Public contract law rewrite could put municipal jobs at risk

A change to Finland's laws on public procurement practices will make more room for small and medium-sized enterprises to win public tenders. The reform will put existing municipal corporations that have traditionally provided the services in many locations at risk, as they will now face tougher competition.

Kuvassa lapsi lusikoi suuhun keittoruokaa
Image: Ritva Karhula / Yle

Finland has laid the groundwork to renew its public contracts act, in what decision-makers say is an effort to improve market performance and boost the status of small and medium-sized enterprises (SME) in competitive bidding for public services and goods.

About 15 percent of Finland's GDP, or 22.5 billion euros, is currently spent by the government, municipalities and congregations on the procurement of goods, services and public works in Finland.

Business representatives have been quick to praise the reform, which is intended to come into effect sometime in the beginning of next year.

The Federation of Finnish Enterprises says one of the change’s largest effects will be breaking up the previous large-scale public procurement contracts into smaller parts.

"A statute that encourages divvying projects up is an important way to help small businesses participate in public procurement bidding and ensure market diversity," says Satu Grekin, a competition specialist at the Federation.

"Concentrated contracts have been a big problem for SMEs. It has led to tenders being turned into entities so large that small companies find it impossible to deliver such large volumes," she says.

Is bigger better?

Municipal suppliers and their employees are wary of the new law and the changes it will bring.

One of the largest companies in Finland that is currently supplying public services is a company called Vantti that supplies food, property and cleaning services to the city of Vantaa.

"I believe that small and medium-sized businesses will submit more offers in the coming years – more than they do now, and this could intensify competition," says Vantti's CEO Liisa Sarjala.

30,000 jobs on the line

If the statute reform stirs up the market too much, it could even put the jobs of the 30,000 municipal company employees at risk. Finland currently has 2,200 municipally-owned corporations, created to meet a variety of public procurement needs.

"Municipal corporations will probably have to alter their operational methods, but at the same time, they will have to try and hold onto their best practices," Sarjala predicts.

She says that smaller companies have participated in the public sector bidding competitions before, and so she has faith that the larger groups will continue to win a share of public contracts.

The Federation of Finnish Enterprises, on the other hand, says municipally-owned companies have had an unfair advantage in public tenders for years.

"Their unfair advantage needs to be dismantled. We should have broken big projects down into a broader set of orders for the tendering processes long ago," says Grekin.

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