In-house entity
An in-house entity (sidosyksikkö) is a formally separate unit controlled by a contracting authority, from which the authority may acquire goods and services without competitive tendering. An in-house procurement is an exception to the main rule of the Finnish Public Procurement Act, under which public contracts must be put out to tender. In practice, in-house entities include service companies jointly owned by municipalities and wellbeing services counties that provide their owners with ICT, financial, catering or staffing services. For a unit to qualify as in-house, the authority must exercise control over it similar to that over its own departments, and the entity may sell only a minor share of its activities to outsiders. The 2026 procurement law reform tightens the conditions for using an in-house entity: a limited-company in-house entity now requires the authority to hold at least a 10 percent direct ownership stake. Bidders should understand the concept, because in-house procurement keeps a significant share of public contracts outside open competition – and the reform brings some of these services back to the market.
Definition
In-house entities are governed by Section 15 of the Finnish Public Procurement Act (1397/2016). An in-house entity is a unit formally separate from the contracting authority and independent in its decision-making, over which the authority – alone or together with other contracting authorities – exercises control similar to that over its own departments. In addition, the in-house entity carries out no more than 5 percent, and no more than EUR 500,000, of its business with parties other than the authorities that control it. This limit is known as the external-sales limit. When these conditions are met, the authority may procure from its in-house entity without competition. The reform adds a new condition to Section 15: using a limited-company in-house entity requires the authority to hold at least a 10 percent direct ownership stake (Section 15, subsection 2). The minimum ownership requirement applies from 1 July 2027, and from 1 July 2029 for certain healthcare in-house entities. There is an exception for small in-house entities established in the public interest to provide a statutory service, where annual turnover does not exceed one million euros. The change stems from the observation that many in-house companies have had a large number of contracting authorities involved with very small ownership stakes and no genuine control.
Practical Example
Ten municipalities jointly own an ICT service company that provides them with information-system and support services. Each municipality owns on average two percent of the company. Before the reform, the municipalities could buy the services from the company as an in-house procurement without competition, as long as the external-sales limit was not exceeded. After the reform the situation changes: because a single municipality's ownership stays below 10 percent, the company no longer meets the in-house conditions for these municipalities. The transitional period gives time to arrange matters: the municipalities may use the existing contract until 30 June 2027, and must report the contract to the State Treasury by 30 September 2026. In practice, some of the services must now be tendered openly, allowing private ICT suppliers to bid for them. Bidders should track which in-house entities in their region lose their status, as this signals new tenders.
Common Mistake
A common misconception is that any company owned by a municipality or wellbeing services county is automatically an in-house entity from which it can buy without competition. This is not the case. The conditions for in-house status – control, the external-sales limit and, after the reform, 10 percent ownership – must be assessed separately for each procurement and each contracting authority. If the conditions are not met, it is an ordinary procurement that must be tendered. A bidder who suspects an unjustified in-house procurement can bring the matter before the Market Court. Another mistake is to assume the reform's transitional periods apply to all in-house entities in the same way: certain healthcare in-house entities have a longer transitional period, and small statutory-service entities have their own exception.
Frequently Asked Questions
What is an in-house entity?
An in-house entity (sidosyksikkö) is a unit formally separate from a contracting authority, over which the authority exercises control similar to that over its own departments and which sells only a minor share of its activities to outsiders (no more than 5 percent and no more than EUR 500,000). The authority may buy from such a unit without competition. In-house entities are governed by Section 15 of the Public Procurement Act.
Can you buy from an in-house entity without competition?
Yes, if the in-house conditions are met. The authority must exercise control over the unit, and the unit must not exceed the external-sales limit. After the reform, a limited-company in-house entity also requires at least a 10 percent direct ownership stake (applies from 1 July 2027). If the conditions are not met, the procurement must be tendered normally.
How does the reform change in-house entities?
The reform adds a minimum 10 percent ownership requirement for using a limited-company in-house entity. The change particularly affects widely owned joint companies in which any single owner's stake is small. The requirement applies from 1 July 2027, and existing contracts may be used during the transitional period. In practice, some previously in-house services move to open competition.
Related Guides
Finnish Procurement Act Reform 2026: What Changes for Bidders
What the new Finnish Procurement Act of 18 June 2026 means for companies and bidders: dividing contracts into lots, the single-bid rule, in-house entities and exclusion grounds, with section references and transitional periods.
Read guidePublic procurement: a comprehensive guide for bidders
Finnish public procurement in one guide: procedures, 2026 thresholds, suitability requirements, award criteria, and bidder remedies under the Procurement Act.
Read guideRelated Terms
Direct Award
Learn about direct award (suorahankinta) in Finnish public procurement. When contracting authorities may procure without competitive tendering.
Framework Agreement
Understand framework agreements in Finnish public procurement. How multi-year agreements with one or more suppliers work under hankintalaki 1397/2016.
Contracting Authority
Understand what a contracting authority is in Finnish public procurement. Types of hankintayksikkö and their obligations under the Procurement Act.
Haavi monitors public tenders for you
AI-powered procurement monitoring finds relevant tenders for your company automatically.