Abnormally Low Tenders: An Effective Mean of Pursuing EU Objectives? A Legal and Economic analysis of Procurement Directive Article 69

Philip Stabell Monby & Mikal Jespersen

Student thesis: Master thesis

Abstract

This thesis examines the provision on abnormally low tenders in public procurement with an emphasis on analyzing whether the provision is effective, in terms of ensuring that the public authority do not pursue purposes that is not in accordance with the means of the provision. The provision requires economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low. The analysis has shown that it is up to the public authority to identify whether it perceives a tendered price to appear abnormally low, as the concept of the provision is unclear. In continuation thereof, the objective of the Public Procurement Directive is to ensure fair and open competition, enabling economic operators to gain benefits from the Internal Market while at the same time achieving competitive bids for the authority. These goals are found to be contradictory. Furthermore, the analysis has shown that the public authority has several reasons why it may wish to accept or reject an apparently abnormally low tender. The analysis has shown that contracting authorities do not act solely on the basis of welfare-maximizing behavior. The analysis showed that the contracting authority can also act profitmaximizing, whereby wishing to use input as efficiently as possible, even though this behavior can lead to opportunistic behavior. The provision introduces transaction costs that are undesired in the first place, but that these costs are proportional to the ex-post costs that may arise in a contractual relationship, after which they are considered to be efficient. Finally, the analysis showed that Public Procurement Law and EU Competition Law have different purposes, but that the set of rules can overlap and influence each other, as both seek to generate effective competition in the Internal Market. As a result of the public authority’s profit-maximizing behavior, the authority may risk accepting a tender coming from a cartel. The analysis has shown that by accepting this tender, the competition may be distorted. The economic consequences are that the cartel will act as a monopoly, and will price at monopolistic prices. This will generate a deadweight loss for the EU community

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2018
Number of pages122
SupervisorsCecilie Fanøe Petersen