In a case between Oslo municipality and two commercial providers of nursing homes (Norlandia and Stendi), Borgarting Court of Appeals has decided that Oslo municipality’s exclusion of commercial providers from a public procurement of nursing home services was unlawful. On behalf of DLA Piper and SANDS, who represent Norlandia and Stendi, Oslo Economics analyzed effects on budgetary and economic efficiency of the exclusion.
In 2020, Oslo municipality decided to procure nursing care homes for up to 800 patients, to be run exclusively by non-profit organizations. As a result, commercial nursing home providers were excluded from the procurement. According to EU and EFTA regulation, the exclusion of commercial providers initially violates the principle of equal treatment of economic actors and may only be allowed if it contributes to increased economic and budgetary efficiency. On behalf of two commercial providers and their legal counsel, Oslo Economics conducted an analysis of the economic and budgetary impacts of Oslo municipality’s decision to only allow non-profit providers.
We conducted an economic analysis, comparing the factual situation with a counterfactual scenario where commercial providers were allowed to participate in the procurement. The analysis found that, in the counterfactual scenario, the municipality would have received tenders for more than the desired capacity, which was not the case in the factual scenario. This increased capacity would have facilitated actual competition for the provision of nursing homes, incentivizing both non-profit and commercial providers alike to lower their prices and improve the quality of services. Consequently, the restriction to only allow non-profit providers resulted in lower economic and budgetary efficiency.
Based partially on Oslo Economics’ analyses, Oslo District Court found that the restrictions violated procurement law according to the EEA agreement, as the restriction could not be justified on the grounds of economic and budgetary efficiency.
The judgment is now upheld by the Borgarting Court of Appeals.
The report Oslo Economics produced in conjunction with the case can be accessed here (in Norwegian).
