As proposed by the Finnish Competition and Consumer Authority (FCCA), the Market Court imposed a penalty payment 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 12 February 2019.
This was the first time that the Market Court resolved a case in which the FCCA had called the Market Court to impose a penalty payment for direct award in violation of the law. The FCCA was granted the authority to monitor compliance with the Act on Public Contracts on 1 January 2017.
Private capital participation is not allowed in in-house entities
The Town of Loviisa gave Posintra Oy a contract for the provision of business development services until the end of 2017 in February 2017 without prior publication of a contract notice. 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. 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.
In its decision of 12 February 2019, the Market Court confirmed that the Town of Loviisa had awarded a contract without competitive tendering in 2017 and that the FCCA was authorised to make the proposal. According to the decision, the direct award was in violation of the law and, as proposed by the FCCA, the Market Court imposed a penalty payment of EUR 20,000 on the Town of Loviisa, payable to the State.
Substantial modifications to contracts require new competitive tendering
Posti Oy was given a contract for providing food and home meal delivery services for a Town of Jämsä catering enterprise on the basis of competitive tendering in 2016. As of 1 July 2017, the Town of Jämsä modified the contract by increasing the hourly rates and reducing the number of deliveries by half. Additionally, in the new contract, the deliveries were rescheduled to another time of day. The FCCA has concluded that the Town of Jämsä violated the Act on Public Contracts by not re-tendering the contract for home meal delivery service, which means that this was a direct award in violation of the Act on Public Contracts.
In its decision of 12 February 2019, the Market Court found that the act that entered into force in 2017 should be applied in the assessment of the modifications made to the contract and that the modifications made to the contract were substantial. According to the Market Court, the way in which modifications should be made was not described in sufficient detail in the original agreements, and also that the modifications could not be justified with unforeseen circumstances. As proposed by the FCCA, the Market Court imposed a penalty payment of EUR 20,000 on the Town of Jämsä, payable to the State.
Max Jansson, Head of Research, tel. +358(0)29 505 3688, firstname.lastname@example.org
FCCA calls for penalty payments for the towns of Loviisa and Jämsä for direct award in violation of the Finnish Act on Public Contracts. FCCA press release, 16 February 2018