On 31 August 2020, the Finnish Competition and Consumer Authority (FCCA) submitted a proposal to the Market Court on the imposition of sanctions on the municipality of Puolanka for unlawful direct procurement. According to FCCA investigations, at the beginning of 2020, the municipality of Puolanka concluded a follow-up contract on the provision of municipal social welfare and health care services worth tens of millions of euros without arranging a competitive tendering process in accordance with the Act on Public Procurement and Concession Contracts.
The FCCA proposes that the Market Court impose a penalty payment of EUR 120,000 on the municipality of Puolanka for unlawful direct procurement. The FCCA also proposes that the Market Court shorten the contract concluded between the municipality of Puolanka and Terveystalo Kuntaturva Oy so that it will end six months after the Market Court has handed down its final decision.
In 2012, the municipality of Puolanka subjected its social welfare and healthcare services to competitive tendering. The contract period based on competitive tendering ended at the end of 2019. After this, the municipality acquired its social welfare and health care services from Terveystalo Municipality Security through a follow-up contract without a competitive tendering process. The contract, initially tendered for a maximum duration of seven years, was extended in the form of direct procurement for six years, in addition to which the range of services falling under the scope of the contract was amended. The FCCA started investigating the municipality’s direct procurement on its own initiative in spring 2020.
“This is a very significant contract in terms of money, over 7 million euros on an annual basis. The contract is one of the largest ones with which the procurement supervision of the FCCA has interfered,” explains Max Jansson, Head of Research on Procurement Supervision.
The objective of the Act on Public Procurement and Concession Contracts is the efficient use of public funds
Social welfare and health care procurement has recently been in focus in the investigations of the FCCA. Senior Specialist Johanna Kirveskoski from the FCCA emphasises that the conditions for direct procurement and substantial contract changes listed in the Act on Public Procurement and Concession Contracts must be complied with.
“Even though the Act on Public Contracts allows for flexibility in the procurement of social welfare and health care services in some cases, the direct procurement of such services is also tied to the conditions laid down in the Act on Public Contracts,” says Kirveskoski.
For example, an individual municipality resident’s care or customer relationship can be continued in the form of direct procurement, if changing the service provider would clearly be unreasonable or particularly inappropriate for the resident in question when their special life situation or other personal reasons are taken into account.
”However, this ground for direct procurement was unsuitable for the direct procurement of all municipal residents’ services under the follow-up contract now at hand,” says Kirveskoski.
The objective of the Act on Public Contracts is the efficient use of our public funds. Should procurement units engage in unlawful direct procurement, they do not take advantage of competition between companies. In direct procurements, companies cannot compete with quality or price. It is in everyone’s interests to have all procurement procedures be carried out in a manner that is open, non-discriminatory and that utilises public funds in the most efficient way possible.
Head of Research Max Jansson, tel. +358 29 505 3688
Senior Specialist Johanna Kirveskoski, tel. +358 29 505 3710
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, the 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, the 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, the 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 to the Act on Public Procurement and Concession Contracts, 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 procurement notice of the procurement as referred to in section 131 of the Act on Public Procurement and Concession Contracts.
Additional information on the supervision of public procurement.