Modification of a public works contract was an illegal direct award of contract

"It is important that contracting authorities take into account the potential of risks in a public works contract when preparing the procurement documents and the contract. It is necessary to ensure that any modifications that may become necessary at a later stage of the project can be managed appropriately. Otherwise, the modifications may require a new procurement," says Marie Östman, Director General of the Swedish Competition Authority.

In December 2020, the Technical and Property Management Committee in Karlstad Municipality entered into a contract with a supplier for the refurbishment and construction of a riding arena. The contract was awarded as a design-and-build contract, subject to the terms and conditions of the standard form contract ABT 06. The procurement was published in accordance with the Swedish Public Procurement Act (LOU). Prior to initiating the procurement, the Committee commissioned and concluded an investigation into the stability of the ground.

When the design phase commenced, the contractor identified problems with the ground conditions at the construction site. The Committee commissioned further geotechnical investigations and the works were suspended. When the investigations confirmed deficiencies in the ground stability, the Committee decided to proceed with an alternative solution. This included relocating and demolishing buildings as well as rerouting a road. The estimated value of the original contract was approximately SEK 45 million, while the estimated value of the modifications was approximately SEK 38 million.

The Committee argued that the modifications to the contract were made in accordance with LOU and that the provisions allowing certain modifications to a contract without a new procurement were applicable. The Committee noted that the alterations and additions provisions in ABT 06 (governing additional, omitted and altered works) met the legal requirements for so called review clauses in LOU, which permitted the modifications. The Committee also argued that the ground conditions constituted an unforeseeable circumstance.

According to the Swedish Competition Authority, none of the exceptions relied upon by the Committee could be applied. In this case, the alterations and additions provisions in ABT 06 did not meet the legal requirements for review clauses under the Swedish Public Procurement Act. Furthermore, the ground conditions could not be regarded as unforeseeable, as indications of stability risks had been identified before the original procurement was initiated. The Committee should therefore have published a prior contract notice before modifying the contract. By not doing so, it carried out an illegal direct award of contract.

"The relationship between the alterations and additions provisions in ABT 06 and the public procurement rules is an important issue, as many contracting authorities use standard form contracts. I would therefore like to emphasise the importance of ensuring that procurements are always conducted in a manner that safeguards the general principles of public procurement. This may require alterations and additions works to be subject to a new procurement open for competition even where standard form contracts are used," says Marie Östman, Director General of the Swedish Competition Authority.

In its decision, the Swedish Competition Authority criticised the Technical and Property Management Committee for its illegal direct award.

In this case, the Swedish Competition Authority cannot decide upon a procurement fine. This is because such a decision must be made within two years of the contract being entered into. In this case, the modifications were made approximately five years ago.

Estrid Faust, Senior Case Officer, +46 8 700 16 41, estrid.faust@kkv.se

Marie Strömberg Lindvall, Press Officer, +46 76 542 15 92, marie.stromberglindvall@kkv.se

Read the decision, dnr 268/2025 (in Swedish)