Dissertation: Form of contract, suitability requirements and uncertainties in the agreement phase affect medium-sized building construction enterprises’ opportunities to act as the main contractor

Ulla-Maria Karhu
A medium-sized building construction enterprise’s opportunities to act as the main contractor in public procurements are particularly affected by the form of contract used, the suitability requirements for the tenderer and the risks to the main contractor caused by the uncertainty of the agreement phase, which is revealed by a business law dissertation by Ulla-Maria Karhu at the University of Vaasa.

While being primarily based on a legal approach, the subject of the dissertation is main contractor public procurement in the building construction sector in Finland which exceeds the EU threshold.

The research identifies the key sensitive points of medium-sized building construction enterprises’ opportunities to act as the main contractor in public procurements as required by the Act on Public Procurement and Concession Contracts. Karhu refers to the sensitive points as the main contractor sensitivity of a medium-sized building construction enterprise.

Medium-sized building construction enterprises broaden the public procurement supplier base

Karhu’s dissertation sets out to increase information about the industry-specific application of public procurement law and its possible effects on society.

Public building construction procurements are often significant in financial terms, making effective competition important.

Karhu points out that the involvement of small and medium-sized enterprises in public procurement broadens the potential supplier base, with positive effects of higher competition for public contracts and as a counterbalance to dominant market players, which is something that has also been considered in procurement regulation.

– The sensitive points identified in the dissertation can affect the equal opportunities of a medium-sized enterprise to act as the main contractor in public procurements, which can cause a concentration of competition in the dominant market players. In the long run, this can cause a rise in price levels and a decrease in competition and public spending efficiency, says Karhu, who will defend her dissertation on Wednesday, 25 May.

The recommendations for actions help by taking the main contracting sensitivity into account

Karhu’s research presents recommendations for actions based on the interpretation recommendations for considering the main contracting sensitivity of medium-sized building construction enterprises in public procurement.

The recommendations touch on focus on the size of the contract and the necessity to consider the choices related to competitive tendering, moderation of the suitability requirements to the main contractor and promotion of predictability in the procurement’s agreement phase through negotiation practices and control during the implementation phase.

The recommendations for actions also emphasise the significance of the capability of the contracting entity carrying out a public procurement process to use its discretionary power independently.

An entity such as a city or municipality carrying out a public procurement process should genuinely understand what kind of procurement procedure they are about to embark on. For example, if an external expert suggests a new type of contract form, such as an alliance or public private partnership (PPP), what does it mean in practice? How does it affect the final group of bidders or the final cost of the procurement? The ability of the contracting entity to use independent discretion is essential for preserving the integrity of public authorities, says Karhu.

Ulla-Maria Karhu, photo: Riikka Kalmi / University of Vaasa

Doctoral dissertation

Karhu, Ulla-Maria (2022) Julkiset hankinnat talonrakennusalalla: Keskisuuren yrityksen mahdollisuus toimia pääurakoitsijana. Acta Wasaensia 487. Väitöskirja / Doctoral dissertation. Vaasan yliopisto  / University of Vaasa.

Publication pdf: https://urn.fi/URN:ISBN:978-952-395-025-2 

Public defence

The public examination of M.Sc. Ulla-Maria Karhu’s doctoral dissertation “Julkiset hankinnat talonrakennusalalla : Keskisuuren yrityksen mahdollisuus toimia pääurakoitsijanawill be held on Wednesday May 25, 2022 at noon at the University of Vaasa, auditorium Nissi.

It is possible to follow the defence online: https://uwasa.zoom.us/j/66483916435?pwd=TDBVVjJoZW41RktYNHptdXFpL1ltUT0 Password: 811204

Professor Antti Aine (University of Helsinki, University of Turku) will act as an opponent and Professor Vesa Annola as a custos. The defence will be held in Finnish.

Further information

Ulla-Maria Karhu, puh. 050 330 6965, ulla-maria.karhu (@) rakennuskarhu.fi

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