Participation of Consortia's in Tendering Procedures

Nanna Ali

Student thesis: Master thesis


The purpose of this thesis is to investigates horizontal consortium agreements from both a legal and an economics perspective. Under the legal analysis of the thesis, the legal position of consortia is examined after respectively Danish procurement and competition law, including latest practices from the Danish Maritime and Commercial Court under the case on road marking lines (“Vejstribesagen”). The analysis highlights a different approach to consortia agreements within both legal areas, that partially contributes to an unclear legal position of the juridical framework for consortia’s. Adding to this, the latest court practice has shown changed standards from the previous practice of the Danish competition authorities in consortia cases and opened the possibility for more lenient claims for evaluating whether consortia agreements in tendering procedures are limiting fair competition, and thus infringing Danish competition law section 6 (1). This development, however, leaves legal space for consortia to freely choose between bidding on sub-contracts independently, or entering into a consortium agreement and thereby bid jointly on the collected tender contract. In addition to this, the Danish court has assessed, in discrepancy with the council’s previous evaluations, that it is justified for companies to reserve capacity for future assignments that they have not yet signed in contracts at the time of the tender. That is without providing documentation for this. The economics analysis of the thesis examines the expected competition effects that follow from consortium participation in tendering procedures. The analysis concludes that these effects are non-monotonous why clear results on this background cannot be provided. Simultaneously, it shows that a reduced number of bids do not directly result in a weakened competition intensity. If the consortium can realise synergies and from this minimise its expenses, this can result in a lower price setting in their bids. This effect, however, is conditioned on the consortium continuing to expect to meet competition from other tenders. It is crucial for this condition whether the market is homo- or heterogenous. Homogenous markets are affected by high symmetry, which makes the incentive for consortia agreements to be driven by considerable efficiency gains, that enables the consortium provide more attractive bids to the benefit of the contracting authorities. 2 In heterogenous markets, the effects are to a greater extent conditioned on who participates in the consortium. If larger companies eliminate competition between them, their incentives to bid aggressively will be eliminated if they expect lessened competition restraints from smaller potential competitors. If smaller bidders realises synergies, they can potentially reduce the gap in the efficiency level between the heterogenous companies. Theoretically, this effect might strengthen competition, as bigger companies will expect higher levels of competition intensity, but since tendering procedures in procurement does not provide information on the participating tenderers, such a theoretical effect is not applicable.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2019
Number of pages83
SupervisorsMarcus Asplund