FCCA reprimands Riihimäki and Vaasa for failing to invite tenders for procurement contracts

According to a decision by the Finnish Competition and Consumer Authority (FCCA) on 4 June 2018, the City of Riihimäki did not follow the Act on Public Contracts when it failed to publish a contract notice, as required by law, on the purchase of home care services from Mehiläinen Oy in the Peltosaari area. The City of Vaasa was reprimanded on 20 June 2018 for not inviting tenders, as required by the Act on Public Contracts, for services concerning rehabilitative work experience.

The City of Riihimäki decided in June 2017 to transfer the services of the some 60 residents in the Peltosaari area to home care services provided by Mehiläinen Oy. No contract notice was published, because the contract was thought to be worth less than the threshold value of 400,000 euros for social welfare and health care services specified in Annex E of the Act on Public Contracts. The contract was made for 12 months, after which the contract was due to continue indefinitely. The City estimates that the service will cost about 31,000 euros a month. The maximum value of the contract was specified at exactly 400,000 euros.

According to the FCCA’s estimate, the value of the contract between the City of Riihimäki and Mehiläinen exceeded the threshold value specified in the Act on Public Contracts for social welfare and health care services. The FCCA estimates that the poor situation with substitutes early in 2017 in the City of Riihimäki’s home care was not so urgent as to warrant the contracting authority to choose direct award, at least for an indefinite period.

The FCCA was preparing a presentation to the Market Court to decide on the consequences, but while the FCCA was investigating the matter, the City of Riihimäki announced that it was inviting tenders for the services and terminating its agreement with Mehiläinen. The City has since then invited tenders in accordance with the Act on Public Contracts, so pursuing the case with the Market Court was no longer necessary.

SGEI not an exception under the Act on Public Contracts

The City of Vaasa negotiated in spring 2017 a service agreement for about 150 customers’ rehabilitative work experience directly with Vaasan Setlementtiyhdistys ry without publishing a contract notice. This was considered to be a service of general economic interest (SGEI). For this reason, the City thought there was no need for public tendering.

The FCCA’s view was that the contract fulfilled the definition for procurement contracts, was governed by the Act on Public Contracts and exceeded the threshold value for social welfare and health care services, with no direct award grounds applicable to it. The Act on Public Contracts contains no provision for exception to SGEI, so the service provider should have been chosen according to procedures specified in the Act.

More care with procurement procedures

The FCCA reminds that calculating the anticipated value of a procurement is an important phase requiring care, because it is the anticipated value that determines the standards applied to the procurement. The requirements for exceptions under the Act on Public Contracts must be checked carefully, because the contracting authority must be able to provide grounds for its procurement decisions.

The FCCA actively monitors procurements made by contracting authorities and takes up suspected infringements for close inspection where necessary. It is in the common interest of all parties that procurement procedures are conducted transparently, in a non-discriminatory way, whilst using public funds in an effective manner.

Additional information:

  • Senior Research Officer Niina Ruuskanen, tel. +358 (0)29 505 3871, email firstname.lastname@kkv.fi

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 award, the FCCA may forbid the implementation of a procurement decision on the basis of section 140 of the Act on Public Contracts. If direct awards 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 award without legal grounds. However, a motion cannot be put forward to the Market Court if the contracting authority has posted a direct award 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.