According to a decision issued by the Finnish Competition and Consumer Authority (FCCA) on 7 October 2020, the Joint Municipal Authority of Social Welfare and Health Care in South Karelia (Eksote), the Municipality of Savitaipale and Kiinteistö Oy Savitapaleeen Vuokratalot (a tenant-housing company) did not comply with the procurement legislation when agreeing on the sale of the buildings and the procurement of social welfare and health care services with Mehiläinen Hoivapalvelut Oy.
In September 2019, Eksote, the Municipality of Savitaipale, Savitaipaleen Vanhaintuki ry, and Kiinteistö Oy Savitaipaleen Vuokratalot signed an agreement with Mehiläinen and its real estate partner on the sale of the buildings used by the municipality of Savitaipale for the production of social welfare and health care services and on the procurement of social welfare and health care services. The agreement included several agreements concluded at the same time between the different parties, linked together through a single master agreement jointly signed by all the parties.
According to the agreement, Mehiläinen would have purchased the buildings used in the production of social and health services from the municipality of Savitaipale, Savitaipaleen Vuokratalot and Vanhaintukiyhdistys, and would have been responsible for the provision of social welfare and health care services in the produced in the buildings for the elderly, persons with disabilities and mental health and substance abuse rehabilitees. Furthermore, it was also agreed that some of the buildings that were the object of the transaction would be dismantled at the expense of Mehiläinen immediately after the transaction was concluded.
The FCCA started investigating the procurement on its own initiative when it became clear that no competitive bidding for the provision of services for persons with disabilities, mental health and substance abuse, now to be transferred to Mehiläinen, had been organised in accordance with the Act on Public Procurement and Concession Contracts. According to Eksote, the value of the disability services included in the agreement was approximately EUR 4.5 million and that of the mental health and substance abuse services, around EUR 800,000. In addition, contracts for the housing services for the elderly, based on the previous framework agreements concluded by Eksote, worth approximately EUR 2.9 million, were included in the contract
The FCCA considered that the contract should have been put out to tender in accordance with the Act on Public Procurement and Concession Contracts on account of the fact that the procurements were included in it. The FCCA prepared a proposal to the Market Court to the effect that the contract be declared invalid. However, the parties decided that the contract would expire, and the FCCA decided to provide administrative guidance on compliance with procurement legislation.
In its guidance, the FCCA drew the attention of the contracting units to the fact that the contract as a whole that included the procurement of social welfare and health care services and the sale of buildings should have been subjected to competitive tendering, as the contract was covered by the Act on Public Procurement and Concession Contracts.
“In outsourcing social welfare and health care services, it is important to secure high-quality services for municipal residents and ensure that tax resources are used efficiently. Without competitive tendering, the tenderers will not be able to compete with each other with price and quality”, says Max Jansson, Head of Research on Procurement Supervision.
In its reports, Eksote referred to the fact that the Act on Public Procurement and Concession Contracts allows the direct procurement of social welfare and health care services in special situations in which competitive tendering would be manifestly unreasonable or inappropriate in order to secure a care or customer relationship.
“The aim of the direct procurement criterion may be, for example, to safeguard the continuity of the care relationship of individual customers. An exception was not considered suitable in an outsourcing situation in which the service production of an entire housing unit was being transferred from a joint municipal authority to a private enterprise, and in which the service provider was in any case changing”, says Niina Ruuskanen, Senior Adviser at the FCCA.
Public version of the decision (in Finnish)
Inquiries:
Senior Specialist Niina Ruuskanen, tel. + 358 29 505 3871
frstname.lastname @ kkv.fi
Under the Act on Public Procurement and Concession Contracts, 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 the Administrative Procedure Act. With regard to illegal direct awards, the FCCA can, by virtue of the Act on Public Procurement and Concession Contracts, prohibit the implementation of the award 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 also apply to service procurements and concession contracts referred to in 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 the Act on Public Procurement and Concession Contracts.