The Finnish Competition and Consumer Authority (FCCA) called on the Market Court to impose a penalty fine of EUR 20,000 on the towns of Loviisa and Jämsä for awarding contracts the value of which exceeded the EU threshold without competitive tendering contrary to the Act on Public Contracts on 16 February 2018.
These were the FCCA’s first motions to the Market Court concerning unlawful direct procurement since the FCCA was given the mandate to supervise compliance with the Act on Public Procurement and Concession Contracts (“Act on Public Contracts”) on 1 January 2017.
In-house entities must not have private capital
The Town of Loviisa gave Posintra Oy a contract for the provision of representation, regional cooperation, communication and vitality services until the end of 2017 in February 2017 without putting the contract out to tender. In addition to the Town of Loviisa, Posintra’s shareholders include, among others, private businesses, and the provisions of the Act on Public Contracts on in-house entities therefore do not apply to the Town of Loviisa’s purchases from Posintra. The FCCA would like to point out that businesses with private capital are not in-house entities as referred to in the Act on Public Contracts from which goods or services can be procured without competitive tendering.
The FCCA also finds that, contrary to the view taken by the Town of Loviisa, the contract did not relate to the kinds of research and development services that are excluded from the scope of application of the Act on Public Contracts. The FCCA is consequently calling on the Market Court to impose a penalty fine of EUR 20,000 on the Town of Loviisa.
Essential changes to contracts require new competitive tendering
Posti Oy was given a contract for providing food delivery and home meal delivery services for a Town of Jämsä catering enterprise on the basis of competitive tendering in 2016. However, the delivery of warm meals meeting food safety requirements customers’ homes failed. As a result of the problems, the Town of Jämsä amended the procurement contract as of 1 July 2017 so that the home meals were delivered to customers cold and the number of deliveries could be halved.
In supervising procurement, the FCCA has given a lot of attention to contractual changes made by contracting authorities, as substantial modifications to contracts require new competitive tendering. The FCCA finds that the Town of Jämsä breached the Act on Public Contracts by not putting the contract for home meal delivery services out to tender again. The FCCA takes the view that the practice involved substantial modifications to the contract contrary to the Act on Public Contracts and therefore constituted unlawful direct procurement. The FCCA is consequently calling on the Market Court to impose a penalty fine of EUR 20,000 on the Town of Jämsä.
More information: Senior Research Officer Max Jansson, tel. +358 (0)29 505 3688, firstname.lastname@example.org
Section 139 of the Act on Public Procurement and Concession Contracts (Act no. 1397 of 2016; “Act on Public Contracts”) mandates the Finnish Competition and Consumer Authority to supervise compliance with public contracts legislation. 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.