Negotiation in the Danish Procurement Act: An Opportunity for Efficiency for Public IT Development Contracts

Christine Hincheli Nielsen & Elena Yalovenko

Student thesis: Master thesis


This thesis examines whether the new Danish procurement act promotes efficient contracting of public IT development contracts. In the economic chapter Coase’s theories on efficiency are supplemented by Williamson’s assumptions on transaction cost and are used to analyze whether an efficient outcome is possible for public IT procurement contracts with high transaction cost. The extend of transaction cost for this type of contracts is analyzed by using Cooter and Ulen’s factors which affect transaction costs, where it is held that transaction costs are high due to the private information, which affects the other factors. Private information can be dealt with by bargaining, which implies a cost itself. The economic analysis declares that a Kaldor-Hicks efficiency is possible as long as the public party gains more from bargaining than the cost of bargaining. By analyzing the Danish procurement act, the thesis examines the possibility of using negotiation in the flexible procedures of the act. The requirements for accessing the procedures with bargaining possibilities are examined and compared to the requirements in the procurement directive for 2004. It is held that the requirements are less restrict and it is now easier for public IT development contracts to access negotiation ex ante in the Danish procurement act. It is found that the procedure competitive dialog allows negotiation of all aspects of the procurement, as long as the negotiation does not resolve in a change of the primary element in the original procurement documents. The access to negotiation ex post is broad for all procurement procedures and negotiation are possible, as long as they don’t resolve in a change of primary element of the contract. The results of the economic and legal analyses are combined and analyzed in an integrated law and economic perspective. The importance of bargaining access is discussed in the perspective of the primary principles of the procurement directive. Based on the less restricted access to the flexible procedures it is stated, that the Danish procurement act can lead to a Kaldor-Hicks efficiency improvement. It is concluded that the Danish procurement act promotes efficient contracting of public IT development contracts.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2016
Number of pages112
SupervisorsKalle Rose