IT Contracting Authorities Preparation of Requirement Characteristics: In a Legal and Economic Perspective

Savannah Janke & Steffen Lindholm Schøndorff

Student thesis: Master thesis


The purpose of this thesis is to prepare a recommendation on how contracting authorities in an efficient way should specify their requirements for a given IT system development that is in compliance with the public procurement rules. The research questions are therefore formulated from the contracting authority’s point of view. The purpose of the recommendation is to ensure that contracting authorities comply with the rules of procurement law while minimizing transaction costs. The analyses will therefore take place at a transaction level and will be analyzed from the public procurer perspective. In order to analyze a specific transaction, the thesis is based on an IT procurement from a Danish state authority.
When a contracting authority purchases IT system development, they are required by law to describe the required characteristics that the system shall entail. However, IT system development is difficult for many contracting authorities to predetermine, due to the complexity of the project and the fact that their needs may change over the course of the procurement. This leaves IT-procurers with the need for flexibility during the procurement process, since the required specifications are exposed of a later need to change these. It is determined that, in order to address this issue, some IT-procurers engage in a negotiated procedure in which they preselect some of their minimum requirements and make them subject to negotiations with the tenderers.
The legal analysis examines whether contracting authorities contravene the public procurement rules by setting negotiation requirements instead of minimum requirements. The conclusion shows that Danish contracting authorities have tried to bypass minimum requirements because negotiation requirements preclude the safeguards set by minimum requirements for the principles of equal treatment and transparency. The economic analysis in turn focuses on deducing an efficient way for the contracting authorities to optimize their requirement specifications, from a transaction cost perspective. The conclusion shows that detailed requirement specifications are unable to economize on transaction costs when the transaction has a high degree of complexity. Furthermore, it is concluded that negotiation requirements do not provide sufficient flexibility to deal with the uncertainty of purchasing IT system development when contracting authorities use detailed requirement specifications.
In conclusion, this thesis finds that in their requirement specifications contracting authorities should focus on specifying their needs and disregard the detailed requirements that entail what the system shall do specifically. A contracting authority is thus better off providing the tenderer with a discretion to assess which solution is superior in fulfilling a specific need preselected by the contracting authority. By implementing this approach the following negotiations will naturally focus on improving the contents of the suggested solutions over the modification of the predetermined requirement specifications.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2020
Number of pages131
SupervisorsChristina D. Tvarnø