Lithuanian parliament debates controversial municipal contracts worth hundreds of millions

A major legislative package under consideration in Lithuania’s parliament could expand municipalities’ ability to award no-bid contracts to their own subsidiaries—a practice critics say distorts competition and risks wasting public funds, LRT.lt reports.

The proposed amendments would loosen rules for so-called “internal agreements,” exemptions that allow local governments to bypass competitive tenders when procuring services from entities they control. These contracts, often used for waste management, street cleaning, and snow removal, totalled €492 million in 2025, down from €735 million in 2023, according to public procurement data.

Business groups warn the changes would let municipalities sidestep private competitors, stifling regional economies and job creation. “This isn’t about efficiency—it’s about avoiding competition because it’s easier for officials,” said the Lithuanian Business Confederation, arguing the reforms would entrench municipal monopolies at taxpayers’ expense.

Local governments counter that private firms sometimes engage in “blackmail” tactics—threatening to abandon contracts unless paid more—leaving them no choice but to rely on in-house providers. Ukmergė district, currently embroiled in a court battle over waste collection, claims a private hauler demanded higher fees or would terminate services, risking a public health crisis. “Imagine if they just walked away—streets piled with trash, a potential sanitation disaster,” said Mayor Darius Varnas. After the company sued, courts ruled the municipality’s internal contract illegal, ordering it to pay €179,000 in lost profits to the private firm.

Lithuania’s Constitutional Court has twice ruled that internal agreements should be a last resort, permitted only when competitive bidding is impossible and essential services are at risk. With the bill now fast-tracked through parliament, a showdown looms between municipal leaders pushing for flexibility and business advocates warning of market distortion.