On 25 July 2014, the Polish Parliament passed on an amendment of the Public Procurement Law (the Amendment). The changes introduced by this legislation reflect suggestions put forward by the country’s entrepreneurs and representatives of its public administration. The amendments are designed to tackle the most serious problems encountered in the public procurement process in Poland, such as competition among economic operators based solely on price, social dumping, and the impossibility of valorising already concluded contracts. The Amendment will soon go to the Senate (the second chamber of the Polish Parliament) and will most likely come into force in the final quarter of 2014.

Price will no longer be the sole criterion

Currently, the outcome of public procurement tenders in Poland is usually determined only by the price criteria. This situation is unfavourable both for economic operators and contracting entities. Often, members of the first group, in their efforts to submit the “best” (i.e., lowest priced) offers, agree to carry out the contract at underestimated costs, which often confronts these entities with bankruptcy. The latter group, the contracting entities, have taken into consideration only one economic factor (i.e., price) and are likely to have received services or goods of low quality -- or none at all, if the economic operator was declared bankrupt in the course of fulfilling the contract.

Pursuant to the Amendment, the price criterion will be the exclusive criterion of the tender evaluation only when a contract relates to the supply of goods or services that are generally available on the market and have commonly established quality standards. In all other cases, contracting entities should also take into account an expanded range of factors, including the quality, functional performance, technical parameters, environmental considerations, social aspects, the best available technologies, servicing, the contract fulfilment period, or the costs of exploitation. It should be emphasised that the above list is not exhaustive and the contracting entity is allowed to also choose additional criteria, if these are more appropriate for the specific goods or services it is seeking.

Under the Amendment, if the offered price is abnormally low in relation to the value of contract’s object and raises concerns about the economic operator’s capability of fulfilling the contract, the contracting entity must request the economic operator to provide additional explanations. In such cases, the economic operator is obliged to justify those contents of its offer that affect and condition the price determination. Moreover, in order to avoid potential problems with the definition of ”abnormally low price”, the Amendment states that a price is abnormally low in particular when it is 30% or more lower than the value of a contract or the arithmetical average of all submitted price offers. Economic operators often aim to reduce the costs associated with fulfilling a contract by reducing labour costs. Under the Amendment, these labour costs cannot be lower than the amount of the statutory minimum wage, which is defined in separate regulations.

Optional exclusion of economic operator

Under the Amendment, a contracting entity can exclude an economic operator from the contract award procedure if within the period of 3 years before the institution of the mentioned procedure the economic operator seriously and wilfully violated its professional duties, in particular, if it had intentionally or due to gross negligence not fulfilled a contract or had fulfilled it improperly. In such case, the contracting entity has to prove incompetence on the part of the economic operator. The Amendment explicitly states that ”any evidence” can be used for this purpose. However, the contracting entity cannot exclude an economic operator which can prove that it has undertaken technical, organizational and staff measures in order to avoid failure to perform a contract or improper performance of a contract in the future and if it has compensated the damage (or agreed to do so).

Obligation to valorize contracts

Parties often conclude contracts that remain in place for a number of years. During that period, the costs fulfilling the agreement can increase at no fault of the economic operator (e. g. due to tax or administrative fee increases). In order to protect economic operators that are parties to such long-term agreements, the Amendment introduces an obligation to valorize contracts if such are concluded for a period of more than 12 months. Such agreements shall contain provisions referring to the rules for altering the economic operator’s remuneration in case of changes to tax rates, an increase in the amount of the statutory minimum wage, and alterations to social or health insurance premiums.

New rules for retaining deposits

Under the Amendment, the contracting entity can retain the deposit with interest only in case the economic operator has not complied with the request to submit the statutory required documents, if such non-compliance is a result of fault, and - more importantly -- the non-compliance would prevent the contracting entity from awarding the contract to the economic operator concerned. The currently binding regulations regarding deposits were designed to prevent cartel collusions. However, they often result in situations in which operators taking part in tender procedure lose their deposits as a result of incomplete documentation, even if their offer was e.g. the least favorable one.

Joint and several liability of the economic operator and its subcontractors

Pursuant to the Amendment, an economic operator can rely on the knowledge and experience, technical resources, financial capacities, and economic potential of subcontractors. If this is the case, the economic operator is obliged to demonstrate to the contracting entity that the subcontractor has access to sufficient resources to fulfill a contract. It shall be proven in particular by submitting a written commitment by the subcontractors to provide the economic operator with the necessary resources for as long as they may be required throughout duration of the contract. The economic operator and its subcontractor are subject to joint and several liability for the damage inflicted by a failure to deliver the resources, as long as the non-delivery is fully attributed to the subcontractor.

Additional changes

Under the Amendment, economic operators participating in a tender procedure may limit access to information they regard as company secrets, but they will have to prove that the data subject to protection indeed involves corporate secrets. In addition, the Amendment introduces a simplified tender procedure for non-priority services. It also contains provisions referring to the use of exemplary forms of agreements, rules and other documents that are applied by public contracts.

The Amendment has been positively recognized by practicing lawyers and representatives of legal doctrine.