2.3.1 What is public procurement?
The main aim of public procurement legislation is to increase efficiency of public funds.159 Public contracts are made by public authorities: state, municipalities, joint municipal authorities, unincorporated state enterprises and other contracting authorities governed by public law.160 An organization, which is governed by public law, has been established for the purpose of meeting needs in the general interest.161 It has legal personality and it is under the supervision of state, regional or local authorities.162 Public entities may differ from one
157 Valovirta et al. 2017, p. 23.
158 McPhearson et al. Ecological Indicators 2016.
159 Ministry of Economic Affairs: EN/ Responsibilities: Competition and Consumers:
Public Procurement: Public procurement is regulated 2019.
160Art. 2 section 1 subsection 1 of Directive 2014/24/EU. OJ 28.3.2014 L 94/143
161 The APA (434/2003) section 2.
162 Bovis 2012, p. 62; Art. 1(9) of the Directive 2014/24/EU.
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EU country to another.163 Either EU directives164 or national procurement laws165 need to be applied in public purchasing. The public procurement directive secures the fundamental freedoms of the EU, which are free movement of products, services, capital and labor.166
Public procurement must comply to the fundamental principles of public procurement which are transparent and efficient tendering, equality and non-discriminatory treatment of tenderers.167 In order for everybody to take part in the tendering process, if the value of the public procurement exceeds certain thresholds, a public announcement of the competition must be published.168 The regulation of public procurement is based on economic and competitive grounds. They are lex specialis.169 Also, under the threshold values, purchasing is not totally unregulated since the FAB (434/2003) is applied and there are often local procurement guidance in municipalities for the procurements falling below the national threshold values.170 The administration needs to follow all these regulations. The public authority is, however, free to decide what it wants to purchase and on what criteria. It means that the purchasing criteria can be widely defined unless it is not restricting the competition.
The evaluation criteria of products, services, as well as, minimum obligations to the
163 E.g. in Finland Evangelic-Lutheran church is a public entity compared to other EU countries such as Sweden where it is a private entity. Also, religious organizations are under the scope of procurement legislation in Finland. APCC (1397/2016) section 6.
164 Depending on the object of the public procurement following directives beside of Directive 2014/24/EU needs to be applied Directive 2014/25/EU of the European Parliament and of the Council of 26 February on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Di-rective 2004/17/EC (DiDi-rective 2014/25/EU) and DiDi-rective 2014/23/EU of the European Parliament and of the Council of 26 February on the award of concession contracts (Directive 2014/23/EU). OJ 28.3.2014 L 94, p.
243–374; OJ L 28.3.2014 94, p. 1–64.
165 The APCC (1397/2016) or Act on public contracts and concessions of entities operating in the water, en-ergy, transport and postal services sectors (1398/2016). However, the procedural autonomy of the member states is limited by the principles of effectiveness and equivalence. It means e.g. that the substantive and pro-cedural conditions for a remedy for breach of EU law cannot be less favorable compared to those relating to similar domestic cases. At national level this however variates. Caranta 2011, p. 89.
166 Art. 26 and 28–37 of the TFEU. OJ 26.10.2012 C 326, p. 47–390.
167 Art. 18 para. 1 of the Directive 2014/24/EU. OJ 28.3.2014 L 94/143
168 The threshold in public contracts is 5 548 000 euros, in public supply and service contracts 144 000 euros and 221 000 euros if public supply and service is executed by central or subcentral authorities. Finnish na-tional thresholds are 150 000 euros in contracts, in public supply and service contracts 60 000 euros and 400 000 euros for public service contracts for healthcare and social services. Työ- ja elinkeinoministeriö:
Vastuualueet: Kilpailu ja kuluttajat: Julkiset hankinnat: Hankintojen ilmoittaminen ja kynnysarvot: EU- ja kansalliset kynnysarvot. 2019.
169 Bovis 2012, p. 11–12.
170 The APCC (1397/2016) section 2 subsection 3.
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tenderers, that is (i.e.) to the companies are set in procurement documents.171 The most suitable procurement process depends on the procurement subject. If mass products, such as pencils are procured, the process used is usually an open procedure.172 If new technical solutions are searched, the procurement is done via innovation partnership.173 The invitation to participate consists of several different documents and it is crucial to be careful and elaborate them, since the documents determine what the legal entity will gain and what the bidders will offer. Public purchasing differs from general business contracts that there is no traditional contract offer and acceptance – formulation.174 The setup is fairly inflexible. It means that the tenderer cannot change its offer according to procurement law after the set timeframe, since the main principle in public procurement is the conclusive offer. That means that the public unit has the legal power to define the criteria, and the tenderer cannot offer something else to what has requested in the tender. That is why the process before publishing the tendering notice is crucial.175 The documents usually included are the invitation to participate, price schedule, procurement contract draft, pre-qualification questionnaire, framework agreement, contract award decision and an invitation to tender, which is published in national HILMA176 or in EU public procurement database Tenders Electronic Daily (TED)177 or both, if the EU threshold is exceeded.
The procurement laws are also applied by foundations and in-house companies, if the main source of funding of a project or investment comes from public sources, i.e. is based on tax money.178 In that case the whole purchasing process needs to follow public procurement legislation and its principles. In practice, this means that also in those entities environmental or climate criteria, in which this study is interested about, can be used if they are applied transparently, they are equitable and non-discriminatory.179
Depending on the chosen procurement method, at the end of the process, a framework
171 By procurement document is referred to a document produced by the contracting authority, where ele-ments and procedure of the procurement are described and determined.
172 The open procedure is defined in the APCC (1397/2016) section 5 subsection 32.
173 The open procedure is defined in the APCC (1397/2016) section 38.
174 Aho – Laine Defensor Legis 2016, p. 1007.
175 The planning of the procurement includes determinating evaluation criteria and whether there exists more emphasis on quality or prize.
176 TED, Tenders Electronic Daily 2018.
177 Hilma, Julkiset hankinnat 2018.
178 The APCC (1397/2016) section 5.
179 The APCC (1397/2016) section 3 subsection 1.
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agreement or a contract is drafted. Every now and then a bidder who has lost the competition or has been excluded from the procurement process files an appeal concerning the legality of the decision of the contracting authority. In those cases, the claim is made to the national Market Court. When unclear circumstances needs to be clarified, the ECJ will inspect the claim and ensure that the interpretation complies with the EU legislation.
2.3.2 City-level action and public procurement in Finland
In Finland, most of the public procurement purchases are done at the local level in total 311 municipalities. Public procurement in Finland is regulated by the national procurement leg-islation which derives from the EU directives.180 Public procurement processes need to be transparent, ensure fair competition and non-discriminatory conditions of competition for suppliers.181 The target of the regulation is to ensure the efficiency in the use of public money.182 Also, the market conditions need to be taken into consideration, and functioning of markets ensured.183
The value of purchasing at municipalities in Finland is 20 billion euros per year. In total 75 % of the public procurements are purchased at the local level.184 If this value of money would be used on low carbon products and services, it would promote the markets of green economy. The public purchasing can be used as innovative experiments i.e. promoting circular economics, supporting renewable resources in construction works and energy efficiency for example, in IT purchasing. The Finnish government has made a decision about promoting greener solutions in the public procurement in year 2013.185 The aim of the government was to decrease the use of energy and harmful environmental impacts in product, service and building life-cycle costs.186 The current aim is that cleantech solutions would cover 10 % of the total annual procurements.187 This target obligates state authorities, but
180 Directive (2014/23/EU), Directive (2014/24/EU) and Directive (2014/25/EU).
181 The APPCC (1397/2016) section 3 subsection 1.
182 The APPCC (1397/2016) section 2 subsection 1.
183 European Commission: Policies: Public Procurement. 2019.
184 Motiva 2019.
185 Valtioneuvosto 2013.
186 Tools for calculating the life cycle costs (LCC) and CO2 emissions have been developed. See e.g.: LCC-CO2 tool user guide 2009.
187 Programme of Prime Minister Antti Rinne’s Government 2019, p. 107–108.
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not local municipalities. Less than half of municipalities consider climate impacts in their procurement and land planning so far.188
However, some municipalities are active in climate-friendly measures.189 In Finland, there is an increasing number of cities, which include the climate change mitigation to their city strategy. Such cities include Mikkeli and Helsinki.190 Moreover, city collaborations are becoming more common.191 Municipalities have created procurement units, as well as the state, which also has procurement collaborations. Hansel is a state-owned, non-profit limited liability company. Hansel’s role and duties are specified in the APPCC (1397/2016), the Act on a Limited Liability Company Called Hansel Oy (ALLCCH 1096/2008) and in the State Procurement Strategy.192 An amendment of the ALLCCH (1096/2008) allows municipalities and parishes to become customers of Hansel.
KL-Kuntahankinnat is a municipal procurement unit. In their webpages, it was concluded that they try to take environmental aspects into consideration in their purchasing, when it is possible and rational, depending on the target, market situation and procurement resources.
They follow partly the EU`s GPP criteria.193 Circular economics are considered, ”when it is possible”.194 You can easily read between the lines that environmental measures are not the core priorities considered.