02/10/2018

Is This a Public Procurement – Do We Need a Tender Process?

This is a question we procurement lawyers hear all the time. Clients regularly want to know whether a contract requires a tender process under the Procurement Act. Most cases we come across are clearly procurement contracts, i.e. agreements for the purchase of goods, services or contracts. The issue that remains is whether the procurement can be carried out directly from a current contractual partner or a particular company under one of the Procurement Act’s direct procurement provisions.

There is a great deal of case law on direct procurement. The legal grounds for direct procurement are interpreted strictly, and the procurement entity is the one that has to prove that the grounds are met. The Finnish Competition and Consumer Authority has issued many decisions in which it has ruled that a direct procurement should have been put out to tender. Procurement lawyers often reach the same conclusion in the cases on their desk.

Mixed Agreements – Procurements or Not?

The most difficult situations to call are ones where the arrangement concerns, for example, both a procurement of services and a sale of city land. In these kind of cases, the goal of the city is often to promote residential construction and improve business opportunities for companies and also to better organise the services it provides to its residents. These kinds of mixed agreements are assessed on a case-by-case basis to determine whether the main object of the arrangement is a procurement or not. The assessment also determines whether the procurement could be carved out of the overall arrangement. If it could have been, but was not, the entire arrangement will be subject to procurement rules.

Contractual Amendments also Need Consideration

A third frequently asked question concerns contractual amendments. Let’s say that a procurement entity wants to purchase additional work from a contractual partner or the circumstances during the contract period have changed in such a way that the contract needs to be amended. Is it okay to go ahead with the amendment, or does another tender process have to be arranged?

The Procurement Act contains detailed provisions on what kind of amendments can and cannot be made without a new tender process. The list is not exhaustive, however, and the provisions don’t directly apply to procurements exceeding the national threshold. There is still little case law on material amendments, which adds to the challenge. However, it is worth noting that the Finnish Competition and Consumer Authority has also dealt with amendments, and one policy it has established is that reducing the object of the originally tendered procurement could be a prohibited amendment.

Tender Processes are Opportunities

When procurement lawyers get questions about whether the Procurement Act is applicable or not, the underlying question is often is there any way to avoid a troublesome and time-consuming tender process. At this point, the procurement lawyer may raise an eyebrow.

The goal of tendering is, after all, to make efficient use of tax money, i.e. find the partner on the market that has the best solution for the procurement entity’s needs. It would be better to think of the obligation to tender as an opportunity to tender. It would make sense to use the alternatives provided by the markets even when not within the scope of the Procurement Act. Small procurements or mixed contracts can be put out to tender informally. If a procurement does call for knowledge of complying with the Procurement Act, procurement lawyers will always be happy to help.