Danish Parliament.