12 September 2017
According to the Finnish Competition and Consumer Authority’s (FCCA) decision on 29 August 2017, the financial and HR services provider Kunnan Taitoa Oy was in breach of the Act on Public Contracts when procuring telecommunications services. The contracting authority had deemed the lack of competition due to a technical reason grounds for direct procurement of telecommunications services. However, the selected contracting partner was not the only service provider as per the Act on Public Contracts that was technically capable of implementing the required telecommunications service.
On 15 June 2017, Kunnan Taitoa Oy/Hankinta Taitoa posted a direct procurement notice via HILMA, an electronic channel for public procurements, regarding telecommunications services for the municipalities and joint municipal authorities of the Etelä-Kymenlaakso region. Elisa Oyj was chosen as the contracting party, with the total value of the procurement reported to be EUR 2.6 million. According to the direct procurement notice, the reason for direct procurement was a technical reason in accordance with section 40, subsection 2, paragraph 2 of the Act on Public Contracts.
According to a report submitted by Kunnan Taitoa Oy to the FCCA, Elisa Oyj owns the fibre cable network and most of the copper cable network in the region. No other operator has invested in information networks in the region to an extent as to provide the service using their own network. According to Kunnan Taitoa Oy, due to this factor, the price level of tenders submitted by other operators would be so high that a call for tenders would result in one real tender only.
However, Elisa Oyj is not the only service provider as per the Act on Public Contracts technically capable of implementing the service to be procured. The contracting authority’s assumption that the other tenders would have been much higher does not provide grounds for direct procurement in accordance with the Act on Public Contracts, and for this reason, Kunnan Taitoa Oy should have put up for tender the procurement of the telecommunications services.
The FCCA’s decision stated that Kunnan Taitoa Oy had not acted in accordance with the Act on Public Contracts in the procurement of telecommunications services and deemed it necessary to draw the procurement unit’s attention to the requirements for the use of direct procurement and to the obligation to state the reasons on which a decision is based. The FCCA has assessed the case holistically, taking into consideration that a voluntary direct procurement announcement was posted for the direct procurement in case, and none of the other potential service providers used their right of appeal.
The FCCA would like to remind that direct procurement is an exception to the obligation to call for tenders and that the circumstances justifying direct procurement have been exhaustively listed in the Act on Public Contracts. Direct procurement must be expressly based on the grounds listed in the Act on Public Contracts.
Additional information: Senior Research Officer Anni Vanonen, tel. +358 (0)29 505 3875, email email@example.com.
Section 139 of the Act on Public Contracts (Act no. 1397 of 2016) prescribes that the Finnish Competition and Consumer Authority’s duty is to supervise adherence to legislation on public procurement. If it encounters illegalities, the FCCA may caution a contracting authority or provide other administrative guidance referred to in section 53 c of the Administrative Procedure Act (Act no. 434 of 2003). In case of illegal direct procurement, the FCCA may forbid the implementation of a procurement decision on the basis of section 140 of the Act on Public Contracts. If direct procurements exceed EU thresholds, the FCCA may also propose that the Market Court impose sanctions, such as penalty payments, shortening of the contract, or the annulment of a procurement decision. The same applies to service acquisitions exceeding national threshold levels referred to in Appendix E of the Act on Public Contracts, carried out as direct procurement without legal grounds. However, a motion cannot be put forward to the Market Court if the contracting authority has posted a direct procurement notice regarding the procurement as per section 131 of the Act on Public Contracts.
The FCCA’s supervisory powers apply to procurement initiated after the Act on Public Contracts entered into force, that is, 1 January 2017.