Poland: New Developments in Public Procurement Law

Last Updated: 25 May 2010
Article by Jaroslaw Sroka

The need to make infrastructural investments in Poland, especially those connected with EURO 2012, requires considerable public finances, including from the EU. Due to that fact, the adoption of clear contract awarding procedures which ensure effective spending of public funds constitutes a fundamental challenge for the domestic legislator.

The system of public procurement in Poland is governed by the Public Procurement Law of 29 January 2004 (the PPL). The PPL has recently undergone two significant amendments. The aim of most of the changes was to implement into Polish law the regulation of the new EU Remedies Directive, on the one hand, and to facilitate and hasten contract awarding procedures on the other. Some of the changes also included measures to protect entrepreneurs against the effects of the economic crisis.

Standstill period

Pursuant to the requirements of the Remedies Directive, the concept of a standstill period was introduced into Polish law. This is a period during which the conclusion of the contract after notifying contractors of the selection of the winning bid is suspended. For contracts "exceeding EU thresholds", such period is 10 days if information on the selection of the bid has been sent to contractors via fax or e-mail, or 15 days if such information was sent by post. During the standstill period contractors may file objections regarding possible illegal activities of the ordering party.

Contract ineffectiveness

A further change refers to the "contract ineffectiveness" within the meaning of the Remedies Directive. Following the amendment, if there is a legal basis (e.g. the conclusion of the contract infringes the principles of the standstill period), a public procurement contract may be deemed ineffective (i.e. as not having any legal effect) by an appropriate authority, in this case the National Appeal Chamber (Polish KIO) or common court.

However, based on the Directive, the PPL creates a possibility of departing from invalidating the contract with respect to unfulfilled obligations and imposing a financial penalty in justified cases, in particular when it is not possible to return consideration made under a voidable contract. The adjudicating authority may also refuse to invalidate the contract and, instead, impose a financial penalty if it deems that enforcing the contract would be in the public interest.

Another crucial change from a practical point of view is the elimination of protest as a legal remedy. Previously, the contractor could file a protest directly to the ordering party free of charge and then, if the protest was rejected, it could file an appeal to the KIO, subject to payment of a certain sum. Now, contractors can only go directly to the KIO.

Facilitating the operation of contractors

The amendments have also introduced regulations designed to facilitate the operation of contractors in the public procurement area. For example, an obligation has been introduced to return the bid security to losing bidders immediately after the selection of the winning bid or after invalidating the proceedings. And the obligation to demand a performance bond in proceedings has been abolished. Now, it is up to the ordering party to decide whether to demand such bond, depending on the size and scope of a given contract.

Further, an innovative solution has been introduced enabling contractors to receive advance payments of remuneration due. However, information on such a possibility should be included in the public procurement notice or specification. In practice, if the ordering party decides to grant the advance payment to the contractors, this means that contractors will no longer have to finance the contract with their own resources or apply for massive loans. This may even reduce bid prices.

The amendment also includes provisions regarding changes to contracts already concluded. The previous absolute prohibition of amending the contract if such possibility was not included in the contract was too restrictive. In the amendment, the legislator differentiated between changes to essential terms and changes to insignificant provisions. As the legislator explained, "insignificant provisions" mean provisions "the knowledge of which at the stage of the contract award procedure would not have affected the circle of entities applying for such contract or the result of such procedure". Insignificant changes are not subject to any limitations.

References from other entities

Another important change from a practical point of view is the possibility of presenting references from other entities. A contractor's documentation demonstrating the necessary knowledge and experience may now come from other entities, regardless of the legal nature of the relationship between them, if the contractor presents a written declaration from the third party of its obligation to make available the knowledge and experience of that party to such contractor. This, however, raises some concerns. While, on the one hand, the competiveness of the proceedings is increased, on the other hand, the practical question arises whether the ordering party will be able to properly verify the competence of a contractor who has not previously performed certain contracts by itself.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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