The Reform Of The Finnish Public Procurement Act – What's The Discussion About?

A draft Government proposal on the reform of the Public Procurement Act was circulated for comments earlier this year, gathering a total of 607 opinions—which is an exceptionally large number. What are the proposed changes that are causing discussion?

The hottest debate concerns companies owned by the public sector ("inhouse entities"), as the intention is to limit the public sector's ability to procure from these entities without arranging a tendering competition. Under the current Public Procurement Act, this is possible in situations where the public sector entity has actual control over the inhouse entity.

In practice, it has been claimed that holding even a single share in the inhouse entity has been adequate to procure without a tendering competition. However, in its decision MAO:154/2024, the Market Court ruled that in an inhouse entity owned by hundreds of contracting authorities, the contracting authority did not have real control over the entity when it held a 0.04 percent share of the company's stock and had no genuine opportunity to participate in exercising control over the company through any of its bodies. Consequently, the contracting authority's purchase of more than nine (9) million euros from the company did not fall outside the scope of the Public Procurement Act, as it was not considered a purchase from an inhouse entity. An appeal concerning the decision has been lodged to the Supreme Administrative Court, so this interpretation is still awaiting confirmation.

Another proposed amendment to the Act that would significantly tighten the current practice: a minimum shareholding of 10% in the inhouse entity would be required to allow purchases without a tendering competition. Such a change could open a market worth several billion euros to competition. In the consultation responses, the 10 percent minimum ownership requirement has been widely criticized, especially by inhouse entities and municipalities. Many smaller municipalities, for instance, are concerned that they may not have the resources or expertise necessary to conduct tendering competitions for procurements they have previously made from inhouse entities. Greater clarity is also expected in the forthcoming government proposal regarding situations where, for example, the public interest could justify not adhering to the minimum ownership requirement, and which sectors (such as waste management) should be excluded from this requirement to ensure security of supply.

In addition, the following amendments have been proposed to the Public Procurement Act:

• Procurement above the EU thresholds should be split into lots, and in the future, it would be possible to appeal if this requirement is not met. Under the current Public Procurement Act, it has not been possible to appeal concerning a decision not to divide the procurement into lots. Selecting two or more suppliers in a framework agreement or setting up a dynamic purchasing system also counts as dividing into lots. The requirement to divide procurements into lots is intended to encourage small and medium-sized enterprises to participate in public tenders.
• A new tendering competition should be launched if only one tender is received. The proposed provision limits this re-tendering requirement to procurements carried out through an open procedure, leaving it unclear whether it would also apply to national procurements. Re-tendering could be avoided if the contracting entity has carried out an adequate market survey prior to the tendering competition. The idea behind the re-tendering requirement is that the more bids are received, the more cost-effective the procurement will be. According to a study by the Finnish Competition and Consumer Authority ("FCCA"), obtaining one additional bid in a single-bid procurement saves taxpayers on average 10% of the procurement's value (the study is available in Finnish on the FCCA's website ).
• For contracts exceeding EUR 10 million, market surveys would become mandatory.
• It is proposed to repeal Chapter 12 of the Public Procurement Act, which governs tendering for social and healthcare services as well as special services. In the future, these services would fall under Chapter 11 of the Act, which regulates national procurements.

The Government proposal is to be submitted to the Parliament in the autumn of 2025, with the new law expected to enter into force on 1 January 2026. Transitional provisions have been proposed regarding inhouse entities.

There has also been a consultation regarding the European public procurement directives, meaning that the need for changes to EU regulation is currently under review. These developments will also affect national procurement law.

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