Are you heard of 2M-It oy?
The technology company founded in 2017 probably doesn’t say anything to a large part of Finns, even though the company has almost 800 employees. In 2021, its turnover was more than 118 million euros.
The reason for the lack of awareness is probably that 2M-It only serves welfare areas that start at the turn of the year. At the same time, it is owned by the welfare regions themselves. The largest owner is Varsinais-Suomen’s welfare region, with more than 40 percent of its share.
2M-It is one of the four publicly-owned companies that rank among the top sellers when looking at regional lead-time acquisitions.
HS requested purchase invoice information from all welfare areas until the end of October 2022. Only two regions, Etelä-Savo and Etelä-Ostrobothnia, did not submit their information despite the request for information according to the Freedom of Information Act.
In addition to 2M-It, the list includes a couple of other lesser-known publicly owned companies, such as Istekki and Kuntien Tiera. The fourth name, on the other hand, rings a bell for many: Sarastia, who made headlines due to the salary mess in the city of Helsinki. These four companies are united by the fact that the welfare regions have acquired ownership of them.
Public ones companies have become a topic of conversation in recent weeks. Business organizations consider purchases made by welfare regions from, among other things, these companies to be illegal.
It is about the fact that welfare regions or, for example, municipalities do not have to tender their purchases from companies if they are the owners of the company themselves. Then you can use the so-called direct procurement permitted by law related unit procurement.
The procedure does not work for the Confederation of Business and Industry (EK).
HS asked the welfare districts for information on their purchase invoices until the end of October 2022. The picture shows the purchases of the Satakunta welfare area.
Together with three other unions, it has made a request for action to the Finnish Competition and Consumer Agency KKV. The organizations are asking the agency to investigate whether the Vantaa and Kerava welfare region violates the law by ordering a personnel management system and services from Sarastia without tendering.
“This criticism of ours is not only aimed at Sarastia, but in our opinion, services are bought illegally from all giant in-house companies, without the real control required by the Procurement Act,” says EK’s competition expert Annaliisa Oksanen.
For example, Vantaa-Kerava owns 0.04 percent of Sarastia. It is clear from HS’s material that several welfare regions have bought shares from 2M-it oy for 2,200 euros each.
In EK’s opinion, such small shareholdings should not be enough for procurement not to be put out to tender.
“Let’s go to the company with a nominal share only because there is no need to compete. This is dangerous for Finland’s market economy and an irresponsible use of public funds.”
of 2M-It CEO Jari Nevalainen according to EK’s interpretation is invalid. 2M-It works as a producer of IT services for welfare areas.
The company is therefore a bit like a wholesaler, which handles the purchase of services and then passes them on to the end user, i.e. welfare areas. 2M-It tenders, for example, software on behalf of welfare areas. In addition, they offer, for example, IT support for the use of these software.
According to Nevalainen, a large in-house company benefits well-being areas, because through it the areas achieve economies of scale. So they don’t have to bid for technology services themselves, but the company does the bidding for everyone at once.
“The owners benefit from us procuring the services for them. Companies, on the other hand, benefit when, by winning our tender, they get to offer their service to all of our owners.”
In EK’s Oksanen’s opinion, this does not enable the emergence of sufficient competition. According to him, the problem is that tenders become huge when large companies tender services for many regions at the same time.
“We don’t have very many companies in Finland that could respond to tenders worth hundreds of millions of euros. But if the size of the competition was even tens of millions, then there would already be many more companies and products.”
EK’s the task is to monitor the interests of Finnish business life, and therefore they want to make sure that they are not pushed out of the market.
From the point of view of the ordinary citizen, however, the acquisitions of welfare areas are important because huge amounts of taxpayers’ money are used for the purchases.
The economies of the regions are very tight. That is why it is especially important that the purchases they make are cost-effective. During the preparation period, purchases are talked about in the millions or tens of millions, but after the actual operation starts at the turn of the year, the amounts will increase considerably.
In public procurement, the interest of the national economy should be realized: therefore, the best possible quality should be bought at the cheapest possible price. It is generally thought that it happens best in competitive markets.
CEO of KKV Kirsi Leivo said In an interview with HS in December, that the lack of competition is the biggest problem in public procurement. According to Leivo, this means that citizens pay too much for public procurement through tax funds.
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“This is a recurring pattern where the status of in-house companies is starting to be questioned. This usually happens during elections.”
of HS in a survey conducted by welfare regions, they feel that purchasing through in-house companies is an efficient way for them to organize technology services. It is reported from several areas that there will be benefits, for example, from the fact that large players have the kind of expertise in technology and tenders that the welfare areas themselves would not have.
In addition, it is reported from many areas that the preparation of welfare areas was so rushed that without in-house companies the entire preparation would not even have been possible.
This is what, for example, the administrative preparation director of the Vantaa and Kerava welfare area says Mikko Hokkanen.
“In this context, the benefit of an in-house company is that we can generally offer the social and health services guaranteed by the constitution to our residents.”
Hokkanen does not consider EK’s criticism justified. In Vantaa-Kerava, it is considered that the purchases made from, for example, Sarastia are legal and in accordance with the prevailing legal practice.
“This is a recurring pattern where the status of in-house companies is starting to be questioned. This usually happens during elections.”
In Hokkanen’s opinion, removing in-house companies from the picture would not guarantee efficiency. According to him, efficiency does arise, when regional decision-makers demand it and the organization has a culture where the use of public funds is treated with the necessary seriousness.
“At least I personally want to maintain the idea that if we are able to make purchases efficiently, it will give us more money to produce the basic task, i.e. to provide social and health services.
From one the welfare regions and EK seem to find common ground on this issue. The current procurement law does not receive praise from either party.
According to Hokkanen, the law makes tenders difficult, and it is often difficult to get participants.
“If the procedure were lighter, we would get more offers. Then we would probably be able to make more efficient public procurements.”
EK’s Oksanen agrees.
“It is absolutely necessary to simplify the procurement act in the next government term,” he says.
Correction 27.12. at 06:53: EK expert Annaliisa Oksanen’s first name was previously misspelled as Anniina.
Correction 27.12. 11:54 a.m.: Removed from the article a picture where it was reported that the employees of the city of Helsinki protested on November 23 due to a salary mess related to the city’s Sarastia company. The picture did not show the opinion of the city employees, but the coffee service related to Fortum’s extraordinary general meeting.
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