SY welcomes Bill on 10% ownership threshold for in-house procurement

Suomen Yrittäjät, the Finnish SME association, welcomes the reform of the Public Procurement Act. If passed, it will make public procurement more transparent.

“Tricks to bypass competitive tendering will end. For example, the minimum ownership requirement for in-house entities will open markets to SMEs, creating growth and jobs,” says Suomen Yrittäjät CEO Mikael Pentikäinen.

Public procurement is worth around €38 billion per year. Minister of Employment Matias Marttinen (NCP) said at a press conference on 5 Feb. that competition in procurement is relatively limited: in 40% of tenders, no more than two bidders participate.

“In particular, we are improving the ability of small and medium-sized enterprises to take part in public procurement tenders, and ensuring that taxpayers’ money is used sensibly. Functioning markets and fair competition are key to accelerating economic growth. The reform includes a number of long-awaited improvements to procurement drafting and increasing competition,” Marttinen added.

Regulation concerning in-house companies will be amended in line with the Government Programme, requiring a contracting entity to own at least 10% of the company from which it makes in-house purchases.

Suomen Yrittäjät considers it important that in-house entities are subject to a minimum ownership requirement. The requirement would also extend to subsidiaries and sister companies.

“The current law has made it possible to avoid tendering with the nominal ownership of even a single share. Better tendering saves public funds,” Pentikäinen says.

Finland has hundreds of publicly owned in-house companies operating in the same markets as private businesses. Municipalities and wellbeing service counties have bypassed tendering to buy support services from companies in which they owned only tiny minority stakes.

“Finally, loopholes are being addressed. Many Finnish companies are hoping for more open competition and more sensible procurement, which also saves taxpayers’ money. The expectations of business owners, companies and taxpayers have been heard,” Pentikäinen says.

One tender not enough

In the Government’s Bill, open public tenders would in future be re-run if only one bid were received. The Public Procurement Act would also be amended in a more SME-friendly direction by requiring procurements exceeding EU threshold values to be divided into lots as a rule, and by enabling appeals against decisions.

The proposed obligation to re-run single-bid tenders could reduce the tailoring of procurements to specific operators.

“This increases competition and improves service quality. Companies have often stayed out of public procurement because tenders have been tailored to certain operators,” says Vice President Harri Jaskari of Suomen Yrittäjät.

Transparency will also be improved by requiring contracting authorities to publish follow-up notices on direct awards and contract modifications.

Dialogue left unfinished

Under the Government Programme, market dialogue should be a default part of the procurement process. Suomen Yrittäjät notes that the proposal does not yet go far enough. The proposed requirement for market consultation would only apply to procurements exceeding €10 million.

“Every high-quality and successful procurement includes market consulation and dialogue with players in the market. In the proposed form, a contracting entity could make procurements of up to €9 million without any obligation to consult the market at all,” Jaskari says.

“Above all, we now need a change in procurement culture. This requires genuine dialogue and a willingness to look at things differently. This is something we are working to promote,” says Katja Rajala, a specialist at Suomen Yrittäjät.

Suomen Yrittäjät therefore argues that market consultation should be made a mandatory part of all procurements exceeding national threshold values.

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