Mitigating contractual hazards in public procurement: a study of Swedish local authorities

Abstract

Private sector buyers often award construction contracts through negotiation rather than through open competitive tendering. Negotiating with a reputable contractor is a way to mitigate contractual hazards. For many public sector buyers, however, open competitive tendering is required by law. The practices of procurement officers in local authorities are examined in regard to the selection of construction contractors, focusing particularly on their use of scoring‐based competitive tendering and ex ante information exchange between procurement officers and the firms competing for contracts. Semi‐structured interviews were carried out with 15 procurement officers in 10 local authorities in Sweden. Using the contractor's staffing of the project organization as a contract award criterion allows procurement officers to select reputable contractors. Arranging face‐to‐face meetings with contractors before the final award decision allows procurement officers to resolve at least some technical problems in complex construction projects. When negotiations are prohibited by law, these practices can be seen as combined responses to hazards of construction contracting.

Keywords:

• Contracting
• procurement law
• public sector
• Sweden.

Notes

1. These new directives are 2004/17/EC (the water, energy, transport and postal services sector) and 2004/18/EC (public works contracts, public supply contracts and public service contracts). For a background to the reforms and an assessment of this new legislative package, see Arrowsmith (2004).

2. These earlier directives were 92/50/EEC (public service contracts), 93/36/EEC (public supply contracts), 93/37/EEC (public works contracts), and 93/38/EEC (the water, energy, transport and telecommunications sectors).

3. There is no single, official title for the people that were interviewed. Different local authorities tend to use different titles. Throughout this paper, however, these people are referred to as procurement officers.