”Sweden needs to review the option of appealing against public procurements”

By louise [dot] larsson [at] ehl [dot] lu [dot] se (Louise Larsson) - published 16 November 2020

The idea behind procurement is to guarantee the right product or service at the right price. But what happens when public procurements are consciously structured to avoid appeals – or are simply discontinued early? Fredrik Tesch-Morawetz’s doctoral thesis in business law examines these issues and has been commended by the Lund University School of Economics and Management as the faculty’s best thesis in 2019.

Each year, the public sector in Sweden purchases products and services for billions of kronor. The value of this amounts to just over SEK 700 billion, or almost a sixth of Sweden’s GDP. Over 13 percent of all advertised procurements are cancelled before they lead to any kind of agreement. Furthermore: far more procurements are appealed against in Sweden than in other EU countries. Why is this? And what are the consequences?

In his thesis, ”Avbrutna upphandlingar – Ansvar i gränslandet mellan privat och offentlig rätt” (“Discontinued procurements – Responsibility along the border between private and public law”), Fredrik Tesch-Morawetz investigates this very question.

What interests you in your research?
“The line between private and public – there are many interesting contradictions there. These are such important projects; everything that is purchased and ordered by public bodies amounts to around 17 percent of Sweden’s GDP. The process for these purchases is governed by the enormously complex system that is the Public Procurement Act (Swedish: LOU).

I believe that many people are deterred from researching procurements because it sounds boring at first glance, but it is actually a practical and massively relevant field. If we misinterpret a rule in a way that leads procurements to perhaps systematically fail to deliver what they should, this has enormous economic and social consequences.”

Why did you want to take a PhD?
“I have always had an interest in analysis and writing, and consider research to be important. I am a lawyer but also an economist at heart, so that is surely a large part of why I applied for the School of Economics and Management (LUSEM).

There is an interdisciplinary overlap and a dialogue between each unit of the School of Economics and Management that I find to be valuable. So much is contained within one organisation: economics, business administration, statistics, business law. That suits me. It is practical law that I consider to be extremely relevant from a societal perspective.”

How would you summarise the conclusions you have reached in the thesis?
“My elevator pitch is that Sweden’s procurement rules consist of different parts, of which much comes from various EU directives. You could safely say that in Sweden we have overzealously interpreted some of the directives, which means the rules become unbelievably strict and it is currently extremely easy for suppliers to appeal against the decisions. I have shown that many procured authorities adapt to this and do something I call legal risk mitigation. By that, I mean that they take decisions during the procurement to reduce the risk of appeals instead of trying to achieve as good results as possible. Good results should mean fulfilling a certain purpose or setting good conditions.

Something Swedish public sector bodies do to a large extent is discontinuing procurements to reduce the risk of appeals and damages. This costs money and takes time. 13 percent of all advertised Swedish procurements are discontinued prematurely. In Sweden, we have both many appeals and many discontinued procurements. It is not even possible to compare with other countries.

I feel that we need to thoroughly review this option of appealing against public procurements. Politically it is a rather sensitive question; it has been tried before but has never led anywhere.”

Who can use the results of your thesis?
“My research does not offer that many solutions, rather it highlights problems. A good next step would be to analyse the Swedish implementation model – what does the right to an appeal lead to from an economic perspective? We don’t know if the costs of this system exceed the gains in terms of efficiency. More empirical research is needed in this area.”

Your day job is with the business law firm Mannheimer Swartling in Stockholm. Do you have any research connection left here at the School of Economics and Management in Lund?
“I still conduct research. I will probably always want to keep one foot in the research community, as it absolutely contributes to my professional work. Awareness of methodology is particularly important, as is being able to present complex ideas in an educational way.”

More information

From the jury's motivation to the 2019 best thesis at LUSEM:

In his dissertation, Fredrik Morawetz examines the legal aspects of public procurement and the discontinuation of such procurement. Modern society is highly dependent on public purchasing – 700 billion SEK annually in Sweden – and the importance of well-organized and adequately applied legal regimes for public procurement is evident. Close to 15 percent of public procurements are cancelled or discontinued, at substantial cost to the parties involved. The dissertation analyses EU law and the Swedish implementation, concluding that current Swedish legislation (LOU) contributes to the culture of significant and burdensome litigation, to a higher degree than in other EU member states.

The prize money consists of SEK 20,000. The award was presented during a small corona-adapted ceremony at the end of August 2020.

The thesis is published by Jure and can be purchased through them.

Fredrik Tesch-Morawetz's profile in the Research Portal