Options

An option (opsjon) is a right for the contracting authority to buy more, expand or extend a contract on terms set in advance. It can for example be an extension of one year at a time, more units of the same thing, or a new phase in a project when the results of the previous phase have been reached (DFØ). The Public Procurement Regulations (anskaffelsesforskriften) do not define the word, but treat options as one type of review clause (endringsklausul), together with price index clauses (§ 8-12 (2) in Part II and § 19-1 (2) in Part III). The § references on this page are to the Regulations. Part III applies at or above the EEA thresholds for supply, service and works contracts. Part II applies from NOK 1.3 million up to the EEA thresholds (except health and social services), and to special services (særlige tjenester) from NOK 1.3 million with no upper limit.

A review clause must be set out in the procurement documents, and it must be clear which changes the contracting authority may make, to what extent and on what conditions. The clause cannot allow the overall nature of the procurement to be changed. The requirements are the same in Part II and Part III. Part I and Part IV (health and social services at or above NOK 8.7 million) have no rules on review clauses.

Options are included when the contracting authority calculates the value of the contract (§ 5-4 (1)), and it is that value which is compared with the thresholds. The rule is in Part I, which applies to all procurements. A contract for two years with an option of one plus one year is counted as four years. The details are on the page on threshold values.

An option is not the same as a contract modification. Under § 28-1 (1) letter a, the contracting authority may in Part III make changes under a review clause without a new competition. DFØ takes the view that an option with terms that were known in the competition is an «alternative course» (alternativt forløp) and not a modification, because everyone could take it into account when they submitted their tenders. If the contracting authority wants to extend or expand beyond what the option says, that is a contract modification. See the page on contract modification.

It is the contracting authority that chooses whether the option is exercised, but the conditions for exercising it must be clear from the documents. The Regulations have no rule obliging the contracting authority to exercise an option. They only regulate how the option must be described, and that it counts towards the value. What you can claim is set out in the contract.

That affects how you price. The value compared with the thresholds includes the options, so the fixed part of the contract may be much smaller. Advice: find out what is fixed and what is an option before you spend time on the tender, and work out whether the fixed period alone covers start-up costs and investments. Also check whether the price schedule asks for separate prices for the options, whether they are included in the evaluation, and whether the price adjustment in the contract also applies to the option period. If the option is exercised, what the contract says about it applies, including the price and any price adjustment. Advice: read what the contract says about the price for the option period, and do not offer capacity you cannot provide if the option is exercised late in the period.

An unclear option gives you a weaker basis for your price and may be contrary to the Regulations. If it is unclear what the option covers, how large it is or when it can be exercised, you can ask the contracting authority questions before the tender deadline.

A central government agency advertises a contract for operating a specialist IT system for two years, with an option to extend by one plus one year, and estimates NOK 600,000 a year. The value used is 4 × NOK 600,000 = NOK 2.4 million excluding VAT. That is above NOK 1.63 million, which is the EEA threshold for service contracts awarded by central government authorities, so Part III applies. The fixed part is NOK 1.2 million.

You have NOK 300,000 in start-up costs. Advice: work out whether the two fixed years alone cover them, because the agency may choose not to extend. If the agency exercises the options on the terms in the contract, no new competition is needed (§ 28-1 (1) letter a). If the agency wants to extend by a fifth year that is not in the contract, that is not an option but a contract modification. A price increase of NOK 600,000 is more than 10% of the contract value, so it falls outside the exception for low-value modifications.