value of the contract for the swimming pool appears very unlikely to be high enough to fall within the scope of the Regulations.20

Finland

There is a document of self-regulation of the Finnish building industry that is of importance in this case, entitled The Principles of Competitive Bidding on the Building Branch, published in the Building Information Foundation series (RT 16–10182).21 The purpose of the Principles is to define good building and construction practices in using competitive bidding, and they are meant to be binding both on the builder and on the contractor.22 The Principles are based on negotiations between central organisations of the industry, representing both builders and contractors.

The Principles are not public legislation. However, they are considered to be an expression of good practice in building and construction, and as such they can have some degree of bindingness. Court practice confirms that they bind parties if the builder has published a statement that they will be followed in the competitive bidding.23 In KKO 1998:48 the builder had committed itself to follow the Principles of Competitive Bidding RT 16–10182. After opening the bids it had, contrary to the Principles, negotiated with bidders and accepted a new lower bid made by another bidder. The original lowest bidder was entitled to compensation for the loss in losing the contract, measured by the so-called positive interest.

Of course, the Principles are not compulsory norms, and the parties may agree upon the application of different rules. In this case, A’s published statements of the rules of the bidding process, on the one

20The Regulations do not apply to contracts where the estimated value of the contract (net of VAT) is less than a defined threshold, currently (for public works contracts) E5,150,000: reg. 8.

21The Building Information Foundation (RTS) is Finland’s leading information service for the building and construction sector. Its mission is to foster and promote good planning and construction practices as well as sound property management procedures. It is a private foundation with representatives from 42 Finnish building organisations. It publishes the RT Building Information File (RT ¼ building information), which is updated regularly.

22See s.1.

23Court decisions, even those issued by the Supreme Court, are not considered to be legally binding in Finland. But in fact they often have great authority, and especially important precedents with thorough reasoning are followed in court practice. On the status of precedents as a legal source in Finland, see e.g. Aarnio, Laintulkinnan teoria

[The Theory of the Interpretation of Statutes], p. 230ff.

prima facie positive interest of the lowest bidder is the economic value to it of the contract on the basis of its bid because according to the rules it is entitled to be awarded the contract unless any of the contrary reasons mentioned above exists. The only item of loss that is mentioned in the case, however, is the expenses incurred in preparing the bid. These are in principle not included in the positive interest. But if the value of the contract exceeds (or at least equals) the bidding costs, as is usually the case, the lowest bidder should of course have these costs compensated on the basis of the positive as well as the negative interest.

The positive interest of a bidder other than the one who is entitled to the contract is usually zero in spite of any fault on the other side. This is because it would not have been awarded the contract and thus would not have its expenses covered even if its bid had been treated properly. The application of the negative interest would not give a different result because there is no loss that would have resulted from an act by the liable party.

A pivotal fact is that A has promised to give the contract to the lowest bidder. A breach of this promise is no doubt wrongful unless there are reasons to reject the lowest bid (for example, those mentioned in the Finnish Principles: see above). Choosing another bid could perhaps also be acceptable if it appears to be the most profitable taking into account, besides the price, all other economic, technical and functional criteria. However, the reasons mentioned in the case for not choosing B’s bid indicate no proper grounds for either rejecting it or accepting another bid.

In situation (i), B’s bid was the lowest one but either (a) it was not properly considered by A because of an administrative error or (b) A always intended to give the contract to C. The latter alternative (b) is a case of intentional breach of agreed rules. Also the former (a) falls within A’s control and thus indicates its fault. So both are cases of fault and constitute a basis of A’s liability. As the lowest bidder, B was in a position which, according to A’s promise, entitled it to get the contract. Only if A can show that the contract should not have been given to B, for example for the reasons set out above, can A avoid liability to B.

In situation (ii), B’s bid was not the lowest but it was not properly considered by A because of an administrative error. As discussed above, an administrative error is regarded as wrongful. However, this case is more complicated because B’s bid was not the lowest one and so it had no prima facie right to the contract. Only if B can show that according to the applicable rules the contract should have been granted to it and not

284 precontractual liability in european private law

to the lowest bidder can it be considered to have a right to the contract. According to the Finnish Principles, in considering this question all economic, technical and functional criteria can be taken into account.

So, in all of cases (i)(a) and (b) and (ii) there is the fault required for A’s liability. The liability is measured according to the positive interest. If B can be considered to have had the right to the contract, which is the case as a rule in situation (i) but not in situation (ii), its positive interest includes the value of the contract to it. If only the bidding expenses are claimed, in general they can be compensated on this basis (see above). If B did not have the right to the contract – this is the case probably in situation (ii) – then it would not be entitled to any compensation from A.

If A is a public authority the legislation on public procurement will be applied. The Finnish Act on Public Procurement (APP,1992) is applicable, amongst other things, to procurement by the state and the communes (local communities responsible for public administration). If the value of the procurement equals or exceeds the threshold value defined in a special decree,27 more detailed rules based on EU legislation will apply. The purpose of the APP is to promote competition and ensure the equal and non-discriminatory treatment of those who take part in the competitive bidding. The exceptions to the scope of the APP are not relevant in this case. According to the APP,28 a building project may not be carried out as own work without competitive bidding if state subsidy relating to a particular project is granted to the project and the cost estimate (including VAT) of the project equals or exceeds FIM5,000,000.29 Exception may be made only for special reasons, such as the small value of the procurement.

The APP contains detailed provisions30 on proper grounds for excluding a bidder from the procedure (such as lack of technical, economic or other qualifications or omission to pay taxes or social security fees). The bidders have to be treated equally and in a non-discriminatory manner in all phases of the procurement. According to section 7, the procurement has to be made as profitably as possible. The bid that is the most profitable in the light of all economic aspects, or the cheapest, should be accepted. There is also a special provision on damages liability.31 Liability

27Decree on Public Procurement and Building Contracts Exceeding the Threshold Value, 1998. The threshold value expressed in ECUs (without VAT) is that corresponding to 5m special drawing rights.

28Section 5. 29 Around E850,000 or £575,000. 30 Section 6. 31 APP, s. 8.