The Swedish Competition Authority's Proposed Position Concerning Äta (Alterations And Additions) Works

L
Lindahl

Contributor

Lindahl
In its proposal, the Swedish Competition Authority has questioned whether the provisions on ÄTA works in AB 04 are compatible with the demands of the alteration- and option clauses in LOU.
Sweden Antitrust/Competition Law
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In its proposal, the Swedish Competition Authority has questioned whether the provisions on ÄTA works in AB 04 are compatible with the demands of the alteration- and option clauses in LOU. Interested parties have the opportunity to submit any points of view on the proposal up to 31 May 2024. This article briefly describes the proposal.

A contract or framework agreement that is subject to procurement may in principle not be changed without a new procurement being announced. However, there are exemptions in LOU that allow alterations in certain cases, for example, it can be permissible to make changes in accordance with an alteration- or option clause pursuant to chapter 17, section 10 of LOU. Initially, the alteration must not entail the contract's or the framework agreement's overall character changing, and in addition specific requirements are placed on the alteration- or option clauses. For an alteration- or option clause to fulfil the demands in LOU, the clause (1) must be present in one of the procurement documents in the original procurement, (2) must clearly, precisely and unambiguously describe the conditions under which the clause can be applied, and (3) indicate the scope and nature of the alterations.

Construction contracts are relatively frequently subject to changes, for example, through the parties agreeing on so-called ÄTA works. For design and build contracts, provisions regarding ÄTA works are to be found in AB 04 chapter 2, sections 3 and 4. Like the Competition Authority's proposed position, the following article describes the ÄTA provisions in relation to LOU's requirements for alteration- and option clauses. An assessment of whether the contract's or the framework agreement's overall character is changed must be made based on the circumstances in each individual case.

One question that has been discussed is whether the provisions relating to ÄTA works in AB 04 can be considered to fulfil the requirements described above for alteration- or option clauses. This question has been addressed neither in the preparatory work nor in practice. The Competition Authority has therefore indicated that there is reason to announce a position.

In its proposed position, the Competition Authority is of the opinion that the first requirement, i.e. that the alteration- or option clause should be set out in the procurement documents in the original procurement, is met in that the procurement documents refer to a standard contract, such as AB 04.

However, the Competition Authority is of the view that the formulation of the ÄTA provisions in AB 04 chapter 2, sections 3 and 4 do not fulfil the requirement to clearly, precisely and unambiguously describe the conditions under which the clause can be applied. For example, the Competition Authority states that AB 04 chapter 2, section 3 contains words that do not have a clear definition and meaning, as well as the fact that AB 04 chapter. 2, section 4 leaves too much room for different assessments, and that it is too unpredictable.

Further, the Competition Authority considers that the ÄTA provisions in AB 04 chapter 2, sections 3 and 4 do not indicate sufficiently clearly the scope and nature of the alterations that might be made. The Competition Authority argues that in principle the provisions' wording implies that alterations can be made to an unlimited extent. The Competition Authority also argues that the equivalent applies to the nature of the alterations, as there is no concrete framework for which types of alterations might be relevant. In this context, the Competition Authority indicates that when making the assessment, it is not significant that the ÄTA provisions are applied in a particular way over a long period and that some people feel they are able to foresee which alterations might be realised.

To sum up, in its proposed position, the Competition Authority considers that the ÄTA provisions in AB 04 do not meet the requirements for alteration- and option clauses set out in LOU. Making an alteration solely with reference to the ÄTA provisions in AB 04 can therefore entail an impermissible direct procurement. To conclude, the Competition Authority argues that there is nothing to prevent parties from using the ÄTA provisions in AB 04 in the future too, provided that they are supplemented. How such a supplement should be made with the aim of fulfilling the demands in the procurement legislation is, however, something that will have to be determined in each individual case. The Competition Authority argues further that the possibility can exist to implement alterations to a public works contract and framework agreement with the support of other alteration provisions in LOU.

If the position becomes reality, it will probably lead to changes within contract- and procurement law. In view of the fact that ÄTA works are added as a result of works that neither the purchaser nor the contractor had been able to anticipate when executing the procurement and entering into the contract, it is likely that the formulation of the sort of supplement that the Competition Authority deems the purchaser should provide will be associated with certain difficulties. However, the procuring authority will probably need to specify conditions in the procurement documents, including for ÄTA works. What is sufficient to fulfil the requirements in chapter 17, section 10 of LOU is not clear. It should also be possible to apply the same reasoning to further provisions in the standard agreements, for example, concerning obstacles and right to a time extension (AB 04 chapter 4, section 3) and cost changes (AB 04 chapter 6, section 3) to mention a couple of examples. Neither is it possible to exclude other alteration provisions in LOU also starting to be applied to a greater extent. It is not inconceivable that the position will have an interesting aftermath.

The next step in this development is to study the points of view received regarding the proposal. It will also be interesting to see whether, and in that case how, the Construction Contracts Committee (BKK) will take the Competition Authority's position into account in its ongoing review of the new AB/ABT. We are monitoring developments with great curiosity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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