Public procurement regulation in Norway

In Norway, public procurement is regulated by the Public Procurement Act. The Public Procurement Act regulates the general principles for public procurement, and is accompanied by several regulations setting out more detailed rules for each sector. These regulations are as follows: the Public Procurement Regulation (“the Regulation”), the Utilities Regulation, the Defence and Security Regulation and the Regulation on Concessions Procurement.

The legislation implements EU rules, including the EU directives on public procurement, Directive 2014/23/EU (the Concessions Directive), Directive 2014/24/EU (the Public Procurement Directive) and Directive 2014/25/EU (the Utilities Directive).

Furthermore, Norway is subject to the WTO Agreement on public procurement, the Government Procurement Agreement (“GPA”). The GPA essentially corresponds to what Norway is already committed to through the EEA agreement.

The same financial thresholds as defined in the EU Directives apply in Norway. The EU threshold normally changes every two years. Furthermore, the Norwegian legislator has decided that procurements below the EU thresholds will also be subject to certain national regulation.

Procurements below NOK 100,000 are exempted from the procurement legislation. Procurements with a value between NOK 100,000 and NOK 1.4 million are only subject to certain basic principles, such as competition, equal treatment, transparency and proportionality. This implies that the contracting authority must usually contact three potential tenderers and carry out a competition between these tenderers. However, the contractor does not have to publish a contract notice.

Procurements between a value of NOK 1.4 million and the EU threshold of NOK 2.2 million are subject to certain requirements, such as publishing a national contract notice. However, the rules below the EU threshold are less rigid than those above it. Procurements with a value above NOK 2.2 million are subject to the legislation implementing the EU Procurement Directive. For all building and construction works, the threshold is NOK 56 million.

Contracts subject to the procurement legislation with an estimated value above the EU thresholds may, as a main rule, only be awarded after the use of an open or restricted procedure. The open procedure is the most used procedure in Norway. The open and restricted procedure is characterized by the fact that the tenderers must submit an offer based on the contracting authority’s specifications. The open and restricted procedure prohibits any negotiation during the tender phase, and there is a very limited possibility to change or clarify the tenders.

The negotiated procedure or the competitive dialogue may only be used if specific conditions are met. After implementing the current directives on public procurement, the right to use negotiated procedure and competitive dialogue has been expanded.

The regulation is very general because contracting authorities needed more flexibility to choose procurement procedures that provided an opportunity to negotiate.

In general, the negotiated procedure and the competitive dialogue may be used when the contracting authority has a need that cannot be met without adapting solutions that already exist in the market. The procurement procedures can also be used when the procurement involves design or innovative solutions or where negotiation is necessary due to the nature of the procurement or the complexity of legal and financial conditions. The negotiated procedure and competitive dialogue can also be used if the contracting authority only received unacceptable tenders in a prior open or restricted tender. The question of whether these conditions are met must be assessed specifically for each individual procurement.

Breaching the procurement legislation may have severe consequences for the contracting authority. In general, there are different ways of challenging a contract award depending on whether the contract has been signed. Secondly, the remedies available differ depending on whether the procurement is subject to the procurement legislation.

During the standstill period (see p. 6), a passed over tenderer may first challenge an award decision by filing a complaint to the contracting authority. The contracting authority is under an obligation to assess and respond to the complaint. However, the complaint itself does not prevent the contracting authority from entering into a contract with the successful tender.

Before signing the contract, contracting authority decisions may also be challenged by filing a complaint to The Complaints Board for Public Procurement (“KOFA”). Before the contract is signed, the Norwegian court can also set aside decisions that the contracting authority has made in violation of the law or regulations issued pursuant to the law.

After the contract has been signed, there are no remedies available allowing a change or suspension of the contract award. After a contract is signed, passed over suppliers are limited to bringing an action before KOFA or the courts against the contracting authority if they are of the opinion that the procurement procedure was not in accordance with the procurement legislation.  

Appeals to KOFA must be submitted no later than six months after the contract was signed by the contracting authority, or six months after the contracting authority has cancelled the competition. For an illegal direct procurement, complaints can be made up to two years from the signing of the contract.

The ordinary courts enforce the procurement rules. After the contract has been signed, interim measures cannot be awarded. In other words, an application for interim measures must normally be lodged with the court before the end of the standstill period.

A contracting authority may, in the restricted procedure or negotiations with prior notice, in respect of decisions to reject an application from an interested bidder, fix a deadline of at least 15 days to seek interim measures. The contracting authority must specify the deadline in the procurement documents and in the notification to the supplier that the request has been rejected.

The general rule is that an application for sanctions (i.e., ineffectiveness, fines and the shortening of contract) must be filed with the court within two years of the conclusion of the contract.

The statute of limitations (normally three years) applies to an application for damages.

Contracting authorities covered by the procurement legislation are obliged to have a standstill period of 10 days between the awarding and signing of the contract.

The standstill period is 15 days if the award notice is not sent electronically.

A Complaints Board for Public Procurement (“KOFA”) is established in Norway and handles complaints in accordance with the Regulation on the Complaints Board for Public Procurement from 2002. KOFA handles complaints of violations of the law on public procurements. KOFA’s decisions are only advisory, meaning that the decisions are not enforceable by law. However, the opinions are in practice usually followed by the parties concerned.

KOFA is meant to be a cheaper and a more effective alternative than the courts, making it easier for a passed over supplier to examine its legal rights pertaining to a decision from a contracting authority. The procedure for reviewing cases consists of a written exchange of pleadings, similar to the hearing of civil actions. There are, however, no oral proceedings. KOFA is composed of ten members that have a legal background and three members consider each case.

In addition to KOFA, the supplier can appeal to the Norwegian courts.

An appeal to KOFA requires a fee of NOK 8,000. The parties bear their own costs in relation to the appeal process.

For the courts, there is an appeal fee of NOK 1,223 and there will be daily court costs (NOK 6,115 for one day in court). The big difference in costs compared to KOFA, is that in courts the losing party, as a rule, have to bear all legal costs, including those of the winning party.

During the standstill period, a passed over tenderer may first challenge an award decision by filing a complaint to the contracting authority. The contracting authority is under an obligation to assess and respond to the complaint. However, the complaint itself does not prevent the contracting authority from entering a contract with the successful tenderer.

Furthermore, a passed over tenderer may, during the standstill period, file a claim for an interim injunction to stop the procurement until a court has reviewed the procurement in question’s legality. When an interim injunction has been passed to the court and served to the contracting authority, the contracting authority is automatically prevented from signing a contract until the court has reviewed the case.

If the court finds that the claim for an interim measure is justified, the court will pass a decision stating that the contracting authority may not enter into contract until the court has assessed the case following a lawsuit from the passed over tenderer. If the court finds that the interim measure is not justified, the contracting authority is free to enter into a contract with the successful tender.

According to Section 13 of the Public Procurement Act, the ordinary courts may rule on the ineffectiveness of a contract. This requires a lawsuit against the contracting authority. The court may rule on the ineffectiveness of a contract if (i) the contract has been awarded without prior publication of the contract notice, (ii) if certain infringements have deprived a tenderer applying for review, (iii) in case of derogation from the standstill period, for contracts based on a framework agreement or a dynamic purchasing system.

If rendering the contract ineffective might damage the public interest, the court can impose alternative penalties. They must be effective, proportionate and dissuasive. Such alternative penalties may consist of (i) the early termination of the contract and/or (ii) the shortening of the duration of the contract and/or (iii) fines imposed on the contracting authority (which will not exceed 15% of the value of the contract.

As a general rule, within the procurement legislation, the possibility to change the contract is limited.

A contract awarded after a procurement process will however in most cases contain regulation concerning changes permitted after the contract has been signed. In general, many Norwegian standard contracts give the contracting authority wide opportunities to change the scope of the contract. Modification is permitted when it is expressly provided for in review clauses set out in the initial procurement documents. Review clauses can provide a certain degree of flexibility in the terms of the contract. Modifications to the contract cannot be permitted simply because they were mentioned in the procurement documents in advance. Review clauses in procurement documents must be clear, precise, and unequivocal. Review clauses must not be drafted in broad terms with a view to covering all possible changes. A review clause that is too general is likely to breach the principle of transparency and entails the risk of unequal treatment.

According to the Regulation there are also some changes that are always considered within the law. For example, a contracting authority if always permitted to modify a contract where the financial value of the modification is low, and the modification does not alter the overall nature of the contract. The financial value of the modification must satisfy both financial conditions, which means that it must be (1) below the relevant EU threshold for the contract in question and (2) be less than 10% of the initial contract value of a services/supplies contract or less than 15% of the initial contract value of a works contract. This is a practical provision for small deviations but has clear limitations where the contracting authority needs to make major changes to the contract.

Even major changes to a contract may be acceptable. The relevant legal question is whether the deviation is regarded as a substantial modification. All substantial modification is prohibited if it is not explicitly accepted, such as because of its low value.

The use of e-procurement is mandatory for all contracting authorities or entities involved in public contracts whose value exceeds NOK 1.4 million. There are a few exceptions to this requirement, mainly where, due to the specialised nature of the procurement, the use of electronic means of communication would require specific tools, devices or file formats that are not generally available or supported by generally available applications.

Under the current rules, the use of an e-signature is optional for tenderers.