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ESA closes investigation into Norwegian restrictions on subcontracting in public procurement

ESA in October 2019 opened a case in response to Norwegian provisions that limit subcontracting in public contracts in the construction and cleaning sectors. In June 2020, ESA issued a letter of formal notice, taking the view that the relevant provisions did not comply with EEA law.
 
EEA rules aim to safeguard cross-border competition in public tenders across the internal market and ensure that public funds – including taxpayers’ money – are used in the most efficient way possible.
 
ESA did not dispute the legitimacy of the aim of combating work-related crime and recognised that EEA public procurement law provides for scope for national measures to be taken which may affect subcontracting.
 
Following the opening of formal proceedings, ESA and Norway engaged in extensive dialogue. Meetings have also been held with social-partner organisations to get a fuller view of the impact of the restrictions.
 
ESA notes that no complaints have been received and that Norway, as a result of dialogue with ESA, has made some efforts to reduce the impact of the restrictions. This includes the updating of guidance on an exemption allowing a more flexible approach to subcontracting where this is necessary to ensure adequate competition.
 
ESA President Arne Røksund said: “As a result of constructive dialogue with the Norwegian authorities, but also with social-partner organisations, we are today closing this long-running case. Dialogue has been key in leading us up to taking this decision, as has Norway’s decision to make changes to its guidance on subcontracting rules.”
 
ESA’s decision to close the case on policy grounds reflects its need to ensure the greatest impact for the functioning of the EEA Agreement. As this closure does not constitute a decision on legal grounds, it should not be read as implying that ESA considers the national laws or administrative practices concerned to be in compliance with EEA law.
 
Subcontracting allows companies to rely on other undertakings to perform part of a public contract. For example, when a public authority awards a contract to one undertaking for the construction of a public building, that undertaking can rely on specialised companies to perform specific tasks such as plumbing or electricity installation. Those subcontractors can, in turn, subcontract parts of their tasks further, creating subcontracting chains. The Norwegian rules limit subcontracting to two vertical levels or chains (the main contractor, first level subcontractors, and second level sub-subcontractors).
 
ESA’s decision can be found here.

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