The Procurement Act in plain language – how the public sector buys
The public sector buys goods, services and works for enormous sums every year. To keep the buying fair and to use tax money efficiently, these procurements are governed by the Act on Public Procurement and Concession Contracts, better known as the Procurement Act.
The text of the law may feel heavy, but its basic idea is simple: a public buyer must give companies an equal opportunity to offer their own solutions. Once you understand the rules of the game, the Procurement Act is not an obstacle but a clear route to new customers.
In this guide we go through the most essential parts of the law from a bidding company's point of view.
1. The three golden rules of the Procurement Act
The whole Procurement Act rests on a few principles that protect you, the bidding company, in particular:
- Equal treatment and non-discrimination: No one may be favoured. A contracting authority cannot, for example, require that a company be from a particular locality, or directly favour a specific brand. The requirements must be the same for everyone.
- Transparency: Tenders must be announced publicly. Secrecy is not allowed, and the tender documents must be available to everyone who wants them. Decisions must also be reasoned, and bidders have the right to know why they won or lost.
- Proportionality: The requirements must be in proportion to the purchase itself. For an expert service worth a few thousand euros, a company cannot be required to have a turnover of tens of millions.
2. The thresholds determine the rules
The Procurement Act does not apply to every purchase of a pen. It only applies once the value of the procurement exceeds certain limits in euros, known as thresholds.
- Small-scale procurements (below the national threshold): If the value of the deal is small (for goods and services below EUR 60,000, for example), the Procurement Act itself does not bind the buyer. The contracting authority has its own lighter rules for such purchases, and they can often be agreed directly on the basis of bids.
- National procurements: When a procurement exceeds the national threshold, the buyer must follow the Procurement Act and publish the tender in the public procurement notice channel (Hilma).
- EU procurements: For very large procurements the EU-level thresholds apply, in which case the notice goes to the Europe-wide portal and the timetables are defined more precisely in law.
3. How does a public buyer run a procurement?
The Procurement Act gives buyers various procedures. A bidder should recognise the most common ones:
- Open procedure: The most common approach. The buyer publishes the tender documents, and any company meeting the requirements may submit a bid.
- Restricted procedure: A two-stage model. First companies express their interest in taking part, and the buyer selects the most suitable among them (five companies, say), to whom the actual tender documents are sent.
- Framework agreement: The buyer tenders several suppliers in advance for a contract period (two to four years, say). When an actual need arises, the buyer places orders with these selected companies either directly or through a small internal "mini-competition".
- Direct award: An exceptional situation in which the buyer negotiates directly with one company without a tender. The law allows this only on extremely strict conditions, for example if the product is protected by an exclusive right or there is unforeseeable extreme urgency.
Read more about procurement procedures.
4. A bidder's checklist for success
When you take part in public tenders, the law sets strict boundaries that must be followed exactly.
- Answer exactly what is asked: The contracting authority is legally required to reject a bid that is incomplete or does not meet the requirements. If the tender documents ask for red, do not offer blue, even if you think it is better.
- Ask in good time: If something in the tender documents is unclear or feels unreasonable, send the buyer a question by the deadline stated in the documents. Buyers often correct their mistakes when these are pointed out in time.
- Use your rights: If you lose a tender, you have the right to receive the decision with its reasons and to see the winning company's documents (excluding trade secrets). This is the most effective way to learn how the comparison was really decided.
At first the Procurement Act may look like a jungle of precise rules, but it contains a clear process. When you follow the given terms and make use of the transparency, the public sector is a stable and reliable business partner.
Frequently asked questions
What is the Procurement Act?
The Act on Public Procurement and Concession Contracts (1397/2016), known as the Procurement Act, governs how the state, municipalities and other public buyers acquire goods, services and works. Its basic idea is to give companies an equal opportunity to offer their solutions to the public sector.
What are the most important principles of the Procurement Act?
Equal treatment and non-discrimination (no one may be favoured), transparency (tenders are announced publicly and decisions are reasoned) and proportionality (the requirements must be in proportion to the size of the procurement).
When does the Procurement Act apply?
When the estimated value of the procurement exceeds the national threshold — for goods and services, EUR 60,000, for example. Smaller purchases are small-scale procurements, governed by the buyer's own procurement rules.
Sources: Act on Public Procurement and Concession Contracts (1397/2016)