The Government Procurement Review: Switzerland
Public procurement in Switzerland is regulated by international treaties, federal law, and cantonal and intercantonal law. The international treaties set out standard principles, constitute the basic legal framework of rights and obligations, and are binding on authorities. These include international framework agreements such as the Government Procurement Agreement of 15 April 1994 (GPA) (which will be replaced in Switzerland by the GPA 2012 by 1 January 2021), the Bilateral Agreement between the European Community and Switzerland on certain aspects of public procurement of 21 June 1999 (EU-CH AAGP) and the Convention establishing the European Free Trade Association of 4 January 1960 as amended (EFTA Agreement). As Switzerland is not a Member State of the EU, EU law on public procurement is not applicable.
On state level, public procurement is governed by federal law. The principal legislative acts regulating federal public procurements in Switzerland are the Federal Act of Public Procurement of 16 December 1994 as amended (FAPP), and the corresponding Federal Ordinance of Public Procurement of 11 December 1995 as amended (OPP) and the Ordinance on the Organization of Public Procurement of the Federal Administration of 24 October 2012 as amended (OOPP). Whereas the FAPP sets forth the general framework, the OPP contains detailed provisions to execute the FAPP and further stipulates the procedure for public procurements not covered by the FAPP. The OOPP aims to centralise public procurement at federal level.
Every canton in Switzerland has its own procurement law for the procurement of the cantonal administration. The main legislative acts for the procurements of regional and local authorities are the Intercantonal Agreement on Public Procurement of 25 November 1994/15 March 2001 (IAPP), which is thought to harmonise the legal framework within the cantons, and the cantonal public procurement regulations of each canton. While the IAPP, certain federal acts and international treaties do not lead to a harmonisation of the public procurement laws, they do, however, contain minimal standards to be respected during the public procurement process.
The purpose of the FAPP is to make efficient use of public funds by enabling competition between tenderers. The FAPP stipulates that the contract must be awarded to the tenderer with the most economically favourable bid. Furthermore, transparency as an important tool to facilitate competition is a fundamental principle of the procurement procedure and stated as the purpose of the FAAP. The principle of equal treatment and non-discrimination is also a key principle of the FAAP. Additionally, the FAAP states that tenderers must guarantee compliance with health and safety regulations as well as employment regulations, including equal treatment of men and women.
In principle, exemptions from the general regime of applicable procurement laws derive from the relevant procurement acts directly. The FAPP, for example, contains a list of procurements for which the FAPP does not apply. For instance, with regard to the procurement of weapons, munitions or war materials, or the construction of fighting and command infrastructure for overall defence as well as the army contracts relating to national defence, the FAPP itself stipulates the non-applicability of the FAPP.
This chapter focuses primarily on federal law, owing to the numerous and different cantonal and even municipal regulations in the Swiss Confederation.
Year in review
The entire legislative framework has undergone revision in the past to implement the revised WTO Agreement on Government Procurement (GPA 2012). In addition to the implementation of the GPA 2012 in the FAPP, one of the main objectives of the revision was to harmonise the federal and cantonal procurement regulations. On federal level, the revised FAPP and OPP will enter into force on 1 January 2021. On a cantonal level, the new acts are expected to enter into force as soon as enacted by the cantonal governments.
The key changes to the laws are as follows:
- Contracts are to be awarded to the 'most advantageous offer' and no longer to the 'most economically favourable' one. The numerous new awarding criteria contained in the new laws are to be given more weight in relation to the price. These criteria particularly include suitability, deadlines, technical value, cost-effectiveness, life cycle costs, aesthetics, sustainability, plausibility of the offer, the different price levels in the countries in which the service is provided, price reliability, creativity, customer service, delivery conditions, infrastructure, innovative content, functionality, service readiness, professional competence and efficiency of the methodology. The overall aim is to place greater emphasis on quality competition rather than price competition.
- Bidding rounds (i.e., negotiations with the sole purpose of reducing the price offer) are going to be prohibited by law on federal and cantonal level. However, price adjustments will remain possible in the context of a bid adjustment or special procedures such as the dialogue, where minor modifications may result in a corresponding adjustment of the price offer. In addition, price adjustments may be made within the framework of an electronic auction or during the negotiation of an offer in an invitation procedure.
- Flexible and modern procurement instruments will be introduced in the revised federal law, such as the possibility of concluding framework agreements or study contracts as well as competitions. With respect to modern technologies, the law will provide for electronic auctions and the electronic processing of award procedures.
- Legal protection on procurement proceedings will be harmonised across the federal and cantonal levels (e.g., the appeal period for awards will be 20 days at both federal and cantonal level).
Since the current legislation will remain effective until entry into force of the revised decrees, the following remarks will focus primarily on the current legislative framework but also take into account the planned new legislation where fundamental changes are expected.
Scope of procurement regulation
i Regulated authorities
The FAPP lists the public authorities, which are subject to the law. The list contains entities both with and without legal personality. Appendix 1, Annex 1 of the GPA has a conclusive list of awarding authorities. However, this list is not exhaustive and entities founded after the contract signing may also be subject to public procurement law. Explicitly regulated are contracting authorities in the water, energy, transport and telecommunications sectors. However, entities active in these sectors may be granted individual exemptions by the federal department.
Private entities are, under specific circumstances and for certain actions, especially when providing public services in the area of production, transport or distribution of electrical power, subject to public procurement law. They have to meet the same legal requirements, in particular, if they act in place of contracting authorities for procurements (Article 2d OPP).
Under the new legislation, the FAPP will provide for a definition of the term 'public authority'. In addition to the current regulated entities, other entities such as courts, federal prosecutors and parliamentary services will also be subject to the FAPP.
ii Regulated contracts
Under Swiss law, the following contracts are covered by public procurement rules:
- supply contracts (i.e., contracts for the supply of movable goods, in particular by purchase, lease, rent or hire);
- service contracts (i.e., contracts for the rendering of services); and
- works contracts (i.e., contracts for building and civil engineering work).
Based on the FAPP, the competent federal department regularly issues an ordinance on the adjustment of the threshold values valuable for a period of two years. The following threshold values (without VAT for each single assignment) are valid from 1 January 2020 until 31 December 2021:
- 230,000 Swiss francs for supplies and services;
- 8.7 million Swiss francs for works; and
- 700,000 Swiss francs for supplies and services procured (1) by a contracting authority regulated under the FAPP (Article 2 Paragraph 2) or (2) by the Swiss Post for its activities in the public transport sector.
For a number of sector entities, the OPP provides for specific thresholds. In addition, the OPP lays down (low) thresholds (without VAT) for contracts, which can be awarded directly, and without invitation to tender:
- 150,000 Swiss francs for works and services; and
- 50,000 Swiss francs for supplies.
The same thresholds apply for areas and sectors not covered by international agreements.
Where the contracting parties wish to vary a contract or transfer the contract to a different supplier, the following applies: in general, Swiss public procurement law assumes that the project described in the invitation to tender materially remains the same during the entire procurement process. No new procurement procedure is therefore necessary unless the amendment materially changes the scope of the contract or the amendments exceed the applicable threshold values. However, the contract cannot be transferred to a different entity without conducting a new procurement procedure following the award of the contract to the entity different to the previous one.
The revised law provides for an explicit definition of 'public contracts', which are defined as transactions by which a contracting authority subject to the law procures against payment the products or services for the fulfilment of its (public) tasks. Accordingly, the public contract is characterised by its remuneration and the exchange of goods or services in return. It is not necessary for the consideration to consist in money; monetary benefits that are only indirectly exchanged are also covered.
With regard to the award of concessions, the revised law now stipulates that these are subject to procurement law if the tenderer thereby acquires exclusive or special rights that it exercises in the public interest and for which it receives remuneration or compensation directly or indirectly in return. However, specific legal provisions (e.g., under the Water Act, the Electricity Supply Act or in telecommunications and broadcasting legislation) take precedence over this new regulation.
Special contractual forms
i Framework agreements and central purchasing
In Switzerland, the FAPP currently does not regulate framework agreements. It is generally accepted that the tendering of framework agreements must follow the same rules if the single contracts to be concluded under the framework agreement qualify as public procurements. The sum of the values of the single contracts provided for in the framework agreement is relevant for calculating the threshold.
Under the revised legislation, framework agreements will be explicitly regulated by the FAPP. The revised FAPP provides that, apart from in exceptional circumstances, framework contracts may have a maximum duration of five years and may not be automatically renewed.
ii Joint ventures
The FAPP does not provide for specific rules on public-public joint ventures (JVs) and does not specify when a contract is to be considered as an 'in-house' contract. If a contract is made between the contracting authority and an entity belonging to, or being controlled by, the same public authority as the contracting authority, the FAPP does not apply. This must be distinguished from the case where the JV company as a supplier also offers its goods or services for a non-significant part to third parties and competes in this way in the market or where a third party has a shareholding interest in the supplier. In these cases, the FAPP applies. However, the application of the FAPP may be exempted if a public entity procures from another public entity.
Similar to the regulation of public-public JVs, Swiss public procurement legislation does not provide for special rules that apply to public-private partnerships (PPPs). Also, there is no clear definition of PPP in Swiss procurement legislation. Generally, procurement procedures apply as PPPs are viewed as ordinary procurements of supplies, services or works. It has been confirmed by a court case that a PPP partner once being selected by the contracting authority according to the FAPP is no longer subject to procurement laws when subcontracting. Despite the recognition of the one-time procurement principle, the contracting authority must ensure that the selected partner obligates its subcontractors to comply with the compulsory regulations.
Also, the revised FAPP does not provide for PPP specific provisions. Therefore, the applicability of procurement laws to PPP projects will in the future also have to be examined case by case, depending on the specific characteristics of the procured service. However, the revised FAPP provides for specific rules on the applicability of the FAPP in constellations where the procurement is conducted from an entity, which is regulated, part of the regulated authority or controlled by the regulated authority.
The bidding process
As far as regulated procurement contracts on the federal level are concerned, all calls for tender as well as the awards of the contract are published on Simap.ch.
Swiss public procurement law provides four main methods of procurement. The contracting authority may award a regulated contract by means of an open, a selective, a negotiated or an invitation procedure.
Under the open procedure, all interested bidder may submit a tender. In the selective procedure, all interested bidders may submit an application to participate, but the contracting authority identifies bidders based on their suitability who may submit a tender. Within the negotiated procedure, the contracting authority negotiates a contract directly with a supplier of its choice without issuing any invitation to submit a tender. In the invitation procedure, the contracting authority determines at least three suppliers, if possible, who will be invited to submit a tender.
As far as electronic procurements are concerned, Simap.ch – where regulated procurement contracts on the federal level are advertised – is an electronic platform. Electronic submissions are standard practice within federal administration.
Under the revised legislation, the same four methods of procurement will remain, but will be regulated in more detail. Moreover, the revised law is intended to give the contracting authorities greater leeway in the use of modern technologies. To this end, the revised law now provides for electronic auctions and the electronic processing of award procedures. Flexible procurement instruments such as the dialogue (competitive dialogue) are likely to be increasingly important in the future, especially in the awarding of intellectual services. Practical experience will show to what extent these new instruments will be used and whether further need for modification of the provisions will result.
iii Amending bids
Modification to the tender documents is limited and amendments are possible in the event that formal negotiations take place. However, bidders may submit alternative tenders in addition to their main offer, as long as such alternatives have not been excluded in the tender documents.
See also Section III.ii for where the contracting parties wish to vary a contract or transfer the contract to a different supplier.
i Qualification to bid
As a general rule, all bidders must comply with general requisites. For example, bidders may be excluded from tenders if they have provided the contracting authority with false information, failed to pay social security contributions or taxes, are the subject of insolvency proceedings, the violation of formal conditions or entered into arrangements to avoid or substantially prejudice competition.
As mentioned in Section V.ii, the qualification to bid may also depend on the method of procurement applicable to the tender. Only the 'selective procedure' provides for a selection or 'shortlisting' of the bidders that fulfil the qualification criteria established by the contracting authority. These criteria may concern the bidders' financial, economic and technical capacity. To meet the principle of transparency, the criteria are published in the invitation to tender or tender documents. The contracting authority can reduce the number of tenderers if the tender could not otherwise be processed in an efficient way. However, even when limiting the number of participants, the contracting authority has to guarantee an effective competition between the bidders.
In addition, in certain cases, the contracting authority may restrict or exclude the possibility for consortia to participate to the invitation to tender.
Finally, the contracting authority may also require in certain cases that the successful bidder has a specific legal status before being awarded the contract.
ii Conflicts of interest
The FAPP does not provide for any rules on conflicts of interest. However, general principles of constitutional and administrative law, according to which members of the administration must recuse themselves if they have a personal interest or could be regarded as lacking impartiality, apply to public procurements. The IAPP also provides for persons concerned to recuse themselves if certain conditions are met but does not specify these conditions.
Under the revised legislation, specific provisions are inserted in the general principles sections of the revised FAPP and OPP to strengthen the conflicts of interest policy that shall be in place for the contracting authority and its members.
iii Foreign suppliers
Foreign suppliers coming from WTO GPA contracting states to the extent that these states grant reciprocal rights, or third states with whom Switzerland has a contractual agreement or of whom the Swiss government has established that they guarantee equality of treatment to Swiss tenderers can participate in Swiss public procurement procedures.
Although Switzerland is not a member of the EU, it concluded a set of bilateral agreements with the EU (and EFTA), notably the EU-CH AAGP. Companies from the EU or EFTA have the right to participate in tenders in Switzerland and to second the necessary personnel to Switzerland.
A foreign bidder that does not fall under the above-mentioned categories may still attempt to take part in the tendering procedure and the awarding authority is not prohibited from awarding the contract to such entity. However, there is no legal remedy if the contracting authority does not consider or excludes such a bidder's tender.
Foreign companies must, however, apply for work permits for their seconded personnel in accordance with the applicable Swiss legislation. They must therefore comply with the social and working conditions applying to the location of the awarded contract.
Under the revised legislation, the rules will not change. The Federal Council will regularly update its list of countries that grant reciprocal rights.
i Evaluating tenders
The FAPP provides that the contract has to be awarded to the most economically favourable offer. The most economically favourable offer is evaluated taking into account a number of criteria, in particular, deadlines, quality, price, operating efficiency, operating costs, customer service, expedience of the performance aesthetics, environmental sustainability, technical value and training of apprentices within the meaning of a basic vocational training. The last criterion, however, applies only outside the scope of international agreements.
The contracting authorities have to determine a catalogue of awarding criteria and their degree of relevance, and must publish them in the tender documentation. Contracts for broadly standardised goods may also be awarded solely on the basis of the lowest price.
As mentioned in Section II, under the revised legislation the contract will be awarded to the most advantageous offer. Case law will show how this new criterion will be applied in practice.
The contracting authority may request further information from the bidder filing an abnormally low tender (e.g., regarding the calculation method) in order to assess whether there is a reason for exclusion of the bidder. Although there is no definition in the OPP for 'abnormally low' tenders, tenders that range below production costs or that differ noticeably from the other tenders should be verified and examined on a case-by-case basis. The revised law provides for an obligation of the contracting authority to request further information from the bidder filing an abnormally low tender and enables the contracting authority to exclude the respective bidder if it cannot adequately respond to the authority's request.
ii National interest and public policy considerations
The GPA 2012 lays down the principle that authorities are required to act in a non-discriminatory manner. National legislation shall not limit the market (i.e., encourage national or local companies or discriminate against foreign bidders).
Under the revised legislation, the procurement may take into account social or environmental criteria but these must have a relevance to the market to which the contract is awarded. Thus, to avoid discriminating against foreign companies, one must always ensure that such criteria are objectively necessary for the underlying market.
Furthermore, as mentioned in Section III.i, there are sectors that may be granted with individual exemption from tender procedures, in particular for public policy considerations.
These exemptions are exhaustively listed in the revised FAPP.
Invitations to tender must be published on the Simap.ch platform. Tender documents containing all information relevant for a company to decide whether to participate in the tender procedure and to prepare its bid must also be available.
The contracting authority may set a date in the tender documents after which no questions will be answered by the contracting authority with respect to the tender documents.
Awards must also be published on the Simap.ch platform. Furthermore, the contracting authority has to communicate its decision to the bidders and must include a reasoned summary of its decision.
In addition, an unsuccessful bidder has the right to request the contracting authority to provide the following information on the award procedure:
- the type of tendering procedure used;
- the name of the successful tenderer;
- the value of the successful tender or the value of the highest and lowest tender taken into account in the tendering procedure;
- the main reasons for the rejection of their tender; and
- the characteristics and decisive advantages of the successful tender.
However, the awarding authority must not provide this information to unsuccessful bidders if disclosing such information would result in a violation of federal law, be against public interest, prejudice the legitimate commercial interests of the bidders or interfere with fair competition among bidders.
The contracting authority may provide this information in a written statement or invite the unsuccessful bidders for an oral debriefing, which is often the case in practice.
Furthermore, other decisions listed in Article 29 of the FAPP, such as the interruption of an award procedure, the choice of participants in the selective procedure, or the exclusion of a bidder, must also be communicated to the bidders with summary reasons or be published.
The FAPP defines several (final and interim) decisions that can be independently contested by way of appeal. This non-exhaustive list includes (1) the award of contract or discontinuation of the award procedure; (2) the invitation to tender for the contract; (3) the decision on the selection of participants in the selective procedure; and (4) exclusions from the tender. Appeals against these decisions must be brought forward immediately. Their unlawfulness cannot be pleaded at a later point in the procedure.
Appeals against decisions issued by a contracting authority subject to the FAPP may be submitted to the Federal Administrative Court filed within 20 days from the notification of the decision. If the decision is published on the internet platform Simap.ch before the tenderers are personally informed about the outcome of the procedure, the date of publication thereon will be relevant for the limitation period.
In addition, in the federal public procurement procedure, suspensive effect has to be requested by the appellant. If suspensive effect is not granted or not requested by the appellant, the contracting authority can conclude the contract with the successful bidder.
Appeals against decisions of cantonal or local procurement authorities may generally be submitted to the cantonal public law court within 10 days from the date of publication of the decision. The cantonal decision can then be appealed to the Federal Supreme Court within 30 days, although the Federal Supreme Court's power to review may be very restricted, depending on whether the thresholds are reached.
Furthermore, on the cantonal level, a standstill clause exists under which the contract may not be concluded before the time limit for appealing against the award decision has expired.
Decisions of the Federal Administrative Court or the cantonal public court can in general be appealed to the Federal Supreme Court within 30 days from the notification of the judgment of the Federal Administrative Court or the cantonal public court.
Under the revised legislation, the deadline for appealing decisions of federal, cantonal or local procurement authorities will be 20 days.
ii Grounds for challenge
The appellant may plead any violation of substantive or procedural law, including excess or abuse of discretional power. The appeal court will review the legality of the contested decisions but not its appropriateness. The contracting authority has a great deal of discretion when taking decisions and the judge may only review the evaluation made by the contracting authority of the tenderer's bid, in the light of the awarding criteria. The grounds may also relate to an incorrect factual situation. In practice, the judge's control in such cases is limited to arbitrariness.
An ordinary appeal to the Federal Supreme Court is limited to the ground of federal law violation and manifestly wrong factual assessment established in violation of the law. In the particular case of a subsidiary constitutional appeal, only those constitutional rights of which the unsuccessful bidder is the holder may be invoked.
Furthermore, according to the Federal Act on Administrative Procedure of 20 December 1968, as amended, an appeal against other separately notified interim orders is permitted if they may cause a non-redressable prejudice, or granting the appeal would immediately bring a final decision, and would therefore obviate significant expenditure in time or money in prolonged evidentiary proceedings.
A distinction ought to be made between the situation in which the unsuccessful tenderer appeals after the award but before the contract is signed with the successful tenderer and the situation in which the unsuccessful tenderer appeals after the contract has been concluded.
In the first case, the possibility to request suspensive effect in order to prevent the conclusion of the contract remains and, if granted, the unlawful award can be annulled or reformed by the appeal court.
In the second case, the appeal court can only determine the extent to which the contested procurement is in breach of federal (or cantonal) law. The only remedy available thereafter is a distinct claim for damages for the costs in connection with the procurement procedure and the appeal procedure.
Regarding remedies outside the legislation, the doctrine is divided on whether the remedies provided by the FAPP are conclusive or whether civil claims based on culpa in contrahendo are possible. As an informal remedy, a complaint to the supervisory authority of the contracting authority can be made.
Under the revised legislation, it will be possible for the appellant to claim for damages within the same appeal procedure as the contested procurement procedure.
The revised GPA, which improves transparency and market access, was ratified by the Swiss parliament on 21 June 2019.
On the same date, the Chambers of the Swiss parliament have ratified the revised FAPP. Concurrently, the Swiss Federal Council ratified the revised OPP. The revised FAPP and OPP will enter into force on 1 January 2021. At an extraordinary plenary meeting on 15 November 2019, the cantons also unanimously adopted the revised IAPP. These revisions aim at implementing the revised GPA on the Swiss level and at aligning the federal and cantonal procurement laws.
As mentioned in Section II, the main changes of the revised FAPP include, in particular, increased sustainability in the area of public procurement and quality-oriented competition (instead of price-oriented competition), better prevention of corruption, moderate extension of legal protection, changes in language requirements (implementation of various interventions adopted by Parliament) and the use of flexible instruments such as dialogue (currently regulated at ordinance level), framework contracts, electronic procurement, electronic auctions and reduced deadlines.
As, with the current revision, the procurement legislation has undergone important changes, new changes are not to be expected in the near future.
1 Astrid Waser and Benoît Merkt are partners at Lenz & Staehelin.