Lithuania: New law shifts responsibility for public service contracts to municipalities

Lithuanian municipalities have been granted greater discretion in how they provide public services, with a new law requiring them to justify any decision to use internal contracts instead of open tenders. This shift places increased responsibility on local authorities to demonstrate that their choices are well-reasoned and serve the public interest.

The law mandates that when opting for an internal contract, municipalities must consider the service's price, quality, accessibility, continuity, and potential impact on the community. This move acknowledges that in certain situations, such as a lack of market competition or difficulties in securing continuous service through public procurement, an internal contract might be a justifiable solution. However, the core principle remains that such exceptions should not become the norm.

Ensuring the effectiveness of these new provisions hinges on how municipalities practically apply them. The law itself does not guarantee fair pricing or high quality; these outcomes depend on the decisions made by municipal councils and administrations. A critical aspect will be the development and implementation of a clear methodology for conducting analyses before awarding internal contracts. This analysis must be data-driven and avoid becoming a mere formality to rubber-stamp pre-determined decisions.

Experts emphasize that the analysis should rigorously compare the costs and benefits of internal contracts against open market tenders. This includes evaluating not only the initial contract value but also long-term expenses, necessary investments, and potential additional costs for the municipality. Equally important are measurable quality criteria, such as adherence to deadlines, complaint rates, service reliability, and resident satisfaction. Simply stating that a municipal company has experience or has received investment is insufficient justification for bypassing market competition, which serves to ensure fair pricing and drive efficiency.