Regulaton & Policy
Public Procurement Podcasts – Pedro Telles Interviews Grith Skovgaard Olykke on Abnormally Low Tenders

In the 17th episode of the Public Procurement Podcasts, Dr Pedro Telles of Swansea University talks to Dr. Grith Skovgaard Olykke, Associate Professor at the Copenhagen Business School, about abnormally low tenders in public procurement and mixed methods research (law and economics).

To start with, Telles asks for a definition of abnormally low tenders. Olykke explains that that’s what makes it an interesting topic, there’s no clear definition of abnormally low tenders and that’s the problem. A lot of discretion lies with contracting authorities and the national review bodies. What has changed with the recent directives, is that there is an obligation that was not there before to verify and reject abnormally low tenders under certain circumstances — it will be interesting to see how that unfolds.

During her research Olykke set out to discover the meaning of abnomally low tenders within an EU law perspective. She argues that a well developed legal tool from competition law could be transferred into assessing pricing in public procurement. She says “I think the approach is appropriate, in particular regarding arguments of coherence in the EU legal system, because if there is a difference between an abnormally low tender and a situation where a low price breaches competition law, there will be a risk of exploitation, of the public procurement context to distort competition and exclude competitors. So I think there needs to be coherence here …”

And how should we be treating abnormally low tenders? asks Telles. While there is still no obligation to reject such tenders, in her areas of study anyway, Danish case law and Swedish case law, but the tender now has to reflect social and economic obligations, and involve these costs, and the right exists to challenge the award to a low price tender. This will bring a massive change to how they are treated.

They go on to discuss how suppliers, depending on the country, have a tendency to under-price bids believing that once they’ve got the contract they can claw back the deficit in additional works or services, as in the current directive there is no limit on additional works. They are talking about Article 72 on amendment of contracts. “I think maybe the obligation to reject abnormally low tenders sort of goes in the other direction, because at least you have to share that some of the specific costs are covered in the tender, otherwise it would not make sense having an obligation to reject. So it could go both ways I think, but the discretion to change the contract after it’s been entered into, puts at risk that you have to pay extra for the same,” she says.

In a second topic they go on to discuss interdisciplinary research. They discuss the advantages and disadvantages of bringing your own research disciplines to bear in the research, in this case legal, and the importance of introducing alternative disciplines to be able to get a more rounded view of the problem. And on this note they talk about what has been gained from having economists working with Olykke on her research, and what it has brought that she could not have achieved herself (even though she has an economics background.

“I think by bringing economists in you get an expert on a specific methodology or theory that you couldn’t bring in yourself, even though you have some ideas about economics and you’ve read all the general theories. And I think that’s very important. They’ve also got some skills in, for example, handling of data … so I think it’s appropriate to acknowledge this and bring economists in rather than just feeling that we can do it all ourselves by sort of general assumptions or reference to general theories of economics.” Bringing in an expert from another discipline, Telles remarks, is also valuable in bridging the gap between languages, in this case legal and economics.

The discussion goes deeper into these topics and the full transcript can be seen here.