Insights | February 28, 2018

Finnish Competition and Consumer Authority takes on new public procurement enforcement powers with vigor – proposes fines of EUR 20 000 on City of Loviisa and City of Jämsä for illegal direct awards of contracts and issues two notices

On 16 February 2018, the Finnish Competition and Consumer Authority (“FCCA”) submitted two proposals to the Market Court for the imposition of  a fine of EUR 20 000 be imposed on the City of Loviisa (“Loviisa”) and on the City of Jämsä (“Jämsä”), respectively, for awarding contracts by direct awards in violation of the procurement rules. These are the first fine proposals that the FCCA has submitted to the Market Court in public procurement matters since it was given a mandate to supervise compliance with the Act on Procurement and Concession Contracts 1397/2016 (“Procurement Act”) on 1 January 2017. Under the Procurement Act, the FCCA may propose to the Market Court that sanctions, such as fines, be imposed on contracting entities in case of illegal direct awards of contracts exceeding the EU threshold and of certain service and concession contracts exceeding the national threshold referred to in Appendix E of the Procurement Act.

Both cases have been opened ex officio by the FCCA and concern illegal direct awards of contracts exceeding the European Union threshold. In the case against Loviisa, the FCCA found that the award of a contract concerning public guardianship, regional cooperation, communication and vitality services directly to Posintra Oy (“Posintra”) violated the Procurement Act because Posintra, which is partly owned by Loviisa but which also has private shareholders and thereby private capital, is not an in-house entity to which contracts may be legally awarded without conducting a tender procedure. The FCCA also rejected Loviisa’s claims that the services in question would have constituted research and development services falling outside the scope of the Procurement Act.

The case against Jämsä concerns the compatibility of material amendments to public contracts with the Procurement Act. In 2016, Jämsä awarded a procurement contract concerning home deliveries of food and meals to Posti Oy (“Posti”) following a competitive tender process. After Posti faced difficulties with the service, the terms of the contract were amended in July 2017, allowing Posti to cut the number of deliveries by half and to apply significantly lower quality requirements. The FCCA found that these amendments were of such an essential nature that they constituted an award of a new contract which should have subject to a new tender process. The FCCA alleges accordingly that Jämsä, by failing to organize a new competitive tender, breached the Procurement Act and awarded the contract to Posti by an illegal direct award.

Additionally, the FCCA has issued two notices finding infringements of the Procurement Act. First, the FCCA found on 29 January 2018 that the municipal authority of the health care district of Länsi-Pohja had performed a tender process relating to certain renovation works in breach of the Procurement Act. The municipal authority had wrongly considered that certain exemptions from preforming a public procurement process due to exceptional circumstances applied. Second, the FCCA found on 31 January 2018, that the municipality of Liperi had incorrectly failed to subject the acquisition of new premises for a training center to a procurement process within the meaning of the Procurement Act. The municipality had wrongly applied the direct awards exception.

Sources: FCCA Press Releases 16 February 2018, 29 January 2018 and 31 January 2018

Article was written by Hanna Sarkio, Associate, EU & Competition.