FCCA issued an admonition to the Northern Ostrobothnia Hospital District concerning changes made to the procurement agreement on IT devices

According to the decision made by the Finnish Competition and Consumer Authority (FCCA) on 7 May 2019, the Northern Ostrobothnia Hospital District (NOHD) violated the Act on Public Procurement and Concession Contracts by not publishing a contract notice required by law, even if substantial modifications were made to the procurement agreement for procuring computers and terminal equipment.

On 12 October 2016, NOHD published an EU contract notice to declare an open procedure procurement of computers, terminal equipment and monitors and the related installation services for a two-year contract period starting 1 January 2017 and a two-year optional extension period. NOHD awarded the contract to Atea Finland Oy. According to the terms of the invitation to tender pertaining to the procurement, the devices could be updated during the contract period as necessary considering the lifecycle of the devices, but price modifications were not permitted before 31 December 2018. However, the qualities and prices of the devices were altered on several occasions already before said date, starting in April 2017. By the end of 2018, the contracting entity paid in total over €400,000 more for the procured devices than what was provided in the procurement agreement. For some devices, the prices had more than doubled when compared to the original winning tender.

FCCA stated that the modifications made to the procurement agreement were substantial and not justified by law. FCCA found that the terms pertaining to the lifecycle-based modifications were not clear, explicit and unambiguous enough to form a basis for the modifications that were made, particularly as price modifications were specifically prohibited in the terms of contract. As the procurement had not been re-tendered, the contracting entity had, in actual fact, made an illegal direct award of contract, for which it was issued an admonition by FCCA.

Flexible, yet explicit terms of contract allow for potential modification needs

The development of IT devices is fast-paced, and the lifecycle of products may be short as new models are constantly entering the market. Contracting entities can prepare for modification needs and ensure that the terms of procurement are flexible enough to take technological advancements into account during the contract period. However, the terms shall be formulated in sufficient detail already in the documents relating to the invitation to tender, so that the tenderers are able to take the effects of the terms into consideration in their tenders. Only by so doing, all tenderers can be guaranteed an equal and non-discriminatory position in the procurement procedure. The terms of a procurement agreement may not be substantially modified during the contract period, which the tenderers should also bear in mind when submitting their tenders.

Further information: Senior Specialist Niina Ruuskanen, telephone +358 (0)29 505 3871, e-mail firstname.lastname@kkv.fi.

Under section 139 of the Act on Public Procurement and Concession Contracts (1397/2016), the Finnish Competition and Consumer Authority is tasked with supervising compliance with the legislation on public procurements. For a detected violation, FCCA can issue an admonition to the contracting entity or provide the contracting entity with other form of administrative guidance referred to in section 53c of the Administrative Procedure Act (434/2003). With regard to illegal direct awards, FCCA can, by virtue of section 140 of the Act on Public Procurement and Concession Contracts, prohibit the implementation of the procurement decision. In the case of direct awards exceeding the EU threshold values, FCCA can also submit a proposal to the Market Court to impose sanctions such as a penalty fine, shortening of the contract period or quashing of the procurement decision. The same provisions apply also to service procurements and concession contracts referred to in schedule E, which exceed the national threshold values and have been concluded as direct awards without justification provided by law. However, a proposal to the Market Court cannot be made if the contracting entity has submitted a direct award notice of the procurement as referred to in section 131 of the Act on Public Procurement and Concession Contracts.