The contracting authority bears the burden of proving that the procurement procedure would have been cancelled

A municipality awarded a works contract to the supplier with the lowest bid. Another supplier maintained that the selected bid did not satisfy the qualification criteria and should therefore have been rejected. The bypassed supplier brought an action against the municipality, claiming compensation for loss of profit. The municipality argued that there was no causal link between any potential error and the alleged loss, as the alternative to awarding the contract would have been to cancel the procurement procedure.

The Court of Appeal found in favour the municipality due to lack of causation. In the Court of Appeal’s view, A supplier may claim compensation for loss of profit only if it demonstrates, on a clear balance of probabilities, that the tender competition would not have been cancelled.

The Supreme Court reached a different conclusion. It held that the supplier must demonstrate, on a clear balance of probabilities, that it would have been awarded the contract had the procurement procedure been properly completed. However, the burden rests on the contracting authority to substantiate any claim that, instead of awarding the contract, it would have cancelled the competition. In this case, the excluded supplier was the only qualified tenderer, and it remained uncertain what would have happened had the lowest bid been rejected. Accordingly, the supplier had discharged its burden of proof on causation. A minority of the Supreme Court agreed with the Court of Appeal. 

The judgment clarifies the evidentiary assessment of hypothetical causes of loss, in tort law generally and in public procurement law in particular.

Read the judgment from the Supreme Court (Norwegian only) (PDF)

Area of law: Public procurement law, tort law, causation, section 10 of the Public Procurement Act

Key paragraphs: 48, 64, 74, 80

Justices: Øie, Østensen Berglund, Høgetveit Berg, Stenvik, Lund